Business News

Industry Voice: 5 Reasons to Outsource Your Mortgage Lending Business

By Jeff McGuiness | August 2, 2016

Industry Voice: 5 Reasons to Outsource Your Mortgage Lending BusinessWhile the intent of regulations like the Consumer Financial Protection Bureau’s (CFPB) TILA-RESPA Integrated Disclosure (TRID) rule is to protect borrowers, many lenders, especially small- to mid-sized ones, continue to struggle with the requirements.

CFPB’s mortgage guidelines today exceed more than 900 pages and the TRID rule tops 2,000, forcing many community banks and credit unions to rethink their role in the mortgage industry.

And at the same time, the total costs of loan production expenses have increased. (See related coverage in Housing Industry Forum.)

Many community financial institutions are struggling to overcome the hurdles of rising costs and risks of originating mortgage loans. Ultimately, many are deciding mortgages fail to meaningfully contribute to their profits and are leaving the business entirely.

However, there is a way for organizations to continue to offer the mortgage products their customers both want and need. The answer is outsourcing. With outsourcing, community financial institutions can be a greater competitive force in the banking marketplace and remain profitable for the long term.

Below are five reasons why I think community banks and credit unions should explore outsourcing their mortgage services and how to reduce risk when choosing a third-party lending provider.

  1. Mitigate Risk

    Penalties for noncompliance can be severe, potentially running into the millions. This puts community lenders at great risk, even threatening their long-term viability. By outsourcing lending operations to an experienced team, these institutions can provide mortgages while minimizing additional costs. This improves their operations, prepares them for new and future regulations, and helps them stay in business.

  2. Reduce Cost

    Outsourcing not only aids with compliance, it can save money too. Increasing demand for home financing means allocating more manpower than ever. Outsourcing optimizes workflow by eliminating the need for additional staff and upgrading technology. Thus, it gives the organization the capability to offer mortgage products that they otherwise would be unable to provide.

  3. Retain Customers

    Customers want and expect a full spectrum of products, and outsourcing can help community institutions meet this demand. However, they should carefully vet outsourcing partners. It isn’t uncommon for third-party providers to be banks that also offer similar competitive services – such as auto loans, IRAs, and checking and saving accounts. To better understand a new partner, be sure to define your objectives in writing, specifically addressing when the partner may offer additional services to your customers.

  4. Capitalize Cross-selling

    By aligning with a like-minded partner to meet the customers’ home financing needs, community banks and credit unions can focus on offering a broad range of depository services, which affords them a competitive advantage. This can allow community banks and credit unions to further extend their brand to attract new customers.

  5. Stay Focused on Customer Service

    Outsourcing mortgage lending allows community banks and credit unions to focus on the customer experience—something we all agree is sought out and valued by today’s consumer. So it’s important your outsourcing partner will be equally adept at customer service. Be sure to ask any potential partner about its customer satisfaction scores. If they are unable to provide that information, they may not be tracking satisfaction rates – and inadequate customer service could affect your customers and your business.

Jeff McGuiness is chief sales officer for Embrace Home Loans.

"Industry Voice" showcases views from industry participants on current topics or events. Views expressed in "Industry Voice" do not reflect the views of Fannie Mae, and Fannie Mae does not endorse or support the positions or opinions expressed herein. To submit your idea for an "Industry Voice," contact us at