Promontory MortgagePath reports that its Promontory Fulfillment Services (PFS) unit has developed a new online Cost Savings Calculator that lets banks, credit unions and mortgage companies quickly compute the operational cost of residential mortgage loan origination – and then compare that to PFS’s outsourced solution.
By inputting just the number of loan units the institution originates per month; the number and annual salary of full time loan-production staff (processors, underwriters, closers and administrative staff); and the number and annual salary of support staff (compliance/legal, secondary marketing and technology), lenders can calculate the cost of origination and compare it to the cost if PFS managed the process.
The calculator only focuses on operational costs once the loan has come into the institution and does not factor in loan officer compensation, because it assumes the client will continue to prospect for the loans. In addition to the cost analysis, the calculator will also identify areas of the operation, such as compliance, which may be under-staffed and could create potential compliance risks, Promontory MortgagePath says in a release.
According to recent data from the Mortgage Bankers Association (MBA), the average cost to originate a mortgage is more than $8,000 when LO compensation is factored in.
But as Ken Janik, head of operations for Promontory Fulfillment Services, explains, “these are averages and they may or may not be the right benchmarks for different sized banks with different overhead structures and business models.”
“Our calculator uses each institution’s own numbers and instantly delivers a client-specific answer,” Janik says.
“In the last few months we have seen a number of mid-tier banks exit the mortgage origination business because they couldn’t justify the low margins or stand the cyclicality of mortgage lending,” adds Bruce Witherell, CEO of Promontory Mortgage Path. “Our new calculator lets executives do their own math, and in minutes, come to their own conclusions about their true processing costs. They can also see how they can competitively continue to offer mortgages as a product without maintaining a mortgage operation.”