Lending Achievements and Technology
Fade in to a black-and-white scene of a 1960’s suburban home. Queue the
upbeat, kitschy music as the scene widens to take in more of the home. Enter
the announcer, “We are living in an age of technological wonder, where
labor saving devices are improving our daily lives…”
Many of us saw this film in grade school. Maybe you watched it on your black-and-white
TV set. If you didn’t, trust me, it was at least as cliché as it
sounds. Yet we were and still are living in an age of wonder: Machines have
gotten pretty darn helpful.
What started me thinking about this was a study whose results were recently
released by Fannie Mae. Known as Mortgage Focus, a voluntary benchmarking study
of mortgage lenders, it provides conclusive evidence that lending technologies
matter in very consequential ways.
A quick review of how mortgage lenders judge themselves. When gauging performance
they look at three main metrics: cost-to-originate, closed loans per full time
employee (FTE) and pull through. Lenders that dial-in these measures become
the long-term players. Rates go down, rates go up, experience tells us these
efficient lenders remain highly competitive.
Now the results. We learn in this study that the average cost-to-originate
for all lenders approaches $1,700 per loan. The most efficient whittle it down
to slightly more than $350, a five-fold decrease. The same is true when looking
at closed loans per FTE.
We learn that, on average, one employee can close about six loans per month.
Those at the head of the class close more than 17 loans per month per FTE. In
other words, their productivity per employee is almost three times higher. And
guess what: they close 10 percent more of their pipelines as well.
The ability to increase lending margins is the first reason technology matters.
In fact, technology is one of the key distinguishing features of the lenders
that achieve. And here’s the best news: many are credit unions. It’s
true: Credit unions have better access to helpful technologies. We use it better,
Now to the second reason technology matters. The mortgage
experience becomes both easily convenient and more affordable for those who
matter most: credit union members. Back when our announcer was making proclamations
about wondrous technological achievement, mortgage lending was in its pre-medieval
period. You want a mortgage? Well, perhaps, but you’ll first endure six
weeks of torment. Then, and only then, some underwriter somewhere might deem
you worthy to repay your 20 percent down mortgage over a period of thirty years.
Borrowers weren’t so much happy as relieved at the news.
Today, technology helps move members into their new homes faster. No mortgage
done well should take more than 30 days, an approval no more than 15 minutes.
Don’t have 20 percent down, no problem, we’ll give you several options
right now. Need to close next week? Yes, we can do that, too. Dealing with the
many variables that make so many options and abbreviated time frames possible
is what machines were designed for.
A third reason technology matters is that it thrives on rejection. As an industry
we don’t sell very well, nor do we excel at cross selling. It’s
both cultural and human nature: we don’t want our members to reject us.
Think about it. On the other hand, how often do you tell your
computer you love it? Probably not often. Yet it doesn’t fret, it does
its job. The ability to remain undaunted by constant rejection makes computers
the ideal sales consultant. Technology doesn’t care: no matter the number
of negative responses, it continues to ask the question. So, when we approve
a first mortgage, why not have your system approve a home equity line-of-credit
at the same time?
Fade in to a computer generated image of a 21st century home. Queue the synthesized
techno-music as the scene widens to entire neighborhoods of happy homeowners.
Enter the announcer, “We are living in an age of technological miracles.
Miracles that improve our daily lives…” This time, though, it’s
our grandchildren who are watching the scene unfold on their super-saturated
color bio-plasma screens. Yes indeed, we live in an age of wonder.
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