80% of Lenders Are Very Concerned About Loan Quality

With new mortgage rules adopted this month and more scheduled to take effect in 2015, four in five lenders today report being concerned about loan quality, a survey by Capsilon Corp., a provider of data management solutions, finds.

Polling more than 100 executives from leading mortgage lenders during the Mortgage Bankers Association annual meeting in late October, Capsilon found that 39% plan to spend more on compliance next year, and 95% were somewhat concerned or very concerned about loan quality. 

Loan production costs are also on the rise, with 80% of respondents stating their loan production costs are higher today than they were in 2013. 

The MBA has reported previously based on industry findings that production costs increased to $6,932 per loan in the second quarter of 2014, up 19% from $5,818 in the same quarter last year. 

“Clearly, this survey data confirms that lenders are struggling with increasing costs as they contend with a myriad of new regulations that require a heightened focus on data integrity and loan quality,” said Sanjeev Malaney, CEO of Capsilon Corporation in a press release. “Rather than relying on expensive labor to ensure data integrity to stay competitive, lenders must move to a data-centric model where technology automates much of the process. Technology gives lenders the ability to move to a straight-through loan processing model, where much of the workflow is automated, with only a small percentage of loans requiring human intervention.”

Quality control is still an uncertainty factor, with roughly half of the lenders surveyed reporting their compliance services are conducted in-house, while 15% outsource compliance and 36% use a combination of services. Many are looking to the upcoming TILA and RESPA rules to take effect next year as being a leading cause for rising costs.

Written by Elizabeth Ecker

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