When we entered 2020, things looked pretty status quo. Pipelines had diminished. After the onslaught of the past summer, production staff were able to take a breather. Interest rate predictions indicated a stable and maybe slightly increasing rate environment. Refinance activity slowed. Managing a pipeline became a little easier.
But, as all too often happens, the predictions were wrong. January applications began to grow, February even more so. Lock activity in February exceeded every month in 2019 except August. Barely into March, our single-day lock activity reached record breaking levels.
One way to prepare for future growth is to look at improvement areas from previous highs. As we reflect on loan activity from the past summer some patterns emerged. In addition, our member satisfaction surveys uncovered some borrower pain points.
When volume was high, all activities in the loan process slowed. Everything from verification to appraisal, title to closing were stretched.
- Higher volume often led to cracks in completeness of data for processing.
- Processing times increased because of incompleteness.
- As rates dropped, borrowers asked to negotiate the rate, slowing the process.
- Underwriting saw more suspense items or increased prior to close conditions.
- Borrowers rushed to close and did not meet the closing conditions.
- Loans took longer to get purchased due to increased time in QC.
How can we take the lessons learned, adjust our processes and emerge stronger, ready to deliver a stellar member mortgage experience? What are some pipeline management techniques to ensure members are receiving what we are promising?
- A complete application and complete documentation upfront solves a lot of issues.
- As volume increases, consider more time on locks. Extensions are far more expensive than locking at a 45-day price rather than a 30-day price.
- Pay attention to your pipeline reports. If getting close to expiration, request extensions before the lock expires. Paying 10 basis points for an extension of 10 days is far better than adjusting pricing, which could cost significantly more than the cost of the extension.
- As a rule, MMS does not automatically accept negotiations. But, for those instances where a loan may cancel, we will consider negotiations. Check out our temporary rate renegotiation program article for more information.
What processes can be implemented to keep loans progressing through underwriting to ensure loans are sellable and your Credit Union gets paid?
- In general, the fewer times the underwriter looks at a file the faster the process.
- A great resource for discussing general questions about loan qualifications is through email to our underwriting team. You can often get preliminary answers to your questions without submitting for a full underwriting review.
- Prior to underwriting submission, ensure all necessary documents are uploaded. For Early Look, everything except the collateral documents need to be included. For new, full underwriting submissions, all documents including the appraisal and title are needed.
- If MMS is processing a file, best practice is to have the processor serve as the coordinator between the Credit Union and underwriting. This minimizes confusion, duplication and miscommunication.
- Showing how you calculated income, assets and debt in the path’s underwriting tabs and comment sections, and describing any quirks with the loan, helps the underwriters review a file more thoroughly in less time.
- Resubmit for review only after all the outstanding conditions are resolved. Upload the files as you receive them but wait to resubmit to underwriting until the conditions are complete.
- Take time to double check the DU findings for changes that may affect another item in the file. If an affected item occurs, resubmit that items as well before submitting.
- Upload the latest DU but leave the previously approved DU in the file for comparisons. Eliminate any duplicate files.
Communication with members throughout the process gives the borrower piece of mind that the loan is being worked on and following a steady march to closing. Members are much more receptive to providing information during the process if they are kept in the loop. A few extra minutes thoroughly gathering on the front end can save days or weeks in underwriting suspension.
By learning from the past and working together to improve processes for the future, we can keep loans on track and members happy.