“Should I stay or should I go?”—The Clash
In today’s volatile mortgage environment, many community lenders are reexamining their commitment to mortgage operations or withdrawing from residential lending altogether. But, with the single-family mortgage often functioning as a cornerstone product for community lenders, many are asking themselves: Do we really want to send customers across the street for a product our communities expect us to offer?
More and more lenders are turning to outsourced fulfillment to continue offering this core product. But, is outsourced fulfillment right for all local lenders? Is outsourcing an option you should be exploring?
To help decide, ask yourself:
- Why are you in the mortgage business?
- Are you offering the digital customer experience large lenders and FinTechs are marketing?
- What is your current monthly loan volume?
- What is your residential lending growth strategy?
- What are your fully-loaded origination costs per loan?
Why are you in the mortgage business?
A growing number of community lenders are re-examining their approach to mortgages and asking themselves: Is mortgage a business or a product? Are we in the mortgage business because it’s profitable, and we excel at it? Or, is it a defensive strategy to keep customers from fleeing to our competitors? If mortgages are strategic and profitable parts of your overall business model, outsourcing may make sense as a supplement to your existing processes, boosting productivity and enhancing profitability. Or if, like a growing number of banks and credit unions, your institution is offering mortgages only to accommodate customers, then outsourcing may be an attractive option – allowing you to continue offering mortgages as a product without supporting an entire mortgage operation.
Are you offering the digital customer experience large lenders and FinTechs are marketing?
In recent years, non-bank lenders and FinTech competitors have taken a growing share of the mortgage market. Their investments in borrower-experience and process-enhancing technologies have outpaced that of traditional lenders. Once a competitive advantage, a tech-driven process has fast become the cost of entry for all lenders. Is your institution keeping pace? If not, how will you catch up? How long will it take, and what will it cost?
In-house technology development and out-of-the-box solutions can be cost- and time prohibitive. For many, the ability – or inability – to invest in tech becomes a major driver in their decision to outsource. Selecting a fulfillment partner whose services include proprietary mortgage tech, like Promontory MortgagePath, levels the playing field with larger lenders and FinTechs for a fraction of the cost.
What is your current monthly loan volume?
When it comes to mortgages, scale matters. For lenders originating between 50 and 150 loans per month, it’s hard – if not impossible – to justify the infrastructure required to successfully sustain and grow volume while originating quality loans. An external fulfillment option converts fixed costs into variable costs, allowing you to pay only for the loans you’re closing.
Institutions processing higher loan volumes each month likely have a profitable and sustainable infrastructure in place; institutions processing very few loans per month may not require such a robust operation and can manage lower volumes with minimal support. Outsourced fulfillment is ideal for those stuck in the middle – with loan volumes requiring dedicated systems, technology and compliance-, tech- and secondary marketing personnel but with little-to-no profitability.
What is your residential lending growth strategy?
For lenders considering non-agency loans to increase pipeline volume and drive origination growth, outsourcing offers the ability to quickly activate specialty products and meet shifting market conditions. Lenders benefit from a full range of mortgage products and a scalable business model without the overhead or risk.
What are your fully-loaded origination costs per loan?
While industry-wide origination-cost estimates garner a fair amount of attention, many lending executives believe their institutions are more efficient than the average lender – and some probably are. This cost-savings calculator can help you get a quick cost-per-loan estimate. Add to it your monthly and/or annual lending technology investments to determine your all-in origination costs. Comprehensive, tech-inclusive fulfillment solutions, tailored to your mortgage processes, can total less than $2,500 per closed loan.
For many, outsourced mortgage fulfillment can be a viable option available to address today’s market challenges and to help lenders remain relevant, competitive, profitable, and poised for growth.