Unit Cost: Mortgage Loan Origination

Metric Details & Benchmarking Report Download

KPI Benchmarks : Unit Cost: Mortgage Loan Origination

  • Benchmark Range
  • Benchmark Average
  • Benchmark Sample Size (n) 23

* Is High or Low Best: Lower is Better

Unit Cost: Mortgage Loan Origination

KPI Details

Unit Cost: Mortgage Loan Origination measures the average operating expense incurred by the lending institution to originate (i.e., close and fund) a single mortgage loan. Higher than average overhead within the origination process negatively impacts production profit per loan, and may be attributed to several common root causes - extended cycle times (for underwriting, borrower data collection, closing, etc.), a lack of transparency within the lending process (i.e., borrower does not know what the status of their loan is at any given point in time), excessive underwriting touch points, and low mortgage pull-through rates can combine to have a significant impact on mortgage origination costs. These factors also diminish customer service levels and overall profitability, placing an increased importance on identifying and implementing process improvements to overcome these issues.

KPI Definition

The total cost of mortgage loan origination operations, including sales/business development, application processing, underwriting, and closing labor, technology and other overhead costs, divided by the total number of mortgage loans originated (i.e., closed) over the same period of time.

KPI Best Practices

  • Properly staffed support functions to handle low value origination tasks without driving labor costs too high
  • Develop a triage process for underwriting loans by sending more complex applications to experienced underwriters
  • Create document checklists to reduce rework and minimize back-and-forth communications with borrowers
  • Perform regular audits of origination process to identify potential reductions in rework, number of touchpoints, etc.

KPI Calculation Instructions Unit Cost: Mortgage Loan Origination?

Two numbers are used to calculate this KPI: (1) the total cost of mortgage loan origination operations over a given time period, and (2) the number of mortgage loans originated, or closed, over the same period of time. Total mortgage loan origination costs should include labor (salaries/ wages, commissions, bonuses and benefits), technology, outsourcing, occupancy and other overhead costs related to mortgage loan sales, processing, underwriting and closing. 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 this calculation. Include only mortgage loan-related costs and volumes (including new mortgages and refinances) in this calculation.

KPI Formula :

Total Mortgage Loan Origination Expense / Total Number of Mortgage Loans Closed

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