Improving the back office during these still-challenging fiscal times for lenders is not easy, but some things that might help avoid them process loans more efficiently include a more proactive front-end approach, more standardized training or best practices, and prioritization.
With back office work growing under the influence of evolving regulatory and investor demands for certain data and/or procedures that have aligned it more closely with the front end’s ability to make and close loans, lenders might move or reject loans more quickly and accurately by checking borrower and property details earlier in the process, suggests Mike Summers, a vice president at Veri-Tax, Irvine, Calif.
Because budgets remain tight, although the industry overall has more “skin in the game” and more to lose when loans go bad, some lenders still are taking a more reactive than proactive stance when it comes to checking borrower information and only doing it when its required, he said.
This means the possibility of originators or loan officers verifying borrowers’ tax information using a 4506-T early in the origination process, for example, might get short shrift, when it could in fact help lenders and originators approve and reject loans more expediently, according to Summers.
“I think the attitude is that, 'It’s another thing that we have to do and another thing that we have to pay for. We’re being nickel and dimed to death, there’s just no income for me as the broker and it’s cutting into the commissions,’” he said.
“The loan officer only used to know the 4506-T used to be called 'the loan killer,’” Summers said. But today, in a world where some loan officers in recent years have come to describe their job as becoming one with “half the commission, three times the work”—and the industry wanting to staff as efficiently as possible—this type of back-office process is increasingly migrating their way.
This still leaves plenty of mushrooming work for the back office, which is charged with double or even triple checking the slew of loan information the industry is handling today, he added.
Whoever is handling the actual verification using the 4506-T, Summers said questions he gets sometimes suggest in certain cases training about how to interpret it might be helpful. While proprietary nature of some underwriting may make standardizing it challenging, formal training in such matters within companies and/or “best practices” discussions on the part of the industry as a whole could be helpful, he suggested.
Vendors can help to an extent, but their assistance often has to be limited, Summers said.
“We’re careful about that because it’s a slippery slope,” he said. “We’re careful not to give too much advice. We don’t have CPAs. We’re not agents of the IRS or that works with the IRS. But on the basic information of what’s contained in the IRS tax transcript we do provide a little bit of that, but we would want to be careful.”
