Using Software to Uncover Mortgage Business Insight

If you are managing a mortgage origination business, no one needs to tell you that things are getting tougher. You’re dealing with tighter margins, production volume is down while costs, driven primarily by compliance, are up. Compass Analytics recently reported that production volume for its clients was down in March by 20% from the February peak. Factor in a decreasing percentage of refinance business and you’ve got the makings of a cage fight where only the very best originators will come out of 2016 looking good.

In an environment where every basis point is worth fighting for, loan originators need to carefully analyze every loan level expense if they hope to gain the kind of insight that will allow them to succeed in today’s tough business environment. Unfortunately, most originators don’t have the analytical power to know exactly what is making them the most money and where costs are out of control.

When Compass Analytics’ David Ellenberger wrote to Rob Chrisman about this problem, he was most concerned with the larger firms Compass represents and suggested a continued focus on “best execution, upfront focus on clean data, and accurate capture, reporting, and tracking of secondary and accounting performance.” Ellenberger added “We remind clients to remain vigilant in challenging their best-execution analysis, counterparties and delivery methods. We encourage discipline with our clients to pay close attention to their daily accounting and secondary numbers so they are always confident in their performance and to avoid surprises at loan sale, purchase advice reconciliation or month-end accounting.”

All excellent advice, but much of this is can be incredibly difficult for the smaller loan originator, whether they be a broker, correspondent, community bank or credit union. Even so, they face the same problems their larger competitors face. Many of these firms are using non-industry-focused accounting software, which does not allow them to easily include loan level expenses. Even when these costs are included, they typically cannot be assigned to more than one or two cost centers, making it impossible to perform the kinds of analytics required to gain the business insight these companies need to make good decisions.

Surprisingly, lenders don’t really need complex analytical tools to find business insights hiding in their loan level data. All they need is the right accounting software.

Where Business Insight is Hiding for Loan Originators

The general ledger is the foundation of the mortgage lender’s financial toolset. Over the years, GL software has evolved and now serves its primary functions, (AP, Cash Management etc), quite well. However, one area in which the mortgage lender’s accounting software too often falls short is in accounting for loan level costs on a granular level. While even QuickBooks allows a user to track a cost center, tracking data across multiple cost centers is so difficult as to be considered impossible for busy managers. Even legacy mortgage specific accounting software makes it far too difficult to analyze cost data effectively.

Looking at costs across multiple cost centers is essential for effective financial management of the mortgage enterprise. In the mortgage industry, we typically see customers looking to analyze their loan level costs against:

Loan number

Business unit



Loan officer

Product type



And more…

Even the smallest lenders are likely to analyze their expenses against some of these cost centers, but doing so involves a great deal of manual labor if they lack the right software. Entering loan level data from the LOS into QuickBooks can take as long as 20 minutes per file, while producing branch level Profit and Loss reports can often take an hour or more. We work with clients today that formerly spent weeks pulling loan level information out of their loan origination system and putting it into Excel spreadsheets in order to sort it by cost center for comparison.

In the past, more originators may have been inclined to put this kind of time into their businesses, but with the dramatic increase in compliance oversight, every additional man hour they can afford is spent on quality assurance in an effort to avoid crippling non-compliance expenses. This leaves those lenders who cannot afford additional staff in the accounting department operating, for all practical purposes, in the dark.

Management guru Peter Drucker often said that “you can’t manage what you can’t measure.” In our business, we know that you can’t measure what you don’t track. Unfortunately, too many lenders lack the software that will allow them to effectively track the financial performance of their businesses. And this isn’t just our opinion. We’ve visited with a number of state banking regulators who have shared with us their concerns about this weakness on the part of many of the smaller institutions they oversee. It constitutes a significant risk to their survival.

What Today’s Lenders Really Need to Uncover Business Insight

Business and financial managers need an efficient, feature rich mortgage loan level accounting software that can easily import loan level data directly from the loan origination system. This information becomes part of a data warehouse inside the accounting system that includes all of the loan related information for each specific transaction. In addition, the right software can hold information particular to each origination, such as branch code and loan officer, as well as a full escrow breakdown and more, including:

Borrower information

Funding/sale Information

Loan Purchase investor

Interim Servicing

1098 reporting

Financial KPI’s

The majority of software available to the industry will include all of the capabilities that a lender would expect from an financial management solution, including general and recurring journals, cash management, vendor management and accounts payable & receivable. In our minds, this is all just the price of admission for today’s robust accounting software.

To get to the business insights that are hiding in your loan origination company, the lenders financial solution must have robust reporting capabilities that will allow for detailed analysis by loan number and multiple cost centers, providing financial reports with flexible column and row layouts with full drill down capabilities.

The reconciling of both loans held for sale and trust accounts is often a very time consuming process, especially for lenders using legacy or non-industry specific accounting platforms; commonly involving the comparison of large and cumbersome pdf’s or spreadsheets of data. Today’s lenders can’t afford that and need tools that will allow them to drastically shorten the time taken for such tasks, reducing the process to a matter of minutes as opposed to hours or days.

When the Consumer Financial Protection Bureau announced last fall that loan officer compensation would be among its enforcement priorities for the coming year, it became a compliance priority for all lenders.An accounting software with a robust indsurty specifc compensation module will make this easy. Unfortunately most software on the market today does not.

CFO’s working in the mortgage origination business will use their financial accounting solutions for budgeting, forecasting, planning and analyzing of data for the enterprise. But without careful tracking of loan level expenses, analyzed across a number of cost centers, managers cannot know exactly how well their enterprise is performing and where changes must be made to increase profitability. Armed with the right software, lenders can easily uncover business insights that will make managing their loan origination concern easier and increase overall profitability.

Finding Business Insights in Your Own Data

All of the information lenders need to make better corporate decisions is currently living in their loan origination systems, but these tools do not come with the financial reporting capabilities to allow business managers to make sense of it. However, robust accounting software for mortgage banking enterprises does exist and offers all of the insights described in this article.

United Shore Financial Services, LLC, is currently using an accounting package that does. According to Paul Orlando, United Shore’s CIO and Julie Nelson, the company’s SVP Controller, they sought out software that provided budgeting and planning, accounts payable, accounts receivable, and fixed assets all in one system, making it much easier to drill down to the data level.

Says Nelson, “Now I can upload a file with one click – it takes less than 10 seconds – and the output is exactly what I need. This is saving us a lot of time. And, I have reporting all the way up and down the stream from client-level, to product-level, to business channel. This gives me insight into which center is providing a positive impact on the loan and which is having negative impact on the loan, and we can make improvements where they are needed.”

By using the right software, United Shore went from processing 1.25 loans per hour to 5 loans per hour and is currently the leading wholesale mortgage lender in the industry.

“The industry is happy if they’re getting a cost of $7,000-$8,000 per loan, and we’re going to be able to originate a loan at under $3,000. Being able to track our costs more effectively allows us to deliver a loan at that price every single day,” Orlando said.

About the author:

Carl Wooloff is Business Development Manager at Bestborn Business Solutions, the company behind Loan Vision, the mortgage industry’s fastest growing provider of accounting and financial management solutions. Carl can be reached at [email protected].


Don't Miss A Thing

Subscribe to the newsletter

Related Articles

Scroll to Top