Susan Graham: Reduce Origination Expenses by Using Loan Origination Software to Maximize Efficiencies

Susan Graham is President and Chief Operating Officer of FICS (Financial Industry Computer Systems Inc.), Addison, Texas, a mortgage software company specializing in in-house mortgage origination, residential mortgage servicing and commercial mortgage servicing software for mortgage lenders, banks and credit unions. FICS’ software use Microsoft.NET Framework and provide customers flexibility to choose an in-house or cloud-hosting platform. The company also provides document management and web-based capabilities in its full suite of products. She can be reached at SusanGraham@fics.com.

The mortgage industry has enjoyed nearly a decade of growth fueled by low interest rates and rising home prices. There were $752 billion in new mortgages originated in Q4 2019, the biggest quarter since Q4 2005. This lending boom was due to a large increase in mortgage refinances. [Source: https://www.housingwire.com/articles/boom-mortgage-lending-just-had-its-biggest-quarter-in-14-years/]

However, as a new decade starts, the Mortgage Bankers Association expects revenue to drop in 2020 as lenders chase fewer loans. MBA projects purchase originations will be up 1.6 percent, but refinances will drop 24.5%. The refinance market had a significant boom in 2019 because of lower than expected mortgage rates. [Source: https://www.washingtonpost.com/business/2020/01/06/experts-predict-what-housing-market-will-bring/]

When loan origination volumes begin to drop, lenders must find ways to be more efficient to maintain profitability. Even with the growth of the past decade and the advances in technology tools, origination costs continue to rise, cutting into lenders’ bottom line. According to the Q1 2018 MBA Quarterly Mortgage Bankers Performance Report, total loan origination expenses were $8,957 per loan. Most of those costs–66 percent–are personnel costs.

Loan origination software is the key to increasing efficiency. As lenders add more apps to automate the mortgage workflow or provide a digital customer experience, they must also ensure they have the best loan origination software in place to maximize those efficiencies. By taking full advantage of functionality in a LOS and automating origination processes, lenders can save staff time, reducing the most significant and variable cost.

Lenders should choose loan origination software that includes these efficiency-maximizing components.

Start at the App: Integrate a Point of Sale Platform with the LOS

Many customers want to complete at least part of the mortgage application process online. According to a Fannie Mae survey of 3,000 recent homebuyers, 72 percent prefer to complete the application online and 70 percent prefer to submit documents online. Despite this preference for a digital application process, most borrowers want personal interaction during complex or critical steps. Sixty-five percent of survey respondents want their loan officer to explain mortgage terms or options, and 58 percent want someone to help them review their final documents. [Source: https://www.fanniemae.com/portal/research-insights/perspectives/digital-mortgage-technology-cason-082818.html ]

Having a Point of Sale that integrates directly with the LOS enables a streamlined transfer of information between the application, underwriting and origination processes. A web-based POS integrated with the LOS makes it easy for loan officers to track prospects and easily convert them to a loan application when the time is right, help borrowers complete the application (human touch), order credit reports and generate disclosures.

The POS needs to be mobile responsive to allow accessibility from any type of device. Lenders should also be able to use the POS to easily communicate with applicants, generate disclosures for viewing, and receive electronic documents. The POS should be able to easily transfer loan application information directly into the LOS, providing the home office with immediate access to the loan data for processing and reducing the risk of manual entry errors.

Put the Power of the Web in the Borrower’s Hands 

Mobile responsive POS technology enhances the customer experience by giving borrowers access to their loan application from any device. Borrower-facing web apps reduce the amount of time loan officers spend tracking down missing documentation and fielding phone calls from borrowers requesting loan status updates.

Web-based tools should enable the borrower to complete the Uniform Residential Loan Application, submit supporting documents with ease, view disclosures online and access loan status updates on demand. Borrowers should also be able to easily upload supporting documents by using their phone to take a picture of documents and attach them to the loan application.

Save Time by Ensuring Compliance

Keeping up with frequent regulatory changes is one of the most time-consuming burdens facing lenders today. To maintain compliance, lenders must keep up with regulatory changes, ensuring loans meet all requirements and reporting to all required agencies is complete and accurate.

The best loan origination software can help lenders meet key compliance requirements, including Home Mortgage Disclosure Act reporting, fair lending tests, Qualified Mortgage standards and investor requirements. Lenders should choose an LOS that facilitates compliance by using business rule engines that run compliance checks throughout the loan application, underwriting and closing processes. Lenders can either select LOS platforms that have the compliance engines built in, take advantage of compliance auditing from their document services provider, or use a third-party compliance software interface.

APIs Help Technologies Work Seamlessly

As lenders embrace more automation from within their LOS, one potential challenge when that automation involves multiple channels, is getting all the applications to work well together. Lenders can use Application Programming Interfaces to support integrations between software programs, facilitating automatic communication between systems for optimal use.

One of the biggest benefits of utilizing APIs is workflow automation. An API that connects the LOS to other tools—such as the POS, document services, automated underwriting systems or compliance software—can help automate the entire application process, saving time and reducing mistakes caused by human error. By automating the exchange of data between the LOS and other systems, APIs save time and increase data accuracy.

Streamline Settlement Services with MISMO-Compliant Interfaces

The best loan origination software saves time spent ordering and securing settlement services. Automated MISMO interfaces enable lenders to order fulfillment services—appraisals, flood, mortgage and title insurance, surveys, documents and credit—with just one click. Credit reports can be ordered from any MISMO-compliant source, and the credit scores and liabilities data can be imported directly into the LOS, eliminating data entry and thereby saving time and increasing accuracy.

By using the best loan origination software to automate and streamline standard processes, lenders can save time, reducing loan origination expenses and improving their bottom line. By using web applications to reduce routine back-and-forth interactions with borrowers, staff can spend their extra time educating borrowers, reviewing final documents with them, and handling more loan applications.

(Views expressed in this article do not necessarily reflect policy of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA NewsLink welcomes your submissions. Inquiries can be sent to Mike Sorohan, editor, at msorohan@mba.org; or Michael Tucker, editorial manager, at mtucker@mba.org.)