In my series on the 5 Key Metrics that define high performance lending I have covered velocity. The faster lenders close loans, the more profitable they will be.
But there are four more key metrics that every lender must focus on in order to maximize their performance. This time, I want to talk about Pull-Though.
This is the ratio of closed loans to applications taken and is a key driver of the institution’s profit. It is a measure of how good the lender is at getting deals done. Lenders with high pull-through see lower overall cost-to-close.
We know that more than half of the total cost-to-close has been spent by the time the application is taken. That represents the money lenders must spend on advertising, marketing, public relations and sales staff to prospect, sell and acquire a full application for a new loan. It also represents the cost of creating and delivering the upfront disclosures required by TRID.
With that much invested, it behooves every lender to close these deals once they enter the pipeline. When they don’t, it inflates the cost of every other loan they produce. In fact, the quickest way to reduce your overall cost-to-close is to increase your pull-through.
Of course, this isn’t exactly easy. In fact, it’s harder today than ever before.
That’s because today’s purchase money borrowers are making application to multiple lenders before they even choose their new home. When lenders spend resources to get borrowers to prequalify but then do not follow up in order to get the deal once the borrower finds a home, they are leaving money on the table.
Only one lender will win each loan. In our experience, those are the high performance lenders.
In a future post, I’ll talk about how the nation’s best lenders are increasing pull-through. But next time, we’ll talk about borrower share, another missed opportunity that lenders should be focusing more attention on now.