As compliance increases, the number of loans originated per employee shrinks. We sat down with Kim Hoffman, global head of mortgage operations at Sutherland, to find out what her company is doing to fix the problem.
HousingWire: What are the expenses involved in originating a loan today?
Kim Hoffman: Loan origination costs typically consist of personnel, occupancy, equipment, corporate allocations, and technology, to name a few. Origination costs have continued to climb over the years. According to the MBA, in 2008, it cost an originator roughly $4,500 to originate a loan. By late 2012, this amount had increased to $5,600. And, at the low point in early 2014, it jumped to over $8,000, but this number is now roughly $7,845 per loan, while productivity per employee continues to go down, with an average of two loans originated per day per production employee.
HW: What can be done to bring those costs down?
KH: This trend of increasing costs is becoming the norm, due to the compliance burden, the paper-intensive manual nature of the business, technology investments, and as personnel costs continue to increase, thus increasing compliance costs. Being creative, thinking outside the box, and working with partners who can provide customized solutions such as outsourcing non-core functions offshore to capitalize on the highly educated work force, lower salary requirements, and ability to work shifts around the clock, can really be a productivity and expense game-changer.
HW: How does this approach integrate with the growing demand from borrowers for a faster,
KH: The mortgage industry has been slow to adapt to the technology and speed which we all expect in terms of consumer transactions. This may be because of the required investment and already thin profits, or because our focus is on keeping our platforms and personnel compliant, or even because the burden to integrate new technology is too great.
I continually hear the technology sector speaking about a future where technology will automate most of the documentation and data required for a mortgage straight from the source, thus minimizing the client burden and shortening the process time. I applaud this “future state,” but in the meantime we are still digging through piles of documents, waiting on countless bits of critical data, and begging the customer to interrupt their day and make their loan process a priority.
Lenders can shine in the eyes of customers by leveraging design thinking to develop a delivery model that is not limited to the constraints of Monday through Friday, 9 to 5. A blended model keeps the loan in motion 24 hours a day as it moves between skilled resources onshore and offshore. An outsourcing partner with the proper onshore and offshore mortgage experience will structure the framework for maximum efficiency in accordance with the lender’s specific needs, always focusing on compliance and the borrower experience.
Regarding wait times — those nail-biting periods when everyone from the customer to the Realtor and the loan officer are in the dark awaiting various approvals — if you could communicate loan approvals to the borrower, loan officer and Realtor within 24 hours of loan submission, wouldn’t this improve the loan experience? What if you could reduce cycle time by as much as 70%, slashing 20 to 30 days or more off the average cycle time? This would significantly increase the number of loans that can be processed per month.
HW: What kind of options do you provide to small or medium lenders to access this kind of service model?
KH: All services can be scaled to meet clients’ needs, whether via a full end-to-end or component model delivered onshore, offshore or dual-shore. We are mortgage bankers serving mortgage bankers, therefore our solutions are customized to fit our clients’ needs versus a one-size-fits-all solution.
HW: How is Sutherland uniquely qualified to help lenders in this way?
KH: A keen focus on continuous process improvement and enhancing the customer experience provides an excellent outcome for all parties, and we strive to provide that focus. Further, our personnel are all mortgage bankers, and they have the education and training via the Mortgage Bankers Association, which sets the gold standard in mortgage training.
I wish I had known of all the resources and assistance available as I was working through strategic challenges throughout my career. There are qualified resources to assist you with virtually every aspect of your business. You simply don’t have to go it alone.