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Mortgage Brokers rose to prominence in the era of subprime lending. Their flexibility to react to the opportunities presented by this market provided both them and many lenders with a new line of business, and profits.
Since then, the Mortgage Broker has become a staple in the mortgage origination process providing correspondent and wholesale lenders with a steady stream of business. See how they’ve grown. (Brokers)
Although it may not have been viewed as such, the Mortgage Broker presented one of the first of the major lending processes to be outsourced. Lenders seeking to expand their business through access to other markets and products, especially sub-prime, began utilizing brokers to originate their loans in markets they were not then servicing. The lender provided the guidelines and the Broker did the deals. The beginning of a beautiful relationship!
The use of Mortgage Brokers has made many a lender more productive, giving them the ability to originate loans throughout the country without the need, and cost, for additional brick and mortar offices. They could each service many more customers without hiring and training new loan originators in each market they wanted to serve.
This presented some challenges for both lender and broker. Managing the process, communication, loan registration and pull through were some of the things that have been successfully handled by quality organizations in both sectors.
When done properly, this creates a good partnership that can be profitable for each, while expanding available products and services to more consumers.
When using a Mortgage Broker, a lender is outsourcing the loan originations. Why not expand that outsourcing, and related savings, to other areas to supplement the process and increase loan revenues?
To ensure quality and compliance, whether the loan is originated retail or through a Broker, Lenders are required to perform pre and post close loan reviews. These reviews can also be outsourced so as to tie their expense to the volume of loans originated monthly. No need to hire and maintain additional staff or take on the permanent expenses of more office space and additional equipment.
Such reviews will also detect any problems in the origination channel used and identify defects needing attention.
If you prefer to maintain complete control and originate all loans retail and perform reviews in-house, then you need to utilize the technology needed to ensure control and minimize expense. Hiring additional people, and opening branches throughout the country may work, but that will get quite expensive.
Technology can be used for online direct marketing and applications, electronic delivery and gathering of loan documentation, loan pricing, rate locks and e-closings. This coupled with the proper systems for tracking loan processing, approval and closing, along with the performance of required pre and post-close reviews will go a long way toward reducing costs, while increasing customer contact and service, while bringing in more profit.
Maybe it’s time to take another look at outsourcing. It works for loan originations. It can work in other areas as well.
