Is contract underwriting the solution to your problems?

by MPA01 Apr 2015
By David Lykken
Special to MPA

Last week on my Lykken on Lending radio show, we had the opportunity to discuss contract underwriting as a potential means for cutting costs. With the recent fall of interest rates, we noticed an influx of new originations in the market. For many organizations, the surge was overwhelming and issued challenges to many service level agreements--especially in regards to underwriting turn times.

How can organizations prevent catastrophes like this from happening? During peak seasons, when the volume of originations is too heavy to handle, many organizations solve the problem by overstaffing. That's one way to handle the ebb and flow of the business, but it can be incredibly costly and--in the long run--may not even be worth it. But, there is another option...

Today, many organizations are turning to vendors to provide contract underwriting as a service. Doing so shifts the costs to the vendor rather than forcing the company to bear it. The variable cost structure created allows the organization to be more nimble and waste fewer resources. That way, when the volume of originations is high, you're only paying for the variable cost of each additional origination. When it is low, though, you do not have to continue to pay staff for work that isn't getting done. Outsourcing your contract underwriting can reduce idle time and improve the efficiency of your organization even during times when it seems that efficiency is an impossible aim.


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