How To Increase Margins By Reducing Origination Costs

We can all agree that the cost to originate mortgages continues to climb throughout 2018 and is forcing lenders to deal with margin compression.


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As stated in an article from Kelsey Ramirez of Housing Wire, “The cost of originating a mortgage hit all-time highs back in 2013 and 2014, but now, those costs are up once again and much like before, hitting all-new highs, according to the last Quarterly Mortgage Bankers Performance report from the Mortgage Bankers Association.”


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In the article she mentions a new study from Deloitte Center for Financial Services and LendIt Fintech that shows nonbank online lenders are also struggling with the cost of funding a loan.


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The survey shows a full 77% of respondents listed the cost of funding among their top three concerns, and 38% said it was their top concern. This is compared to just 39% who listed any other issue among their top three concerns.

Today’s mortgage market challenges you and your staff more than ever before. It starts with heightened pressure to reduce loan production costs and the areas that cause those costs to rise:  constantly changing rules and regulations, lack of effective internal controls; communication break downs, poor loan visibility; and getting bog down doing manual rudimentary tasks are all significant factors forcing lenders to rethink their lending operations. 

To survive, brokers, loan officers, and lenders now require an intelligent loan manufacturing solution from a provider that truly understands mortgage banking and its constantly shifting mortgage process. The right digital mortgage platform helps you drastically reduce the chaos in your daily lending processes while improving communication to help you close more loans faster and in a more cost effective manner.  

So where should lenders begin?  If lenders truly want to reduce the cost to originate it starts with automating manual tasks and all of the communication breakdowns between all parties to the mortgage transaction. Each one of those breakdowns delays the time to close and increases the time and resources needed to originate the loan.

When we talk about all the parties to the transaction it is not just the fulfillment staff and borrowers, but realtors, title agents, financial planners, and all other interested parties that need to be accounted for. Keeping all parties in the loop is one thing, but automating that communication in a way to significantly reduce friction points while lowering costs.

To more efficiently manufacture a loan, system-driven processes need to unfold, so that lenders can reduce and/or eliminate manual rudimentary tasks. This way, your production team doesn’t need to think about what needs to be done, when it needs to be done, and by whom it needs to be done. 

For lenders that want to truly drive down the cost to originate, they must realize the importance of automating the entire mortgage process.  Lenders that put forth the energy and resources to automate the entire lending process will be able to cut costs while gaining a competitive advantage over other less efficient originators.

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