The cost to originate a home loan is skyrocketing as lenders try to comply with stricter rules to catch problem loans, and some community banks and independent mortgage lenders are now facing a stark choice: invest in technology that would help automate the loan process or exit mortgage lending entirely.

Origination costs are expected to rise 11% this year from a year ago, to nearly $5,900 per loan, as lenders scramble to meet tough new requirements from the Consumer Financial Protection Bureau, the Federal Housing Administration and Fannie Mae and Freddie Mac that take effect in January. That's on top of costs lenders have already incurred in recent years as they have added staff to better ensure the accuracy of loan files. In 2007, the average cost of originating a loan was about $3,700.

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