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HMDA Analysis Shows Lenders Could Add Significant Revenues

April 2014 Industry News - Mortgage Payment PriorityAn analysis of the 2013 HMDA data shows that lenders are missing opportunities; There is a gap in the approval rates between lenders. Some lenders have approval rates on non-conventional loans of as low as 11 perfect, where the typical rate is between 60-80 percent from larger lenders.

More importantly than this, Mortgage TrueView found that just an additional 10% of approved loans could increase a lender’s revenue significantly.

They pointed out two clear cut examples:

There was a specific smaller lender with 3,700 loan applications, with only 12% (445 loans) approved. If that lender were to increase its approvals by 8% to just a 20% approval rate (740 loans), the lender would see an additional $150,000 in revenue (based on a conservative $500 profit per loan).

Mortgage TrueView also looked at a larger lender. This lender had 150,000 applications and approved 93,000 loans (62%). The lender saw revenues of $46.5 million (based on the same conservative $500 profit per loan). If that lender increased its approved loans to 108,000 (just 10%), it would reach revenues of $54 million dollars.

Mortgage TrueView believes the huge discrepancy between approval rates of large lenders and small lenders is based off three determining factors: bias in the approval process, borrowers aren’t qualified, but mainly – loan denials are due to the lenders’ process itself – and how they execute it.

Lenders with higher loan approval rates – and higher revenues – tend to have very strong technology, or strong non-conventional lending programs (or both). The more streamlined the process – the more loans (ie more revenue) a lender is able to produce.

 

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