A full plate.

Author:DeZube, Dona
Position:Cover Report: Broker/Wholesale

With the refi boom heaping loans on wholesalers, they are scrambling to keep loans moving through the pipeline as fast as possible. Leading wholesalers are using smart staffing strategies, new technology and outsourcing to handle the record volume.

IF YOU THINK OF THE WHOLESALE CHANNEL AS a pipe and loans as water, then the one thing you can say about the business this past summer was the water pressure was astounding. Borrowers have been lining up to refinance their loans repeatedly. Even people living in caves are calling their broker, wondering if they should switch into a 15-year note. Well, almost. * For wholesalers, keeping the pipeline flowing is paramount. Nobody wants to leave business on the table, but if you take on more loans than your staff can handle, your pipeline can clog up. And if your pipeline clogs, the broker may pull the loan that's stuck because today's borrower rarely displays patience let alone loyalty. * So what are wholesalers doing to keep their pipelines from clogging? * "I wish there were an easy answer," says Arlene Hyde, managing director for wholesale lending at CitiMortgage Inc., St. Louis. "Our pipeline is up 50 percent." * The most important puzzle piece in this effort by wholesalers to keep loans from backing up is m anaging manpower, followed closely by technology and outsourcing, Hyde says. Those are the elements of a strategy shared by most of, if not all, her competitors. From the very beginning of the loan origination process right through closing, wholesalers are combining technology and humans in ways that have exponentially increased the volume of loans they can close.

AU finally pays off

If there is a wholesaler left on the planet not using Internet technology to lock loans or an automated underwriting system to deliver decisions in minutes, we didn't find it.

It's technology that helped InterFirst Wholesale Mortgage Lending, a division of ABN AMRO Mortgage Group Inc., Ann Arbor, Michigan, take more than 12,000 rate locks one day in September. Given their $150,000 average loan amount, that's roughly $1.8 billion in a single day--volume that would have been impossible using the company's old fax-based system, which accommodated about 200 rate locks a day, says National Wholesale Manager Collier Smith.

The Internet loan underwriting system at Homecomings Financial Inc. helped the Minneapolis-based GMAC-Residential Funding Corporation (GMAC-RFC) subsidiary underwrite more than $5 billion in brokered loans during the first half of 2002. The system does things in 30 seconds that used to take humans hours or even days to accomplish. It pulls credit, submits the loan to a Fannie Mae underwriting engine as well as a GMAC-RFC proprietary underwriting engine, and then suggests to the broker the "best product" for which the borrower qualifies.

"What it does, versus where we were a couple of years ago," explains Homecomings Executive Vice President Lee Jacobsohn, "is [now] the broker can offer the borrower the product they're qualified for when they sit down--versus starting a file thinking they qualify for a 6 percent loan when they only qualify for the 7 percent. In the previous system, the broker sat down with the borrower and said, 'Bring me everything about your life.'"

Ironically, while automated underwriting moves loans through the pipeline faster, it can also move more different kinds of loans through a pipeline if the system is designed to underwrite more than one class of loan. While there are certainly plenty of loan officers who can read a set of underwriting guidelines and analyze which program is best for the borrower, there are still plenty whose underwriting style is to throw every borrower at a lender to see which ones stick. If a wholesaler's automated underwriting program covers A loans through subprime loans, a lot more borrowers are going to stick.

Carrot and stick?

Of course an automated underwriting system only works if you can get the loan officer to use it. Homecomings has found a simple way to get brokers to use its Assetwise Direct [SM] system.

"We will not accept loans from brokers unless they load them into our technology. You can load it into [Calyx Software's] POINT[R] and we'll accept a Fannie Mae 3.0 file transfer. We will accept [a paper loan application] from a new broker, but after a couple of files, we expect you to get trained on our system," says Jacobsohn. "If they're not submitting loans via Assetwise, the broker's not going to have an enjoyable experience and it's going to be inefficient for Homecomings."

Along with the stick, there's a carrot-a 25 basis point to 50 basis point price break for brokers who use all Homecomings technology solutions, according to Jacobsohn. The result? More than 90 percent of Homecoming's loans are submitted electronically. The exceptions are new clients and certain products and situations. And once they're in the door, only 20 percent of loans require a human underwriter...

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