Progressive single and team-member mortgage originators know that success isn’t just about increasing revenue; it’s also about reducing loan production costs. With the costs hovering at $9,000 per loan and new regulations suggesting it’ll climb, looking for ways to lower that number drastically is critical to business survival.
Fortunately, the mortgage industry is experiencing drastic improvements in technology, all of which make it feasible to reduce costs by as much as half. How? This article will outline the most effective and powerful ways to cut your loan processing costs.
Reducing Your Loan Production Costs With Mortgage Tech
Simplified Application Intake
Up to two-thirds of loan production costs are attributed to human processing and those “charges” begin at intake. Your mortgage application, the way it functions and how well it integrates (more on the below), either adds or reduces your costs. Here’s how:
- Abandoned applications
Getting a prospect to fill out your online application has a price. Advertising, mortgage email campaigns, social media marketing, personal consultations all add up. It’s necessary and worth it if it leads to a closed loan. But imagine investing all of that time and money only to lose the prospect because of a poorly formatted digital 1003.
Every abandoned application isn’t just a lost opportunity; it’s money thrown away.
Errors are another area that raises your cost per loan. Even the tiniest mistakes like missing information, misspellings, and lost info because the digital app doesn’t have autosave capabilities can cost you hundreds or even thousands of dollars.
However, given the right digital mortgage tools, you can also reduce the number of abandoned applications and errors.
Alerts of missing information, misspellings plus autosave, and the ability to restart the application on another device are just a few of the powerful ways that you can eliminate careless mistakes. And all of that translates to dramatically slashing your loan production costs.
Incorporate Mortgage APIs
But the value of a digital 1003 doesn’t stop there! A smartly built digital 1003 like our SmartApp 1003 also makes use of APIs (Application Program Interfacing) and this is where most other digital 1003’s fall short.
You can think of APIs as a sort of “electrical socket” and here’s how that works in terms of reducing your mortgage production costs.
Imagine that your microwave did not have a plug nor a socket to plug it into the wall. To power it up, in this example, you’d have to hard-wire the appliance to the wall.
Now imagine that you needed to do that for all your appliances, taking into consideration the voltage for each appliance, incorporating various plug styles, and have them all seamlessly communicate with each other with the help of a “smart home” platform that you configure.
Not only is that a headache to build and but the costs would be immense should there be any mistakes in miscommunication.
Generally speaking, that’s where the mortgage industry has been the last ten years, and one of the reasons that the cost to close a loan remains high. Tasks like manually inputting data, having to go back and correct mistakes from inaccuracy, spending long periods of time searching for info, all add up, and can mean thousands of dollars in revenue loss.
The solution to this expensive mess is incorporating mortgage tech with capable APIs. Need more proof that mortgage tech works to reduce errors and costs? Check out this 2018 study on the role of technology in mortgage lending done by the Federal Reserve Bank of New York where they found that technological innovation unequivocally improved the mortgage market.
Along the same lines of streamlining work with APIs is automating conversations. There’s a couple of ways to do this, each with its impressive capabilities and benefits. Here are a few ideas:
- Use instant replies and chatbots on your website to address simple customer queries and funnel them to the correct department.
- Automation also frees up originator time for addressing more complex issues, thus improving the experience for both your prospects and your mortgage team.
- For email communication, have a system for flagging, filing, following up, and collaborating with team members on conversations.
No one can argue the value of human interaction. Maybe you’re even guilty of skipping over automation to talk to a live operator. However, the result is usually costly frustration. You have to explain the issue, only to get transferred, wait, and explain it all over again.
On your side, the servicer perspective, wasted time, and reduced customer satisfaction start to eat away at your profits. Quicken Loans understands the influence of time and customer satisfaction to their mortgage profit margin, and that’s why they make it a priority.
When looking for ways to increase revenue and outpace the competition, remember to incorporate the cost-saving capabilities of a digital mortgage platform. Working from all angles including reducing costs, increasing profit, enhancing customer satisfaction, and amplifying originator’s capabilities, LenderHomePage is the solution for today’s digital mortgage era. Click for a free 10-day trial.