MBA Premier Member Editorial–Application Abandonment: The Silent Killer of Mortgage Profits
Tim Nguyen is CEO & Co-Founder of BeSmartee, San Juan Capistrano, Calif.
After three difficult years for mortgage originations, lenders may finally be seeing daylight. Interest rates have fallen to their lowest point in over a year. The Mortgage Bankers Association projects a 11% increase in origination volume (and origination units) in 2026 with continued growth into 2027. Lenders in Q2-2025 have reported the highest level of profit per loan since Q4-2021 (the past two quarters were negative).
This is the moment many have been waiting for. But as anyone in the business knows, mortgages are unpredictably cyclical. We don’t know exactly when and for how long. That’s why I’ve long called mortgages a “camel” business, i.e. we endure the dry seasons so that when the oasis comes, we drink as much as we can.
The key question now: Are lenders ready to capture as much of this next wave as possible?
Consumer Direct vs Distributed Retail: Two Models, One Challenge
How lenders prepare depends on their model.
• Consumer Direct lenders often lean heavily on lead buys and refinance volume. When rates drop, they can scale lead spend and chase refinance opportunities more aggressively.
• Distributed Retail lenders, on the other hand, rely primarily on referral partners and purchase transactions. They can’t abandon their core relationships to pursue refinances. They need to find a balance of continuing to serve their purchase pipelines while also capturing as much refinance business as possible as the tide rises.
For both models, the efficiency of the top of the funnel (how many applications actually make it into the pipeline) will determine how much of the next cycle they can truly capture.
The Standard Ratios That Matter
Note: Big thanks to our BeSmartee clients who provided the below historical data for the writing of this article.
Lenders already know the key checkpoints:
• Total Applications (leads that start and complete an application)
• Total Submissions (applications that are submitted into the official pipeline)
• Total Funded (loans that are closed and funded)
• Beginning of Month Pipeline (loans in the official pipeline at the start of a new month)
• Locked Pipeline (loans with a rate lock)
From these, four highly measured ratios stand out:
• Application-to-Submission: Typically 20-25% in consumer direct; and 25-35% in distributed retail
• Submission-to-Funding: Typically 40-55% in consumer direct; and 55-65% in distributed retail
• BMP-to-Funding: Typically 65-75% in consumer direct; and 75-85% in distributed retail
• Locked-to-Funding: Typically 75-85% in consumer direct; and 85-95% in distributed retail
The Overlooked Ratio: Application Abandonment
There’s one ratio most lenders don’t actively track, but it may be the most important: Application-Start to Application-Submission.
This measures how many borrowers who start an application actually finish it, and thereby eventually get submitted into the official pipeline. It’s the mortgage equivalent of e-commerce shopping cart abandonment; if borrowers don’t complete the process, there’s zero chance of revenue.
Every borrower lost at this stage will never even have the chance to be locked, funded, and revenue-generating. And unlike downstream fallout (such as credit denials or rate shopping), this abandonment is largely preventable with the right application experience.
Here’s the reality:
• Many POS platforms convert between 60–75% of borrowers from start to finish
• Best-in-class POS platforms convert closer to 80-85%
That spread of 10 to 25 percentage points is dramatic; as you will see in the math in the next section, those points ripple through the entire funnel, multiplying into additional funded loans and incremental revenue every year.
Most lenders already obsess over Application-to-Submission, Submission-to-Funding, and BMP-to-Funding. But unless you’re measuring Application-Start to Application-Submission, you’re missing the first lever in your funnel.
The Cost of Application Abandonment
Every borrower who starts but doesn’t finish an application is a lost loan before it ever reaches your pipeline. Unlike credit denials or rate fallout, this loss happens at the very first gate and it’s entirely preventable. To see the impact, let’s anchor on a simple example:
Assumptions:
•10,000 application starts annually
• $9,000 gross revenue per funded loan
• Application-to-Submission ratio = 25% (industry midpoint)
• Submission-to-Funding ratio = 55% (industry midpoint)
At 70% Completion:
• Finished applications: 10,000 × 70% = 7,000
• Applications submitted to pipeline: 7,000 x 25% = 1,750
• Funded loans: 1,750 × 55% = 963
• Revenue: 963 × $9,000 = $8.67M
At 80% Completion:
• Finished applications: 10,000 × 80% = 8,000
• Applications submitted to pipeline: 8,000 x 25% = 2,000
• Funded loans: 2,000 × 55% = 1,100
• Revenue: 1,100 × $9,000 = $9.9M
The difference a 10% improvement makes is greater than 10% of total revenues. Specifically in this example:
• +137 more funded loans
• +$1.23M in additional gross revenue
All from the same 10,000 starts without buying extra leads, recruiting more LOs, or spending more on marketing.
This is why the Application-Start to Application-Submission ratio matters so much. It’s the lever that compounds through every downstream stage, making the difference between just surviving the next cycle and truly capitalizing on it.
And remember, abandoned applications don’t just represent lost revenue; they create operational drag. Staff must re-engage borrowers with tools and processes that need to be paid for and managed. Even if a lender could re-engage every abandoned file (which no one can), the cost per re-engagement still cuts into profitability.
Preparing for the Next Cycle
The oasis is ahead. Consumer direct lenders will buy more leads. Distributed retail lenders will double down on referral partners. But both will be judged on the same math:
How many applications started and finished?
How many make it to submission?
How many ultimately fund?
How many locks make it across the finish line?
The winners in this cycle won’t just be the ones who recruit the most originators or spend the most on marketing. They’ll be the ones who quietly improve their first ratio and let compounding do the rest.
Every Percentage Point Matters
Your exact numbers may vary, but the lesson is clear: Every percentage point matters. When lenders think about investments for the coming cycle, optimizing Application-Start to Application-Submission should be at the top of the list.
In a camel industry, survival depends on drinking deeply when the water comes.
The water is coming… We can see the oasis on the horizon…
The question is: How will you fix your application abandonment leak and capture the most originations in this next cycle?
(Views expressed in this article do not necessarily reflect policies of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA NewsLink welcomes submissions from member firms. Inquiries can be sent to Editor Michael Tucker or Editorial Manager Anneliese Mahoney.)
