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By Paul T. Pouliot
There are many persuasive reasons for using the secondary
market, including improving profitability, capturing or improving
market penetration in specific geographic locations, accessing
cross-sales opportunities by retaining servicing rights to
the mortgage customer, expanding mortgage-product offerings,
and transfering interest-rate risk on fixed-rate mortgage
loans.
A key benefit of using the secondary market is the opportunity
to review how your institution processes its loan requests.
Many financial institutions have been processing mortgage-loan
requests the same way for years.
During the 1980s, a performance benchmark for efficient
mortgage-loan processing was that each processor should be
able to process 60 loan files within 60 days.
Since then, however, automation has altered the way we measure
performance. The introduction of loan-origination systems,
laptop technology, and Automated Underwriting Systems (AUS)
has reduced the time it takes to process a mortgage loan.
This has led to lower labor costs or the ability to process
more loans at current staffing levels. It has also improved
the efficiency and overall data integrity of the mortgage-loan
process.
AUS has also reduced the amount of documentation required
for mortgage loans sold into the secondary market while providing
consistency in mortgage underwriting. This process has put
vast amounts of information on mortgage customers and properties
at the fingertips of community financial institution managers.
It has also provided opportunities for financial institutions
to acquaint customers with their other financial services.
To reach its full potential, AUS must be deployed as close
as possible to the point of sales. Automating the information
directly at the point of sales allows financial institutions
to prepare the necessary disclosures, determine the documentation
required to process the loan request, and evaulate the customer.
This may require re-engineering the loan process at your financial
institution.
Using AUS, a credit-worthy customer may only need to provide
a bank statement for two months of activity and two pay stubs.
This allows the loan request to be closed quickly and improves
the likelihood that the customer will accept an institution's
offer to finance a home.
Through participation in the Mortgage Partnership Finance®
(MPF®) program, the Federal Home Loan Bank of Boston will
assist you in re-evaluating your loan-processing procedures
and expand your experience in the secondary market.
For more information about the Bank's MPF program, please
call 888-675-0556 or Paul Pouliot at 617-292-9641.
Paul Pouliot is first vice president / mortgage manager
at the Federal Home Loan Bank of Boston.
"Mortgage Partnership Finance" and "MPF"
are registered trademarks of the Federal Home Loan Bank of
Chicago.
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