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Independent HMDA analysis shows lenders could add significant revenues by increasing loan approval rates by just 10%

Analysis by Mortgage TrueView shows where lenders may be missing opportunities

BOUNTIFUL, UT (September 30, 2014) — An analysis of the recent 2013 HMDA data shows that many lenders are sacrificing millions of dollars in missed lending opportunities, according to Mortgage TrueView, a provider of data-driven business intelligence services. Mortgage TrueView’s analysis of the latest HMDA data also shows an interesting gap in the approval rates between lenders. The company saw that some lenders have approval rates on non-conventional loans of as low as 11%. Typically the approval rates of large lenders hover in the range of 60% to 80%, the analysis showed. The FFIEC released the 2013 HMDA data last week.

Importantly, Mortgage TrueView found that by adding an additional 10% to the rate of loan approvals, a lender could increase revenues significantly. “We’ve uncovered some meaningful patterns in approval rates, and believe that lenders can use our analysis to determine where they may be missing out on business,” says Mortgage TrueView President and CEO David Moffat. “Mortgage companies and banks are not taking full advantage of all the insights offered in HMDA data.”

Mortgage TrueView provides two lender examples from the 2013 HMDA reports to illustrate the additional revenue that could be realized by adding roughly 10% to loan approval rates.

For instance, the company looked at a smaller lender with 3700 loan applications, with only 12%, or 445 loans, approved. If that particular lender were able to increase its approvals to 20%, or 740 loans, the lender would see an additional $150,000 in revenue. Mortgage True based its estimate by using a conservative $500 per loan profit.

In another example, Mortgage TrueView looked at a larger lender. In this case, the lender had 150,000 applications. With an approval rate of 62%, or 93,000 loans approved, the lender saw revenues of $46.5 million, again using an across-the-board $500 per loan profit. If that lender increased its approvals to 72%, or 108,000 loans, it would realize revenues of $54 million. “That means increasing their loan approvals by 10 percent would have resulted in additional revenues of $7.5 million for that particular lender,” Moffat says.

Mortgage TrueView examines possible reasons for the disparity between large lender and small lender approval rates, adds noted industry expert Becky Walzak, executive vice president, director of regulatory compliance with Mortgage TrueView. “Today, the regulators and the advocacy groups look at HMDA data and believe they see that there’s bias in the approval process,” Walzak says. “In the other corner, lenders look at HMDA data and see that borrowers aren’t qualified, so that’s why loans are denied. We believe there’s a third leg to this stool, and that at least some of the loan denials are due to the lenders’ process itself, or the way the process is carried out.”

Mortgage TrueView has looked at various factors that might influence lenders’ operations and processes. “The lenders with the highest loan approval rates tend to have either very strong technology, or strong non-conventional lending programs, or both,” Walzak says. “Higher loan approval rates were associated with more technology, better trained people, or a more streamlined process.”

Mortgage TrueView’s analysis also looks at possible reasons the largest lenders are grouped in the middle percentiles with regard to approved loans. “Perhaps some of these lenders are so large they aren’t effectively developing processes that are capable of approving non-vanilla loans,” Moffat says. “Would better marketing programs or an increased investment in technology help raise approval rates?” he asks.

These are just a few of the issues Mortgage TrueView has identified through its analysis. The company has the tools to show lenders how adding operational data for a true process analysis can help increase loan approvals.

Mortgage TrueView’s flagship product HMDAnalytics helps lenders identify trends in loan application data, compares their data to other lenders, and calls attention to risks that increase the likelihood of a fair lending examination. It also helps lenders find new business opportunities, according to Walzak. The company’s advanced analytics offer an in depth and meaningful view of lending activities that can help reduce potential risk and financial exposure, and can ultimately lead to increased revenues, she says.

By integrating other lender data elements that a lender has in its loan origination system (LOS) such as income or debt-to-income ratios (DTI), Mortgage TrueView is able to offer additional insights into lending practices. “We can isolate certain elements and look at how they are influencing loan approval rates,” Walzak says. “A lender should know more about their own HMDA data than the regulators know.

Mortgage TrueView will be releasing a new HMDA scoring mechanism within the next few weeks to help lenders measure their HMDA data against the industry, she adds. The company will be also be exhibiting at the 2014 MBA Annual Conference & Expo in Las Vegas, where they will be explaining how lenders can leverage their HMDA data for enhanced compliance and increased lending opportunities.

About Mortgage TrueView
Based in Bountiful, Utah, Mortgage TrueView provides mortgage originators and servicers with cost-efficient enterprise business intelligence and risk management solutions. The company drives measurable bottom-line benefits with business intelligence capabilities that improve origination processes, servicing activities and regulatory compliance efforts for financial institutions of all sizes. Mortgage TrueView was founded in 2013. For more information, visit Mortgagetrueview.com.