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Why account at the Loan Level?
Everyone likes to talk about needing loan level accounting but what is it really? How will you benefit from it? Can someone be more specific?
The answer is you need it to make sure you didn’t leave money on the table and if you did, how to prevent it systemically from occurring again.
It could be as simple as a loan processor rushing and they keep clicking on the credit report button in the LOS to get to the next step, not realizing they are ordering a credit report literally each click at $20 a pop. A loan level accounting system tells you which loans this happened on but more importantly which LO is doing this.
Or it could be more financially painful where the funds went out for closing and were never sent back when it cancelled with no-one realizing it. This could cost you $250,000 on an average loan and I have seen it happen way more than you think is possible. Not to mention the interest cost on the warehouse line being incurred or the opportunity cost of not putting those funds to use in more production.
The other benefit to loan level accounting is for the analysts and number crunches. If you actually had the data and then took the time to analyze it, you might make strategic decisions that could make the difference between survival or certainly to maximize profits.
You owe it to yourself and your employees to mind the farm for longevity. Secondary need to know what the right balance of volume and margin should be and they do with spreadsheets and price sheets but it would be nice for accounting to back them up with the data that proves it (or not) after the loans have funded and been sold.
What if certain products are incrementally more profitable either short term or long term (if you retain the MSR). Are Ginnie Mae loans really more risky with the insurance guarantee or can you mitigate this risk by running a tight ship and banking the extra profit over their conventional counterparts?
Wouldn’t it be nice to know if the squeaky wheel loan officer eating up all of your time and the operations team time is really bringing in all that volume at a profit. What if the LO is just bullying their way through lock extension after lock extension and you made far less profit than you thought.
The problem with not having a loan level accounting system is “you don’t know what you don’t know”. This is a risky was to run your business. We are not talking rocket science here like Artificial Intelligence for example. Its just a matter of selecting the right accounting system such as Loan Vision. Then you need to install it right and train your staff so they are utilizing the data the system is telling them.
You can also outsource to firms, such as Loan Level, to install, train, or do the ongoing accounting who are mortgage accounting experts and it will probably be less expensive than having your own staff anyway. Plus imagine the extra profit you will make from knowing the true economics and having less costly leakage.
Loan Officer Commissions?
Everyone likes to talk about needing loan level accounting but what is it really? How will you benefit from it? Can someone be more specific?
The answer is you need it to make sure you didn’t leave money on the table and if you did, how to prevent it systemically from occurring again.
It could be as simple as a loan processor rushing and they keep clicking on the credit report button in the LOS to get to the next step, not realizing they are ordering a credit report literally each click at $20 a pop. A loan level accounting system tells you which loans this happened on but more importantly which LO is doing this.
Or it could be more financially painful where the funds went out for closing and were never sent back when it cancelled with no-one realizing it. This could cost you $250,000 on an average loan and I have seen it happen way more than you think is possible. Not to mention the interest cost on the warehouse line being incurred or the opportunity cost of not putting those funds to use in more production.
The other benefit to loan level accounting is for the analysts and number crunches. If you actually had the data and then took the time to analyze it, you might make strategic decisions that could make the difference between survival or certainly to maximize profits.
You owe it to yourself and your employees to mind the farm for longevity. Secondary need to know what the right balance of volume and margin should be and they do with spreadsheets and price sheets but it would be nice for accounting to back them up with the data that proves it (or not) after the loans have funded and been sold.
What if certain products are incrementally more profitable either short term or long term (if you retain the MSR). Are Ginnie Mae loans really more risky with the insurance guarantee or can you mitigate this risk by running a tight ship and banking the extra profit over their conventional counterparts?
Wouldn’t it be nice to know if the squeaky wheel loan officer eating up all of your time and the operations team time is really bringing in all that volume at a profit. What if the LO is just bullying their way through lock extension after lock extension and you made far less profit than you thought.
The problem with not having a loan level accounting system is “you don’t know what you don’t know”. This is a risky was to run your business. We are not talking rocket science here like Artificial Intelligence for example. Its just a matter of selecting the right accounting system such as Loan Vision. Then you need to install it right and train your staff so they are utilizing the data the system is telling them.
You can also outsource to firms, such as Loan Level, to install, train, or do the ongoing accounting who are mortgage accounting experts and it will probably be less expensive than having your own staff anyway. Plus imagine the extra profit you will make from knowing the true economics and having less costly leakage.