Outsourcing to a Contract Mortgage Loan Processor

One of the biggest dilemmas for independent mortgage brokers and small mortgage broker companies is whether to do the loan processing in house or outsource it to a contract mortgage loan processor.

Will the mortgage broker do better with an independent freelance loan processor, a local processing company, or an online company capable of processing loans nationwide? Big is not always better, especially in this business. With technology, local is not always better either. The loan processing company should never be judged on big, small, local or national, but their accuracy and skills.

A single real estate transaction involves ordering, tracking, collecting and QCing 100s of pieces of paper and coordinating the efforts of over a dozen vendors and participants to the loan. This takes skill. Trying to build a successful business using inexperienced and unmotivated professionals is an exercise in frustration. The mortgage broker's best efforts can be sabotaged if the wrong partners or vendors are used.

Some mortgage brokers select their processing solution based on fees, which can set them up to receive very poor service. Lower fees means the contract mortgage loan processor must do more volume to earn their income. The increased volume can lead to bottlenecks, delays in return calls and severe delays that can have closing dates missed and locks lost. A good contract processing service will pay for itself many times over by providing fast, smooth service that earns the loan officer a steady stream of referrals and by using their skills to get tough loans funded. Here is a list of things a broker or loan officer should consider when hiring a contract mortgage loan processor:

* How fast will new submissions, conditions and closing requests be handled?

* Is there a formal quality control process to insure issues are caught and resolved before underwriting?

* How many years have they been processing and what other mortgage experience do they have?

* How fast do they return phone calls and emails?

* Will they work with your borrower directly to gather signatures, documentation and provide updates?

* How do they keep you updated on the loan’s progress?

* Will they update your Realtors for you?

* Are there any loan programs that they will not process or that they charge extra for?

Comparing “extra” charges can make the process of finding a contract mortgage loan processor confusing. Third party fees are legitimate costs and are expensive, so while most contract processing companies don’t like to discuss these upfront be sure to ask about them anyway. Most contract mortgage loan processors track and pass these fees along to the loan officer, in addition to the processing fees charged at closing. A verification of mortgage costs $55. A verification of deposits costs $40. Verification of employment costs $15. Some even track overnight charges and even long distance fees.

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It is popular for contract mortgage loan processors to charge fees for certain services. Extra charges may be charged for preparing disclosures, sending disclosures, running AUS findings, coordinating manual pre-approvals and printing copy packages. Ask to get a list of fees upfront so there are no surprises later.

There should be no processing fee if the loan is turned down. This is a obvious red flag that should warn mortgage brokers away from that processing company. It is popular for some contract processors to charge variable processing fees depending on the loan type. This can be confusing and can lead to mistake on Good Faith Estimates so we recommend finding a contract processor with one flat processing fee regardless of loan type.

This last promise is the processor's promise that they are able to work quickly, without error. Delays, problems, and changes in the papers can cost a mortgage broker their client base, time, and money. The loan processing company should accept responsibility for their part of the process.

A mortgage broker cannot expand their business if they try to do everything themselves. Outsourcing the paper pushing can free them up to network, market and sell. Their choice of contract mortgage loan processor will have a long-term effect on their business, for good, or bad.