Lenders reap tech paybacks

September 30, 2002

Study confirms automated underwriting results in cost savings, productivity gains

Inman News Features

A recent study released by Fannie Mae confirmed that lenders who implemented automated underwriting achieved significant cost savings and increased productivity.

The study showed that lenders reduced costs and increased productivity in every channel compared with the previous year, and attributed the results to the expanded use of technology, according to Terri Davis, managing director of Fannie Mae eBusiness.

Retail lenders who implemented automated underwriting at the point-of-sale reported origination cost savings of approximately $1,300 per loan, according to the 2002 Mortgage Focus study.

"In addition to the dramatic savings traditional retail lenders realized from implementing automated underwriting at the point-of-sale, the study found that lenders with AU-enabled Internet/call center channels achieved the lowest origination costs overall," said Davis. "Further, wholesale/correspondent lenders achieved noteworthy full-time employee productivity gains as a result of employing business-to-business Web sites powered by AU."

The study also compared the profit margins of retail lenders who did not use automated underwriting at the point-of-sale during the 1998 refinance boom, but did so during the refinance boom last year. These lenders reported a remarkable increase in profits—some as high as 250 percent—as well as increased productivity.

Top-performing lenders incorporated a wide range of tactics including employing clear business strategies and comprehensive employee retention programs that complemented their use of technology and drove their business to new heights, according to the study.

In addition, the study's key findings concluded that the total cost to originate per closed loan was down in all channels, while direct productivity increased across all channels; and integrating automated underwriting technology and moving it closer to the point-of-sale brought savings, even as many lenders were more carefully monitoring IT expenditures.

Each year Fannie Mae's Mortgage Focus study provides current mortgage origination data for the traditional retail, Internet/call center, wholesale and correspondent channels. This year, 96 lenders from a variety of channels participated in the study. Data collected included information about the lenders' business strategies and mission, as well as detailed data regarding profits, cost to originate, staffing and loan production.

Copyright: Inman News Service

Contact ALTA at 202-296-3671 or [email protected].