How Originators Can Measure and Improve Mortgage Pull-Through Rate
What is Mortgage Pull-Through Rate?
Mortgage pull-through rate provides a loan originator with a high-level view of the overall health of their mortgage process. It’s a foundational metric meant to generally assess workflow efficiency, the quality of submitted applications, the level of customer service being provided, interest rate competitiveness, and how ideal the LO's customer profile is.
Loan originators can calculate their pull-through rate by dividing the number of funded loans in any given time frame by the number of applications that were submitted in the same period.
Why Do 25% of Loan Applications Fail to Close?
In ICE Mortgage Technology's most recent Origination Insights Report, data from June 2021 showed that pull-through rate, or closing rate, for the mortgage industry averaged 75.3% for loans initiated 90 days prior.
1 out of every 4 loan packages submitted did not close!
There are a number of reasons why a loan may not close. Borrowers may be deemed unqualified by underwriting, borrowers could get spooked by shifting market conditions, or the borrowers could just be turned off by a poor experience.
Given the large resource and opportunity cost to acquire a new prospect, engage with them through the application phase, and dedicate underwriting resources to their file, it is imperative that lenders and originators examine all areas of their origination process and take any necessary steps to improve upon the factors that affect their pull-through rate.
Strategies to Improve Mortgage Pull-Through Rate
As a holistic indicator, mortgage pull-through rate does not identify any single problem component of the origination process. Instead, a low pull-through rate compared to industry averages serves as a warning sign requiring further action. There are a number of other, more detailed performance indicators that can provide those deeper insights.
That said, there are several generalized strategies that loan originators use in order to improve their pull-through rate without diving into more data.
Get Picky with Borrower and Loan Profiles
Improving the quality of the loans applied for and the profile of the borrowers that an LO works with is one of the quicker tactics known to positively impact an LO's pull-through rate by consistently delivering better underwriting outcomes with fewer conditions.
This shouldn't come as a surprise, but more qualified borrowers tend to have less issues getting their loan funded and enjoy a shorter loan cycle. Unfortunately, not all borrowers applying for loans are going to meet this standard and every LO should have and politely enforce a profitability threshold as it pertains to their ideal borrower profile. This keeps the LO's pipeline moving and their pull-through rate healthy.
Similarly, not all loans are good loans for an LO even if the borrower has solid financials. Understanding what circumstances or issues with properties lead to more difficult, and therefore less likely, loan approvals is key to knowing when to strategically say no.
Deliver an Efficient Process
While market conditions can and do shift, giving borrowers an excuse to bail on their loan application, delivering a buttoned-up and efficient process helps mitigate the impact by keeping borrowers engaged and the loan cycle as short as possible.
In today's mortgage environment, process efficiency is synonymous with a workflow that is technologically enabled for both the origination team and the borrower. Having a digital point-of-sale and mortgage automation platform, like Floify, has been proven to dramatically reduce a loan's days-to-close.
These platforms are able to create efficiency gains by streamlining portions of the origination process that account for the majority of the bottlenecks in a traditional workflow, such as needs list generation and document gathering or disclosure delivery and execution.
With a shorter loan cycle and more engaging process, borrowers are much less likely to have a knee-jerk reaction to abandon their loan.
Increase Transparency and Communication
Read enough reviews and it's clear that one of the biggest complaints, by far, borrowers have with the mortgage process is a lack of transparency and communication. The process is already stressful for many, particularly first time borrowers, and that stress is compounded when loan status isn't communicated effectively and/or the borrower can't easily find information for themselves.
Communication is a critical ingredient in a positive mortgage experience.
Fortunately, this is another area that an LO can quickly improve upon without over-working themselves. By again leveraging automation to deliver customized text and email updates as well as a secure digital portal for borrower self-service, LOs can make a large positive improvement in overall borrower satisfaction.
With their ideal customer profile, origination workflow, and borrower experience all optimized, LOs will be well on their way to improving their mortgage pull-through rate and increasing the per loan profit they generate.
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