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Extending Your Backend Operations

September 6, 2023

Why Lenders Should Augment Backend Operations With Outsourcing

The real estate market is rapidly changing. Today’s strong economy is driving higher interest rates, causing prospective homeowners to think twice before purchasing and giving homeowners pause before putting their properties on the market. For lenders, this means that every loan and borrower counts.

According to MBA’s Q1 2019 Quarterly Performance Report,  the average loan production cost has crept up to approximately $8,887 and nearly one in three mortgage origination professionals say increased purchase competition is their biggest challenge as stated in Altisource’s 2018 report, “The State of the Originations Industry.” Meanwhile, new technology is being designed to disrupt the traditional real estate industry with apps and startups shaping borrowers’ expectations and putting pressure on lenders to deliver fast and accurate service.

Yet apps and blockchain can’t solve every problem. Today, a growing number of lenders rely on outsourcing partners to augment their backend processes. With underwriting, processing and other backend functions entrusted to a capable team of experts, lenders can focus on building relationships with borrowers.

Learn about the key benefits that outsourcing partners can provide.

Outsourcing partners provide a rare perspective on best practices

Lenders rarely have insight into their competitors’ operations. Without access to information about how other firms operate, lenders must rely on their own institution’s history to guide business processes. This can lead to inefficiencies, oversights or mistakes, negatively impacting borrowers and inadvertently undermining lenders’ long-term success.

Outsourcing partners can provide rare perspective on best practices for backend operations. “We serve dozens of lender clients and have developed best practices over many years,” says Phil Huff, Senior Vice President, Mortgage & Real Estate Solutions at Trelix, a provider of licensed fulfillment, quality control and other due diligence products and services across the loan origination and securitization lifecycle. “All of our clients benefit directly from lessons learned across our entire customer base.”

Using observations gleaned from working with a wide variety of clients, outsourced partners can make informed recommendations that help lenders improve their in-house operations, boosting efficiency and providing better results for the customer.

No matter what backend operations lenders outsource, a trusted partner can deliver high-quality assistance along with suggestions that drive profitability and efficiency.

Outsourcing protects lenders against market fluctuations

Anyone who works in the real estate industry knows that market fluctuations are a part of life. In 2018 alone, the Federal Reserve increased interest rates four times. As the supply of homes on the market spikes or flatlines, buyers’ readiness to invest in a new property wavers accordingly.

Lenders often struggle to adapt to these frequent changes in demand. During busy periods, understaffed lenders risk mistakes and dissatisfied buyers who expect the process to move quickly. However, maintaining a large staff during slower periods can erode profit margins. Because many roles require expertise, it’s especially difficult to quickly staff up or down.

Outsourcing partners can step in during busy periods and scale back during slower times, providing much-needed stability regardless of the market. “We empower our lenders to stabilize their operations through the peaks and valleys that our industry is prone to,” Huff says. “No more of the hiring and firing cycles. We become a flexible extension of their business.”

Outsourcing can also provide continuity, especially for lenders that struggle to retain employees in competitive roles. For example, Altisource's report found that 30 percent of mortgage origination professionals said the greatest limitation to pursuing new types of loans is the experience level of underwriters. Underwriting also carries the highest risks for lenders; if an underwriter makes a mistake, the process could derail and become an unsaleable loan. Because of this, underwriting is an increasingly popular backend process lenders choose to outsource.

Similarly, lenders are also increasingly likely to outsource processing. As of October 2015, TRID requirements require easy-to-understand consumer disclosures and a copy of Closing Disclosure at least three days before closing. Outsourcing partners ensure every detail is correct, paving the way for a smooth closing.

Additional backend processes that are commonly outsourced include closing, due diligence and quality control—eliminating the need for time consuming and costly hiring processes so lenders can focus on building deeper relationships with borrowers.

No matter how the market shifts, outsourcing partners can provide support for backend processes to ensure lenders deliver a seamless experience.

Outsourcing partners mirror quality and operations

While lenders will always be aware of what is handled in-house or by an outsourcing partner, the customer should never be able to tell the difference. The best outsourcing partners provide services as if they are part of a lender’s organization, mirroring an in-house team’s every nuance.

For example, Trelix matches retail lenders with experts who have prior retail experience and are accustomed to interacting with borrowers and loan officers. When working with a wholesale business, Trelix provides experts who are used to talking to brokers. This approach ensures lenders always have backend support tailored to their specific needs.

Additionally, outsourcing partners should always deliver fast response times, including working in a lender’s time zone. When a buyer calls, they shouldn’t be able to distinguish any difference.

By outsourcing backend processes, lenders increase efficiency and drive profits

Outsourcing partners add value to lenders’ organizations by streamlining backend processes, providing a buffer against market fluctuations and even advising on best practices that drive efficiency.

At Trelix, highly qualified experts handle mortgage production activities for lenders anywhere along the cycle, providing end-to-end support including processing, underwriting, closing, quality control and more. With experts licensed in every state, Trelix can provide backend support all over the country.