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I don’t think so. I’ll bet (if I were a betting man) that if we carefully analyzed the process to originate a new loan, we would find the cost to originate a loan has actually declined.
What with online applications and the technology for consumer communication, information gathering and verifications, and automated loan approvals, less time is spent creating a loan than in the recent past. What has increased is the cost to ensure a loan’s quality and compliance. That has taken on a much bigger role.
In the past, most lenders did what was minimally necessary to comply with secondary market and agency QC requirements. That seemed to be okay until the spit hit the spam in 2008. Then, everything changed.
The manufacture of a quality loan took on a whole new meaning. We got hit with target defect rates, defect taxonomy, actions plans, and the CFPB’s required CMS (Compliance Management System), to say nothing of Dodd-Frank.
These things didn’t directly affect the cost to originate the loan but they sure increased the cost to ensure its quality.
It’s no longer enough to do a cursory review of 10% of your loans after they close. We now have required pre-close reviews, select discretionary reviews, and special default reviews to go along with the old standard random 10% post-close audits. Additionally, everything now needs to be documented to the teeth.
Then, you need to review the reviews and also the reviewers to ensure more quality and compliance. Like it or not, that’s the way it is and every lender needs to comply.
When talking with lenders around the country, I hear the same concerns…
- “It’s tough to meet all the investor and regulatory requirements of today’s lending. I feel exposed”
- “How do we achieve the levels of accuracy and data completeness needed to meet all auditing and regulatory requirements, and still make any money?”
- “Is there a way to get ahead in the loan quality and compliance game without sacrificing loan volume and income?”
- “How can I minimize my costs while maximizing results?”
Technology and training are the answer. In most cases, the challenge is not in the training, it’s in upgrading current inefficient legacy LOS platforms. Systems that were developed long before all the new requirements took effect. Systems not built to ensure loan quality or compliance.
To meet today’s QC challenges lenders must have a single, cost-efficient enterprise platform providing the capabilities to control and ensure a loan’s quality and compliance from origination through sale or pay off, with on demand, timely, granular reporting of results, and analytic tools built in to monitor risk, while quickly identifying problems and opportunities for improvement.
(And now a word from our sponsor)
The game has charged. Play different. LoanLogics offers such a solution in our comprehensive Loan HD platform. A QC platform developed for mortgage lenders by mortgage lenders. Click HERE to get more information.
