Keeping track of key performance indicators or KPIs is one of the best ways to refine your lending practices and focus on what works — that is, what practices and programs are attracting leads and driving conversions. The problem is, there are dozens of KPIs that can be measured, and keeping track of all of them is a task that’s beyond the scope of most loan officers. The good news? A recent study from Mortgage Cadence found you can significantly boost your revenue by looking at just a small handful of KPIs — most notably, the four listed below.
Borrower share is a relatively underused KPI that looks at how many of your existing customers are also mortgage borrowers with your bank or credit union. Instead of looking at brand-new prospects, borrower share helps loan officers focus on potential mortgage loan leads who have already developed a level of trust and “comfort” with their institution. Since a relationship already exists with these customers, paying attention to this KPI can help you find new leads while keeping initial lead-generation costs low.
Monitor Pull-Through Value
Gaining mortgage loan leads is important, but a lead that goes nowhere won’t really do anything to improve your bottom line. Pull-through is a measurement that tells you how many of the loan applications that were submitted went all the way to closing. One of the best ways to increase pull-through is with good communication with the loan applicant. About a third of loan officers take 24 hours on average to even acknowledge a borrower’s application. Now, that may not sound long, but for a buyer who’s excited and ready to move forward, putting off communication can mean the difference between closing with you and moving on to another lender. In fact, customer satisfaction drops by at least 10 percent for every 24 hours that passes between the initial application and acknowledgement by the lender. On the flip side, lenders who respond quickly are far more likely to close on a mortgage loan, and they’re also more likely to leave a positive impression that just might lead to referrals in the future.
Analyze Cost to Close
Like its name implies, this KPI measures how much it actually costs to close on a loan. To calculate the cost to close, mortgage lenders must consider all the direct and indirect mortgage expenses, including advertising and sales-related costs, processing and administrative expenses, and all closing costs connected with the loan. When you add up all those expenses over a year and divide it by the number of loans that actually closed during that same period, you have your cost to close. Obviously, if your pull-through metric is low (i.e., a lot of loans aren’t making it all the way through closing), your cost-to-close will be high overall. Comparing these two metrics can provide you with valuable data to help you refine your lending practices and improve your bottom line in the future.
Productivity typically is assessed on a month-to-month basis, and it’s a measurement of how many loans your team closes on a monthly basis. Comparing productivity on a monthly basis can uncover trends that might be related to the audience you’re targeting or to broader economic factors. Since productivity measures loans that close, it’s no surprise that this KPI is perhaps the most critical measurement to keep track of — and the one most closely linked with profitability for most mortgage lenders. Like pull-through, productivity has an inverse effect on cost-to-close — that is, as productivity increases for any given month, the cost-to-close decreases with every successful loan. According to the Cadence study, productivity is the “single most important metric” driving high-performance lending.
Mortgage Loan Leads to Overall Profits
Keeping track of KPIs may sound like a lot of work. But the time you invest can pay off handsomely at the end of the year. By focusing on these four critical KPIs, you can streamline your lending processes and optimize your business plan and strategy to find clients, nurture leads, capture closings, and ultimately build your bottom line.
NestReady bridges the gaps between consumers, banks, and real estate professionals, enabling financial institutions to offer a personalized and seamless home search process. With NestReady, lenders can enhance their marketing, increase engagement and client loyalty, and achieve higher and faster conversions — all through their own digital environment. If this sounds interesting - we invite you to reach out to our team here. You can also follow us on Twitter or LinkedIn for product updates, industry news and more.