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Identifying Opportunities To Save Costs

Digging deeper for better understanding

Chrissy Brown
Chrissy Brown
Identifying Opportunities To Save Costs

I love learning new nuggets of information about our industry. Fortunately (and unfortunately for some) “it is what it is” or “just because” are not acceptable answers for me. I always find myself digging deeper for better understanding of things I’m not as well-versed in because, as industry professionals and leaders within our organizations, we should never stop learning and growing.

This brings me to sharing another discovery I made while on my quest for more information. As a mortgage company, the second-biggest expense (outside of people) is your credit-reporting cost. Latest studies suggest that around 10-15% of leads in general turn into closed deals. It makes sense why credit is the No. 2 expense. Every lead has the natural next step of pulling a credit report (or Softqual).

And this is where my interest in understanding the world of fees surrounding credit began. Too often we just assume things are the way they are because that is how they have always been. Why question it, right? Quite honestly, in many cases that is true. However, due to tech advancements throughout the mortgage industry, everyone is hyper-focused on cost — every dollar matters.

Now let’s talk about the line item you see on your credit report invoices called the “Secondary Use.” I quickly started asking for specifics around this line item. As an executive of a mortgage company, one of my major responsibilities is process improvement. I feel directly responsible for ensuring that every dollar we spend is necessary, and if it is not, I am then dialed in to finding an improvement to the process that could reduce the cost.

My initial finding was that this was an investor charge. Obviously, unable to be satisfied with that, I wanted to know which investors and when. This line item was representing 6% of our total credit activity.

I then received a loan-level report of each loan to figure out if there was a common investor. I thought, “Maybe this was something we could negotiate with them?” I was very surprised by my discovery. The “investor” was the United States Department of Housing and Urban Development, along with the U.S. Department of Agriculture. All this new information led me to the understanding that this is the fee to provide a credit report through Total Scorecard and Guaranteed Underwriting System (GUS).

Here’s the kicker though: It rivals the cost of a tri-merge credit report. Albeit not the end of the world, but every dollar adds up. On top of that, why are the Government Sponsored Enterprises (GSEs) so much cheaper when the government products are supposed to be for the underserved community?

These are the kinds of reasons I am so motivated to get involved and advocate within the mortgage industry. I am active in the Community Home Lenders Association (CHLA), and one of the changes we are really advocating for is to shorten the life of mortgage insurance (MI) charges on FHA loans. This seemed to be another example of how much more expensive it is to do an FHA loan verses a Conventional, when the mission should be in affordable housing.

In trying to answer the question of “why are FHA loans so much more expensive to do?”, I found my next and final piece of information. FHA and USDA were not getting this “Secondary Use Fee.” That was not going into the pockets of those agencies; rather this was going to the bureaus. They are justifying this fee since FHA and USDA need to view the credit report to purchase/insure the loan. In my opinion, as an industry we should be paying close attention to the costs associated with affordable housing loans.

While some of these issues may never change and/or exist for reasons I am unaware of, I needed to find out exactly what every nook and cranny of this process looked like for our team. Because of all of this, I have been able to work closely with our team to create more effective processes and eliminate unnecessary spending. I think it’s good for the company and the consumer when we challenge some of the legacy ideals. For instance, “Always run AUS (Automated Underwriting Systesms) at the onset.” Maybe you should, maybe you shouldn’t, but every piece of information helps determine the appropriate path for your company and your borrowers.

Whatever happens with these initiatives, at least my digging into them was a good avenue to learn exactly where every dollar is going. Hopefully my discoveries will help others in their efforts to be more aware and cost-effective.

This article was originally published in the Mortgage Women Magazine February 2022 issue.
Chrissy Brown
Chrissy Brown,
Chief Operations Officer, Atlantic Bay Mortgage
Published on
Feb 10, 2022
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