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As if you didn’t already know, a recent report (and chart) issued by MBA indicates that Underwriter productivity has been on the decline over the past ten years (UW Productivity).
On average, for the larger lenders the number of loans reviewed per underwriter per month decreased from about 165 to 33; that’s a decrease daily from approximately 8 down to 1.5 loans per day per person. Quite a drop!
Here we go again, comparing apples to oranges. Although they are both fruit they are very different. This decrease in loans per person is obviously due to the increased amount of work an underwriter must do today, when reviewing and approving a loan, as compared to what was being done in the not too distant past. But, why so much more work? This is partly the result of recent and proposed regulatory requirements aimed at increased consumer protection and transparency in the lending process.
However, the loans underwritten ten years ago were mostly limited, low or no doc loans. The underwriters of these loans for the most part only reviewed the appraisal and that, at best, was a cursory review. There wasn’t much else to review. Times were good and nobody cared about verifying such simple things like income or maybe assets. Everyone was making big money and no one wanted the underwriting to stand in the way.
Come to think of it, the new regulations which created the increased underwriting were also the result of the deceased underwriting reviews. Those were the result of the decreased loan documentation. This is a clear case of “less resulting in more.”
Maybe, had we continued to follow the tried and true rules of loan approvals, we wouldn’t have the increased regulations now forcing lenders to go back and underwrite loans more thoroughly. Had we continued to fully document and underwrite loans, we might have avoided so many defaults and repurchase requests.
Don’t get me wrong. There’s a place for low and no doc loans but not in mainstream lending. These programs should be the exception, not the norm. We took it a little too far and now we’re paying the price. We learned the hard way.
We now know that quality and compliance do matter. They are not a cost but rather an investment. The industry needs to wake up and smell the coffee. A smart investment in quality, compliance and training will result in better profits. We can learn for our mistakes (I hope).
Based on the numbers, it seems that lenders may have a handle on things as the loans per person have stabilized while income per loan is increasing. Training, experience, and an increased use of technology will continue to help lenders reduce their costs to originate by increasing the number of loans handled person. This will result in an increase in the income earned per loan.
Loading ...The game has changed; play different my friends.
