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Rising Costs to Originate Spur Innovation

Jun 22 2016

Feel like your costs to write loans are going up? It’s not your imagination. In 2008, the average cost to write a new loan was $4,500, but in Q4 2015 that average cost increased to over $7,700, according to Mortgage Bankers Association Chief Economist Mike Fratantoni.

And that can take a bite out of any company’s budget.

Why the Escalation?

Point to increased regulations for most of the cost increase, Fratantoni says, citing TRID, Dodd-Frank, the ability to repay and qualified mortgage standards — all of which require a marked focus on quality control.

Due to the changes in regulatory requirements, mortgage providers have had to increase their back office personnel, from risk managers to additional quality control (“QC”) and quality assurance (“QA”) specialists.

This increase in personnel, which typically adds to fixed costs for salaried employees, can greatly increase the cost per loan. In contrast, costs involving the sales force more typically increase or decrease commensurate with loan volume since they are paid on commission.

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