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Why Outsourcing Makes Sense For Local Lenders And Credit Unions?

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For many of the largest mortgage lenders in the country, outsourcing plays a key role in their overall business strategy. By capitalizing on the benefits of outsourcing, including reduced overhead costs and economies of scale, these lenders can direct more of their resources on expanding their business and gaining market share. Yet outsourcing and the benefits it offers is not reserved for just the largest lenders in our industry. Credit unions and local lenders can also benefit from outsourcing. In fact, it is often the local lender or credit union that can reap the greatest advantage from outsourcing. In this post, we look at several of the reasons why outsourcing makes sense for local lenders and credit unions.

Make Every Dollar Count

Managing loan production costs and overhead expenses is vital to the success of any lender, but even more so for the local lender. With operating budgets that are a fraction of those of their larger regional and national competitors, every dollar spent has return the greatest possible benefit. By outsourcing back office loan production tasks to a low cost third party provider, local lenders and credit unions can free up dollars spent on production expense for more critical capital investments or growth initiatives.

Utilize the Newest Technology

A single lender may find it difficult to lay out the capital expenditures needed year after year for the most recent technology, but when this expense is spread over 20 regional lenders or credit unions it is not as daunting. While a simplistic example, this is in effect the business model of the outsource provider. By leveraging economies of scale, the outsource provider can employ the most recent technology to handle your back-office processes. On the processing side, this means faster turn-around times, greater efficiencies and added functionality all at a cost that is less than handling the work in-house on dated technology. Yet it is your customer that will realize the greatest benefit as new technology will have the most recent cybersecurity features to assure that their non-public private information is secure.

Optimal Staffing and Scalability

The real estate industry is a highly cyclical market with both seasonal buying cycles occurring during each calendar year punctuated by longer-term peaks and valleys. This cyclicality makes it challenging to maintain optimal staff levels. As the market heads to a peak, additional staff is needed to handle the increase loan volume. As the market wanes, the additional staff becomes a drain on profitability and must be laid off. Outsourcing can assist in smoothing this undulation in staff and help you achieve and maintain an optimal staffing level. As the market heats up, the additional work load, and any possible need for additional staff, is managed by the outsource provider. Conversely, it falls on the outsource provider to adjust staff levels as business volume fall and you outsource less work.

Focus on Service 

For most local lenders and credit unions it is the level of service they provide their customers that differentiates them from their regional and national competition. When back office processes are outsourced, not only are expense dollars freed up, but staff have more time to focus on what they do best – servicing your customers.

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