Streamline Your Mortgage Office

7 Key Performance Metrics for Loan Officer Workflow

loan officer metrics kpi key performance indicators

Without data to inform decisions, determining what elements of your business are contributing positively to your bottom-line, and which ones need to be honed, would be like cleaning your house in the dark. It’s not impossible, but you need to get lucky.

There is a saying amongst analytically driven business people: “what gets measured, gets managed.” Use the 7 key metrics below to measure the performance of your mortgage loan workflow so you can manage it towards a higher level of efficiency.

1. Cycle Time

Measure the details of your loan cycle to get a high-level view of your workflow effectiveness. This should encompass the stages of your loan cycle, from the start of origination through post-closing. Common loan cycle stages include:

  • Origination
  • Processing
  • Underwriting
  • Closing
  • Funding
  • Post-closing

The goal is to understand how long loans are taking to move through each of the stages of the cycle. This allows benchmarking of the data, as well as a macro examination of the strengths and weaknesses of your workflow.

2. Fallout Rate

Fallout rate is the percentage of loans that don’t close after the interest rate is locked. Mortgage fallout rate is traditionally a metric used by lenders in their rate hedging assumptions due to the sunk costs associated with loans that don’t close after lock.

Loan originators can use fallout rate to analyze their own rate-lock strategy. Lock too early, and you risk rates dropping and the customer seeking greener pastures. Lock too late, and you risk rates rising and the customer frustratingly seeking greener pastures. It’s a dilemma that is best examined through data.

3. Number of Lock Extensions

Rate lock extensions almost always come with an attached fee that can hurt your borrower or your net revenue on the loan (or both). Because of the costs associated with lock extensions, it is imperative to dig deeper if you find that you’re often requesting them.

Is your workflow to blame for not moving efficiently enough? Are you locking the rate too early in the process? Or are there other circumstances outside of your control? If it’s happening often enough it’s likely that it’s not just a borrower problem.

4. Pull-through Rate

Pull-through rate is the percentage of loan applications you take that get approved, close, and get funded. A high pull-through rate would indicate that you’ve dialed in your ideal customer profile and origination process.

A low pull-through rate on the other hand is a warning sign that you’re spending time and money on loan applications that don’t pay off with any revenue. This could be because you’re not doing proper diligence and are submitting loan applications from potential customers that are not highly qualified.

5. Number of Conditions per Loan

A high number of conditions per loan is indicative of a sub-par processing workflow. When the loan application and supporting documentation are submitted to underwriting in an incomplete or incoherent format, there is no avoiding delays in underwriting and thus delays in the entire process.

This will very likely also be reflected in the average number of days your loan files require to pass through underwriting.

6. First Submission Approval Rating

First submission approval rating is the rate at which your loan files are approved by underwriters on the first try. Similar but opposite to the number of conditions per loan, a high first submission approval rating would indicate that you’ve got a good workflow for gathering docs and putting together loan files before submitting to underwriting.

If you rely on a team of processors and loan partners to prepare your files, this metric will give you a general idea of their effectiveness within your workflow.

7. Profit per Loan Originated

A well oiled loan workflow is designed to close loans quickly, but also cheaply. Less man hours are required, and with fewer sunk costs, when your process works efficiently. This all equates to how much profit is generated per loan originated.

Production volume is generally viewed as an indicator of success in the mortgage industry. But loan volume does not tell the entire story for an originator without the context of profit per loan. Maximizing profit generated per loan should be the goal of all originators as that would mean that your workflow is efficient and your customers are being well served.

You can get more fine-grained with your metrics in order to measure the efficacy or your marketing programs, or performance of individuals within your organization. Use the key performance metrics listed above to understand if there are issues in your workflow, and where to begin when you want to look deeper.