A slew of rule changes introduced by the Dodd-Frank act and sea of red tape from the CFPB have pushed credit unions to the walls.  The seemingly endless rulemaking process along with the outdated regulations existing in statute are forcing credit unions to dedicate more resources to ensure compliance than focusing on services that would benefit their membership. Stats reveal that that 94 percent of credit unions have seen compliance burdens increase since Dodd-Frank’s passage and over 27% had increased their FTEs for compliance personnel.

The most startling fact, according to a latest survey, is that over 70% of credit unions are forced to take noncompliance staff members take on compliance-related duties to meet regulatory burden. With a new administration in charge and chances of relaxation of regulation norms looming large, credit unions need to overcome these stumbling blocks to stay in contention in the mortgage space. A viable solution is to consider outsourcing as an operational model.

Mortgage processing outsourcing can help credit unions gain technical superiority, and achieve more regulatory compliant closures, within a short turnaround time. Passing on the labor-intensive, monotonous, yet critical paper work involved in loan servicing to third-party providers can allow credit unions to concentrate on more important tasks like mortgage product designing, modification programs and loan origination. Overall, a fruitful credit union-MPO partnership can ensure maximum returns on investment, in a more relaxed business arena. This article provides a detailed account of the numerous advantages of outsourcing mortgage process requirements, in today’s competitive landscape.

Cost -Cutting

Outsourcing work to an external vendor brings down the cost of processing loans, by many folds. With in-house processing, credit unions incur additional expenses like staffing costs (advertising, hiring, training, payroll, employee benefits, taxes, insurance, firing etc.), additional equipment, supplies and postage expenditures, licensing fees, compensatory fees for mistakes, and so on. By holding hands with a professional outsourcing partner, they can cut down on many fixed and variable cost components, involved in servicing mortgage. A current survey reveals an annual saving of $237 per loan, upon adoption of an outsourced servicing strategy.

Complete Control

Credit unions have a misplaced fear of losing control over their work process. This is because, good outsourcing partners always appreciate mutual encouragement, participation and consent, at work. Established contractors provide credit unions with proprietary technology that offers the latest online compliance tools and 24/7 access to member data to remotely supervise their processes. Many vendors also provide a variety of private label sub servicing programs to reinforce a partner’s brand amongst members.

Regulatory Compliance

Licensed ­vendors keep themselves updated with changes to regulatory compliances and in the process, insulate credit union processes from compliance violations. Most services have instituted policies and procedures consistent with new regulations and guidance. So, they comply with evolving rules with great care and accuracy.

Meeting Member Expectations

A flourishing credit union business demands world-class service delivery to its members. Providing such superior and regulatory compliant service is indeed a challenging task because of the associated investments in technology as well as resources. A sub-servicing partner, can take care of this need with great finesse. They can offer a proactive approach in anticipating members’ expectations and integrates subtle modifications into their servicing platform to meet each demand. Such upgraded servicing options guarantee positive experience to both lenders and borrowers.

While the benefits of roping in a third-party mortgage service provider can be manifold, credit unions need to have a well-defined strategy to manage processes with third party mainstays throughout the loan origination and closing stages. The CFPB’s vendor management expectations makes it explicitly clear that onus of failures brought about by vendor missteps must be borne entirely by the mortgage lender.