The Role of Enhanced Branch Reporting in a Buy Market

BLOG VIEW: In further attempts to reduce inflation, the Fed is expected to enlist another 0.75 point interest rate hike later this month, pushing lenders much deeper into the current buying market. Meanwhile, overall residential mortgage activity is seeing the biggest annual decline since 2014, down 32% in the first quarter of this year.

As a result, many lenders in the industry will see a drop in their lending volumes – but now is a great time to assess how money is flowing through the organization, as well as strategies to reduce staffing and capital costs. operating to remain profitable. Unlike a high-volume refinance market, today’s buy market will require more “boots in the field” to support healthy origination pipelines, and an increased level of control over billing and operational expenses. recurring.

The reality is that many businesses today still use labor-intensive and outdated processes to manage both the approval and reconciliation of loan and non-loan expenses, which presents risks of human error and delays.

In the wake of pandemic-related business challenges, some mortgage companies may have given their accounts payable and procurement departments a smart automation overhaul. By automating accounts payable with rules-driven workflows, lenders benefit from increased levels of visibility into specific vendor invoices and individual employee expenses, as well as greater control over the approval process. Quickly learning about vendor fee increases, new contract terms, changes to vendor service level agreements, and changes in vendor billing frequency. As one can imagine, these early adopters are likely already reaping the benefits by making automated and immediate adjustments to positively impact ROI.

The key to reducing existing operational costs to effectively manage “expenses” is to provide lenders with access to faster reports, including detailed information on loan volumes or margins and profits, for each branch of their network. Automated reporting capabilities not only allow lenders to move loans faster and more efficiently from origination pipeline to close, but as the lender closes more volume, it also generates the potential for greater savings through in the evaluation of each invoice.

Loan officer commissions and operating staff bonuses are the largest expense that each branch, as a business unit, has to bear. By positioning mortgage bankers to adapt to changing market conditions through better use of automated commission systems, lenders can more easily adjust commission calculations on a monthly and/or quarterly basis to individuals within branches.

The flexibility and benefits of transparent reporting help lenders see beyond loan volumes, providing the ability to drill down to revenue and commission basis points on any group of loans. In this case, actual margin and profitability data positively impacts employee retention while serving as a recruiting tool for talented branch managers who may feel undercompensated by competing lenders.

In times of economic uncertainty coupled with an impending recession, it is imperative that lenders look beyond the loan volumes shown on the spreadsheets to more accurately assess the true profitability of each branch. As the industry continues to grapple with the reality of declining loan volumes, faster reporting and automation will help drive greater consistency and profitability across branch networks, which will pay even greater dividends to the future when lending volumes rebound.

Joe Ludlow is Vice President of Irvine, Calif.-based Advantage Systems, a provider of accounting and financial management tools for the mortgage industry.

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