Mortgage Banking

Background

A financial institution had only originated mortgage loans for investment in its long history. When the bank’s marginal cost of funds materially increased over the loan portfolio earnings rate, bank management realized that it had to transform its mortgage loan origination business to originate for resale into the secondary market.

Approach

·        The Tomorrow Group updated the institution’s policies and procedures to conform to secondary market standards and supported transitioning current loan operations to becoming a third-party originator, selling GSE eligible products with servicing released to aggregators through correspondent programs.

·        We guided the institution in creating a quality control program and engaging a third-party vendor to provide outsourced loan reviews and reporting.

·        We then provided guidance and introductions to correspondent lenders as well as support in qualifying as an approved third-party originator.

·          After several quarters of experience in selling originated loans and establishing a record of good quality control reporting and investor scorecards, the Tomorrow Group supported the bank becoming an FHA Approved Mortgagee and a Freddie Mac Seller.  

·        The institution expects to expand its mortgage banking business over time to also sell and eventually service loans for both GSEs.

·        As a result of this strategic transformation, the bank’s profitability materially improved from gains on sale of mortgage loans and improved interest margins.