But a handful of very small banks — those with assets of less than $100 million — are finding some light by using loan origination software as a service, and paying for it on a volume basis. It's a move that can free up staff and other tech resources, as well as provide some geographic flexibility.
The idea of using the web to process mortgage loans is not new or cutting edge — it's the same technology that larger banks have been using for some time. But there was a tech gap between larger and smaller banks that was creating relative loan processing delays for small lenders, which were already facing a size and scale disadvantage.
The cause of this technology gap was the expense of the technology. But a new pricing model, in which the banks pay for the technology based on volume of usage, is giving resource-strapped banks a much-needed jolt. "It's like having another loan officer on duty 24-seven," says Jeff Fauver, president and CEO of First National Bank of Catlin, a $45 million-assets institution serving central and east central Indiana.
The bank, which specializes in loans for one- to four-family residences, recently began using a mortgage processing product called PowerSite from Mortgagebot that has automated most of the bank's loan origination process.
Delivered as software as a service on a pay-as-you-go model, the PowerSite technology came with little up-front investment for the bank. It's also enabled First National to replace a mostly manual process with bank-branded web delivery of appraisal orders, credit report requests and delivery of compliance disclosures.
First National is additionally able to collect application fees, order appraisals and obtain approvals in less than two weeks. The software has also enabled the bank to attract new customers. In the first three months of the deployment, 70 percent of the applications came from new customers, and most of those were between the age of 25 and 45. "This is a small institution where people have to wear many hats, and this is a way to focus what we're doing," Fauver says.
The institution has also expanded into a neighboring county without needing to lease space for a new branch, since far more of the documents involved in loan processing can be transferred via email. "Geographically it's tough for people to get off work early and drive to the bank to apply in person if they have to go 30 miles," Fauver says.
Mortgagebot faces competition in the mortgage processing space from firms such as Calyx Point and PCLender, which also offer a Saas solution for community banks.
Steve Poss, a senior vice president at Bank of Galesville, an $83 million-asset bank based in Wisconsin, says the bank has been able to leverage automated loan processing to offer loan refinancing. The bank, which is hosting the PowerSite tech internally, says taking advantage of lower rates would have likely not been possible without the added automation, which has cut processing time in half.
"Part of our problem is we can go out and get loans, but we don't have the manpower to process them," says Poss, noting the bank has only two lenders originating home loans. "It would be tough to keep up with the volume without the technology."