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Tuesday, May 09, 2006

More Banks and Brokers Outsource Mortgage Processing

Check this informative article on outsourcing mortgage loan processing... we found it very interesting:

By Dave Stokes, Senior Vice PresidentIntegrated Loan Services (ILS)

As the real estate market fluctuates from boom to bust, bankers and brokers are looking for ways to control costs and stabilize overhead. In increasing numbers, their solution has been to outsource much or all of their mortgage processing.

Why would a lender go outside for backroom operations? Here are a few reasons.

1. Cost Control — The biggest reason that banks and brokers outsource their mortgage processing is to control their fixed costs without sacrificing quality, especially when workflow increases. Outsourcing allows them to use the service only when they need it. There is no need to staff up in anticipation of a short-term influx of applications, for example, when interest rates go down. When all processing is done in-house, an increase in workflow can mean that understaffed processing departments keep customers waiting for long periods to close their loans.

2. Immediate Staffing Needs — Even institutions that maintain in-house mortgage processing operations outsource some of their processing because they have trouble locating enough qualified specialists to meet their needs. Finding the right people to handle mortgage applications is not easy and hiring the wrong ones can be disastrous for a lender. Banks know that the way they process a loan has an impact on their long-term relationship with a customer. You do not want to entrust that kind of relationship to a temporary worker who has no ongoing stake in a quality product. Outsourcing with a company experienced in meeting the needs of mortgage lenders helps to avoid that problem.

3. RESPA Requirements — Timely action on a mortgage application is more than good business. It is also the law. Understaffed processing divisions may not be able to meet the 72-hour application documentation that is required under RESPA requirements. This is another reason banks and mortgage brokers outsource their backroom operations. Many of our clients handle the RESPA requirements with our Automated Mortgage Processing. This enables them to input the mortgage application right at their offices and the 72-hour RESPA documents are printed on the spot.

4. New Entries into the Mortgage Lending Business — Institutions such as credit unions that are adding mortgage lending to their services may not want to take on the processing functions. They can hire mortgage originators to take the mortgage applications and rely on outsource processing to improve the efficiency and reduce the overhead of their mortgage department.

5. The One-Stop Mortgage — Many financial institutions and brokers want to offer their clients a full package from origination to closing. Outsourcing allows them to do this from one source instead of going to a variety of services for things like appraisals, credit reports, flood certification and title search, all of which require separate documentation. A full-service mortgage processing operation shares documentation. They move all parts of the processing along, without bothering the client to fill out multiple forms with the same information.
6. Meeting the Needs of the Secondary Market — By outsourcing the mortgage processing function to an experienced provider, financial institutions and brokers make sure that they are writing their loans to meet the special needs of the secondary market. We do all of our work with the secondary market guidelines in mind so that the package can more easily be sold.

In the end, outsourcing means more control over overhead, fewer headaches from irate customers and quicker closings. Our experience is that it enables financial institutions and brokers to meet the needs of their customers and close loans at a lower cost than doing it in-house.

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