Why Credit Unions Must Outsource Underwriting Requirements in 2018
March 15, 2018
Credit unions face an upfront challenge in 2018. While on the one hand, rising mortgage rates combined with higher home prices is shrinking profits, on the other, bearing the brunt of the continuous increase in financial regulations, is leading to backlogs and delays. In the face of these two challenges, credit unions need an alternative business model – one that would help them keep operational costs at a minimum and at the same time ensure optimum efficiency levels of critical processes like mortgage underwriting. The outsourcing model which for long has helped major mortgage players happens to be the most viable alternative to meet both these urgent needs.
Cost-Cutting on Resources Should be a Big Priority in 2018
Owing to the unpredictable rate environment and marketplace in 2018, keeping control on resource costs will be a big challenge for credit unions. With borrowers waiting for the rates to fall, which is unlikely to happen any time soon, demand for loans will fall and so will profits. Therefore, the need to cut costs incurred on maintaining resources has turned into a necessity. Payment to experienced underwriters, processors and appraisers, constitute bulk of the expenses and cutting down on resource related expenses would mean doing away with their services. However, by outsourcing underwriting requirements, credit unions can save on this expense, without losing on the expertise needed to review loans, particularly the ones that cannot be decided by automation.
Outsource Underwriting for Guaranteed Improvement in Efficiency
According to a recent credit union report, a good outsourced underwriting provider can decision a minimum of 2,500 loans each month with an approval ratio of around 45 percent. This number can vary depending on the actual requirements of the credit union, because most third-party providers base their decisions on credit union guidelines. So, if 45 percent is not actually what you are looking for, you can set the guidelines as per your needs and achieve a greater approval rate.
The same report says that the ideal turnaround times for third-party underwriting should be 10 minutes or less. However, experienced providers can churn things out even faster —may be as little as five minutes. A lot of course depends on the proficiency of the provider’s team members. A reliable and seasoned offshore provider can offer a team of highly competent underwriters with tens of thousands of individual auto-underwrites under their belts. They strictly adhere to the lender’s policies and criteria and steer clear of risky loans unless the credit union mandates the provider to dig deeper. Additionally, in today’s increased regulatory scrutiny times, providers help credit unions understand the real risks and scope of risk that accompanies regulatory action.
Yet another advantage of outsourcing is availing flexible pricing models. Different providers offer different pricing models and some even adapt to a model that’s favourable to credit unions. Providers are more than willing to negotiate discounts should there be an increase in volume of work.
With over 10 years of experience in providing quality back-office underwriting support services to credit unions, Expert Mortgage Assistance combines automated and manual underwriting processes, to help credit unions meet mortgage underwriting requirements in a more efficient and cost-effective way. With interest rates rising sharply, you can leverage our experience to make your underwriting services more accurate and focus on alternative revenue sources to replace falling income.