Ellie Mae: Here's what lenders get back from their origination costs

by Candyd Mendoza13 Mar 2019

Ellie Mae commissioned MarketWise Advisors to conduct an in-depth evaluation of the cost of origination and the return on investment (ROI) lenders could get from using the Encompass Digital Lending Platform.

The average cost of a loan origination for Encompass users was $813 lower than the industry average, according to Digital Mortgage Return on Investment (ROI) and Impact on Cost of Origination Study. Ellie Mae president and CEO Jonathan Corr said that by utilizing technology to automate the mortgage process, lenders realized an average total annual return of 698%, or approximately seven dollars for each dollar invested.

“The cost of origination is perhaps the single most important financial benchmark that we discuss with our lenders,” said Corr. “Beyond the numbers, our lenders are better poised to deal with shifting industry headwinds, regulation and changing demands of homebuyers, all by leveraging digital mortgage technology.”

“The 2018 housing market presented significant challenges for lenders. Total loan volume decreased, led by a dramatic decline of refinance activity due to rising interest rates. The cost to originate a loan grew to as much as $8,957 in 2018, according to the Mortgage Bankers Association,” said MarketWise CEO Jordan Brown.

Encompass users were also able to trim the time to originate and complete a loan by an average of 23.5 hours per loan, according to the study.

Other key findings from the study included:

  • The total potential positive financial impact for customers who adopted Encompass plus additional Ellie Mae solutions was $1,182 per loan, on average.
  • On average, Ellie Mae’s customers eliminated 23.5 hours to originate and fulfill a mortgage loan.
  • The average payback period for Ellie Mae customers on their investment in Encompass was 1.92 months.
  • The average net income margin for study participants was 9.96%, compared to industry levels of between -0.08% and 0.21% as reported by MBA in 2018.