The loan officer engineer: The $11,898 problem

Start with a number that still bothers me: It costs the industry $11,898 to produce one mortgage. The average since 2008 is $7,903. So through the whole “digital mortgage” era, all those billions in software, the cost of making a loan went up 50%. We digitized the fax machine and sent borrowers the bill. If you’re a borrower, here’s roughly where your money goes. A point or so to the loan officer’s commission. Something to the branch manager’s override. Something to whichever lead company sold your phone number. And a lot to the layers of processors, coordinators, and re-checkers, who mostly exist because the layers before them can’t be fully trusted. Freddie Mac’s own study puts two-thirds (67%) of the cost of a loan at personnel expense. People, doing things. A depressing amount of it is retyping numbers from one system into another. Every bit of it ends up in your rate. If you work in the industry, you already know all this. You’ve seen a loan bring in $11,190 of revenue and still lose $40. You’ve keyed the same file into three systems before lunch. My point is just that the bps parade isn’t only expensive for borrowers. It’s expensive for you. It eats your margin and your eveni...