The purpose of going on a mortgage network is not just to provide customers with a high level of service but also to earn an attractive return.
The direct revenue source is the markup you set on the prices posted by the lenders on the network. In addition, by merchandising the quality of your new home-loan service, you should be able to attract noncustomers to branches. This would give you a crack at converting them into customers for other depository services.
The staff required to go on a mortgage network consists mainly of loan counselors, who constitute a variable cost. The counselors could be existing employees who would add home loan counseling to their existing duties, or they might be full time if the traffic justifies it.
Offices that do not promise enough traffic to justify even a part-time counselor can be supported by remote counseling - full-time counselors in the central office would take over the computer, monitor, and printer in the branch, performing all the counseling functions.
Support-staff requirements are small, consisting largely of counselor training and support. Even these functions can be outsourced to the networks if desired. You will also want a small staff to deal with and monitor the performance of lenders, and the networks provide built-in functionality for this purpose.
The depository might want to offer some of its own products to its customers without offering them to other users on the network. For example, a thrift may want to offer its favorite ARMs. In this case it need not include on its terminals other lenders it views as competitors. Both thrifts and banks may want to offer CRA-type products for their own portfolio.
To do this, the depository becomes a lender on the network, offering its own loans to its own offices. This requires entering its products in the network's back-office system and maintaining them, which requires one employee or less, depending on the number of products involved. This task can also be outsourced to the network. However, the depository will need the support staff to process and underwrite these loans or find a way to outsource these functions as well.
The depository also has the option of processing other loan applications, as most mortgage brokers do, as opposed to delivering applications to the lenders for processing. It could also elect to have its loans processed by a third party. This decision will depend partly on whether the depository believes that its current processing system is cost efficient. The depository might also believe that it can maintain better control over the customer by processing the loan itself.
When HUD issues its revised Respa regulations later this year, the depository might want to advertise itself as an "eligible CLO." This new Respa designation will require that the lender observe certain consumer protections, such as providing access to multiple lenders, providing lender-neutral methods of selecting loans, and prominently posting uniform markups to all borrowers.
The depository on a multilender network will automatically comply with these protections except for the uniform markup requirement, which is subject to its own discretion. If "eligible CLO" becomes viewed as a Good Housekeeping seal, which is quite likely, the depository might want to adopt the uniform markup rule in order to use the seal, which would give it an edge over single lenders.
Mr. Guttentag is president of GHR Systems in Wayne, Pa.
