Fannie: Origination Costs Up Sharply

A benchmark Fannie Mae survey of 101 lenders of all types, sizes, and locations found that origination costs for correspondents increased dramatically in the past year, rising 28%, from $1,601 per loan to $2,144.Wholesalers, meanwhile, saw their origination costs rise 14%, from $785 per loan to $916, while online lenders reported a slight drop in costs, from $1,846 to $1,831. The "Mortgage Focus 2003" study also found that "pull through" rates fell "sharply" for the wholesale channel while improving "somewhat" for the retail and Internet, or call-center, channels. The latter were the only ones showing an overall improvement in direct productivity. Fannie Mae cautioned that the annual study of origination costs should be viewed as a representative sample rather than as an industry average or statistical study. Nevertheless, the company says the results provide useful insights into lending costs. Not surprisingly, the survey found that automated underwriting is now the norm. It also said that the closer automation is to the point of sale, the greater the cost savings and the bigger the bump in productivity. In the retail sector, it costs $1,524 to write a loan when the process is integrated into the point of contact with the borrower. When underwriting manually, however, retailers spend an average of $2,549 to originate the loan. At the same time, direct productivity falls from 66 loans closed to 51 per full-time employee when humans get involved.