Mortgage Payment Processing: The Benefits of Outsourcing
Investing in real estate is back on the rise as banks are beginning to once again signal the marketplace that mortgage payment processing loans are available. According to the latest data released by the Federal Reserve, total loans for all U.S. commercial banks increased 7.9% compared to a year earlier, in spite of tight regulations the Consumer Finance Protection Bureau (CFPB) has on mortgage lending.
Mortgage companies, community banks and small financial firms have been struggling to stay afloat since the 2008 banking crisis. Currently, new regulations from the CFBP are adding penalty risk due to regulatory non-compliance. This factor, combined with increasing loan demand and a more competitive landscape among financial institutions that are vying to maintain a loyal customer base, is pushing some in the mortgage industry to turn to third party providers for their mortgage processing needs.
In addition to known cost-savings derived from reducing overhead or staff; and, cutting other expenditures such as CapEx investment, here are some of the more intangible benefits of outsourcing mortgage processing.
Outsourcing Suits Large and Small Banks
Big banks have the resources to keep up with Dodd-Frank and CFBP compliance burdens, but a majority are still looking to cut costs by partnering with an expert business process outsourcing (BPO) partner to handle all or part of the mortgage process. According to the Mortgage Bankers Association, banks lost an average of $194 per mortgage in the first quarter of 2014. And smaller FIs such as community banks, credit unions and regional mortgage companies are vulnerable to going under because compliance burdens are onerous.
National Mortgage News reported, “Banks still want to be able to offer their customers’ mortgage products while at the same time not lose the relationship to a competitor.”
Community banks and smaller institutions are becoming more confident that aligning themselves with a third-party mortgage processor will increase their lending potential. From origination to sales to servicing, mortgage companies are seeking to integrate BPO to handle back-office processes so they can focus on the customer relationship.
Accelerate the Loan Life Cycle
Speed up the life cycle of loans by reducing processing errors, limiting the risk of non-compliance fines and providing customized troubleshooting and problem-solving as they arise.
Streamlining the collections process improves the bottom line, accelerating balance sheet cash which many FIs consider a strategic benefit in a tough economic climate.
How to Assess a Provider
As the trend toward outsourcing mortgage processing continues, here are five key benefits to outsourcing mortgage processing:
- Risk Management: The client-to-client relationship should rely on risk management, loan processing expertise, and knowledge of mortgage standards and regulations.
- Added Value: Providers can add value to mortgage businesses because of economies of scale and their specific training and specialized expertise in mortgage processing.
- Flexibility: The mortgage sector is constantly changing which is largely due to an over-regulated atmosphere. Providers help FIs stay ahead of the curve by keeping up with technology, regulations and economic shifts.
- Latest Technology: Does the provider have the necessary software expertise, consulting and support along with sophisticated workflow management systems that can be tailored to mortgage processing?
- Less Overhead: Banks can boost lending returns by eliminating overhead and carrying less staff. Third-party providers typically handle all loan types and collections at a lower cost-per-item than in-house operations.
To Learn More: Are you ready to outsource your mortgage payment processing or change your remittance provider? Get started by talking to a 3 Point Alliance expert, by visiting our Contact Us page.