KPI Benchmarks : Production Labor Cost per Mortgage Originated
- Benchmark Range
- Benchmark Average
- Benchmark Sample Size (n) 20
* Is High or Low Best: Lower is Better
Production Labor Cost per Mortgage Originated
Production Labor Cost per Mortgage Originated measures the average labor cost incurred by the organization to originate, or close, a single mortgage loan. Labor expenses typically comprise 55%-70% of total origination unit cost. High labor costs may be related to various organizational shortcomings, including: redundant job positions within the origination process (e.g., Loan Processors and Loan Specialists perform similar, overlapping tasks), low pull-through rates, extended closing cycle times and lower than average Loan Officer production volumes can all contribute to high labor costs on a per mortgage basis. Several common improvement opportunities can be addressed to reduce average labor cost per loan: simple and transparent KPIs to measure Loan Officer production, better methods to track loan documentation and status, standardized pre-approval checkpoints, and the use of alternate channels to collect borrower application data (e.g., the internet and mobile devices) can help to improve cost-effectiveness, efficiency and overall customer service levels.
The total mortgage loan production personnel expense (all salary, commissions and benefits related to mortgage sales and origination) incurred by the organization divided by the total number of mortgage loans originated by the organization over the same period of time.
KPI Best Practices
- Map/allocate personnel costs to origination activities to expose redundancies or duplicate work
- Perform periodic time studies to determine loan officer time allocation to maximize prospecting and relationship-building time
- Analyze mortgage origination channels regularly to identify most effective sources of loan production
KPI Calculation Instructions Production Labor Cost per Mortgage Originated?
Two numbers are used to calculate this KPI: (1) total labor expense incurred by the organization related to mortgage loan sales and origination over a given time period, and (2) the total number of mortgage loans originated (i.e., closed and funded) by the organization over the same period of time.Total mortgage loan origination labor costs should include salary/wages, commissions, bonuses and benefits costs related to all origination-related job positions. Common mortgage loan origination job positions typically include Loan Officers, Underwriters, Loan Processors and Loan Closers. A closed loan is considered a mortgage that has been funded by the institution; do not include loans that have not yet been formally closed in the denominator for this calculation. Include only mortgage loan-related costs and volumes (including new mortgages and refinances) in this calculation.
KPI Formula :
Total Mortgage Loan Origination Labor Expense / Total Number of Mortgage Loans Closed