by Bob Dougherty
Much has changed since I made the jump from broker to lender in the 1990s, but some things are the same. Significant capital and net worth, written processes and a lot of auditing are still necessary. You must have a handle on your team. If you have multiple branches in multiple states, trustworthy leadership is essential. You need to staff and train loan officers who understand and are concerned with the fact that they could lose their license and put the company in peril by making poor decisions. And finally, you still must qualify for a warehouse line. If you make errors and your loans are unsellable, you can lose money and go out of business.
That said, transitioning from broker to lender was much easier 20 years ago than it is now. Since then, our industry has had its share of ups and downs, forcing significant regulatory changes. Today, keeping up with compliance in an ever-changing regulatory environment is not only costly (production expenses currently average $8,060 per loan, according to the Mortgage Bankers Association), but also a full-time job. Lenders must always be aware of and understand new and changing rules impacting everything from advertising to disclosing change of circumstance to reporting HMDA data, and how these rules will change their workflows and processes.
This makes it critical for lenders to have reliable technology in place. Having a data-driven loan origination system allows lenders to input all borrower and property information once, in a logical progression, and then use those data fields to populate multiple forms. The LOS simplifies the application process, compliance with new regulations, and internal oversight. When a new form is mandated, a data-driven LOS only needs to add the new data fields and map them to the correct lines on the new form—making it easier and more cost-effective to implement new regulations.
As we all know from the news, non-compliance, on a federal or state level, can lead to hefty fines or a cease and desist or both. And those are things that you cannot afford to take on when you are just starting out as a lender.
Do you still want to be a lender? Be sure to check out my next blog on the dos and don’ts of transitioning from broker to lender.
Bob Dougherty is vice president of business development at Calyx Software, a leading provider of comprehensive mortgage software solutions for banks, credit unions, mortgage bankers, wholesale and correspondent lenders and brokers. He has more than 20 years of operations and business development experience in the mortgage industry. Previously, Dougherty was vice president of mortgage operations at Merchants Bank and chief executive officer of Timberland Mortgage Services, Inc., a multi-branch lender and underwriter of residential mortgage loans in Minnesota, Wisconsin, Kansas and Colorado.
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