Four Out Of Five Lenders ‘Very Concerned’ About QC, Survey Reveals

Four out of five mortgage lenders are ‘very concerned’ about loan quality, a survey conducted by document management solutions provider Capsilon reveals.

The survey, which was conducted during the Mortgage Bankers Association's (MBA) Annual Convention and Expo in October, shows that 95% of lenders are either ‘somewhat concerned’ or ‘very concerned’ about loan quality.

What's more, with the deadline for compliance with the Consumer Financial Protection Bureau's new integrated disclosures fast approaching, about 80% plan to spend ‘somewhat more’ or ‘significantly more’ on compliance-related activities in 2015 compared to 2014.

In addition, about 80% of respondents reported that their 2014 loan production costs are ‘somewhat higher’ or ‘significantly higher’ than their loan production costs in 2013.

This is consistent with recent MBA data showing that total loan production expenses increased to $6,932 per loan in the second quarter of 2014 versus $5,818 per loan in the second quarter of 2013 – an increase of 19%.

‘Clearly, this survey data confirms that lenders are struggling with increasing costs as they contend with a myriad of new regulations that require a heightened focus on data integrity and loan quality,’ says Sanjeev Malaney, CEO of Capsilon, in a statement. ‘Rather than relying on expensive labor to ensure data integrity, to stay competitive lenders must move to a data-centric model where technology automates much of the processs. Technology gives lenders the ability to move to a straight-through loan processing model, where much of the workflow is automated, with only a small percentage of loans requiring human intervention.’

Although four out of five respondents report that they are very concerned with loan quality, there is no consensus as to how quality control (QC) should be handled. About 49% of respondents said their QC is handled in-house, while 15% said it is outsourced and 36% said they use a mix of in-house and outsourced resources.

About 84% of lenders say their companies have already begun preparing for implementation of the new integrated disclosures and the related rules, according to the survey. Surprisingly, 7% say they haven't gotten started yet and 9% don't know whether their organizations had begun preparations.


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