Technology Allows Lenders To Calculate Their “True Cost” Of Origination

Promontory MortgagePath, through its Promontory Fulfillment Services (PFS) unit, has developed a new online Cost Savings Calculator that lets banks, credit unions and mortgage companies quickly compute its own operational cost of residential mortgage loan origination and compare that to PFS’s outsourced solution.

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The Cost Savings Calculator requires only a minimal amount of information:

>>Number of loan units the institution originates per month.

>>Number and annual salary of full time loan-production staff (processors, underwriters, closers and administrative staff).

>>Number and annual salary of support staff (compliance/legal, secondary marketing and technology).

The calculator enables the institution to calculate its own cost of origination and shows what a similar cost would be if PFS managed their fulfillment process. The calculator only focuses on operational costs once the loan has come into the institution and does not factor in loan officer compensation, because it assumes the client will continue to prospect for the loans. In addition to the cost analysis, the calculator will also identify areas of the operation, such as compliance, which may be under-staffed and could create potential compliance risks.

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“The Mortgage Bankers Association (MBA) publishes a wealth of data on the cost of origination, and today the average is above $8,000 per loan, when LO compensation is factored in,” said Ken Janik, head of operations, Promontory Fulfillment Services. “But these are averages and they may or may not be the right benchmarks for different sized banks with different overhead structures and business models. Our calculator uses each institution’s own numbers and instantly delivers a client-specific answer.”

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Bruce Witherell, chief executive officer of Promontory Mortgage Path added: “In the last few months we have seen a number of mid-tier banks exit the mortgage origination business because they couldn’t justify the low margins or stand the cyclicality of mortgage lending. Our new calculator lets executives do their own math, and in minutes, come to their own conclusions about their true processing costs. They can also see how they can competitively continue to offer mortgages as a product without maintaining a mortgage operation.”

About The Author

Tony Garritano

Tony Garritano is chairman and founder at PROGRESS in Lending Association. As a speaker Tony has worked hard to inform executives about how technology should be a tool used to further business objectives. For over 10 years he has worked as a journalist, researcher and speaker in the mortgage technology space. Starting this association was the next step for someone like Tony, who has dedicated his career to providing mortgage executives with the information needed to make informed technology decisions. He can be reached via e-mail at tony@progressinlending.com.