Leveraging Data To Make Informed Lending Decisions

Written by Brian Lynch
on December 22, 2014 No Comments
Categories : Blog View

16300_data Leveraging Data To Make Informed Lending Decisions BLOG VIEW: The mortgage industry has evolved in terms of how it extrapolates raw data to make better lending decisions. In the past, lenders relied heavily on general trends and small sample sizes, and the information was often too outdated to be used effectively.

Today, information is available at a much more granular level. Loan-level accounting software allows users to easily report on profitability down to the loan level. Advances in business intelligence systems and dashboards allow management to look at data like never before. Rather than just reporting on the past, data is offered in real time so that management can spot problems or take advantage of opportunities.

The graphical presentation of data offered with dashboards allows users to more easily visualize trends and variances. As such, more people have access to tools, which, in turn, generates greater awareness among managers at all levels. For this to work, though, lenders' reporting systems need to focus on accuracy, timeliness and the relevance of the data.

Ensuring the accuracy of the reported data is critical. The value of the decisions made will be directly proportional to the accuracy of that data. This may seem obvious, but we have seen instances where the selection of the data was based on how accessible it was rather than how accurate it was. Controls need to be created to ensure accuracy.

Given today's demand for up-to-the-minute information, these controls need to be automated. It might be a simple comparison of an account balance to the general ledger or the loan volume for a given period to the loan origination system. Regardless, the success or failure of the entire reporting system will hang on the accuracy of the data. If lenders do not believe the data is accurate, they simply will not use the system.

When making lending decisions, the timeliness of the data is also extremely significant. Having regularly scheduled updates, such as daily, weekly and monthly reports, gives lenders the confidence that data is both accurate and timely. When analyzing the data presented by these reporting systems, dashboards permit administrators to view data groupings in custom time parameters. Having the data segmented by time lets viewers analyze seasonal changes or pinpoint the impact of an individual regulation coming into effect. Administrators can scale reports on the dashboard to reflect their interests and, thus, find the information most relevant to their inquiry.

The amount of data now available can be overwhelming. Books have been written on different metrics used by managers. Lenders ought to focus on metrics that are relevant to their business and which they have some ability to manage, such as the number of days to close a loan, the mix of refinancing versus purchase loans, the net income per loan, loan officer, branch or geographic region or even loan count versus marketing dollars spent by loan officer, branch or geographic region.

Being able to analyze the number of purchases and refinances, for example, allows lenders to make predictions on how to allocate their resources or which departments need to be scaled up or down. Examining the number of days to close a loan may indicate the need for better technology. These and other metrics allow managers to identify and adapt to emerging trends.

Data – especially when accessed via dashboards – gives lenders the ability to view past performance in great detail and make better lending decisions. A dashboard is more than just a pretty picture; it is a gateway to the actual dataset. Having this information in a digestible format permits lenders to identify areas of improvement to make business procedural changes moving forward.

Lenders today have access to various methods of viewing data. Whether it is the form of traditional reports or new dashboards, the quality of that data in terms of accuracy, timeliness and granularity offers management an essential tool to running their business.

Because data is more accessible than in the past, ignoring this valuable tool as a device to chart future growth opportunities is self-defeating. Successful lenders have the chance to improve results, examine trends and confirm decisions, thanks to the quality of data available.Â

Brian Lynch is president and founder of Irvine, Calif.-based Advantage Systems, a provider of accounting and financial management tools for the mortgage industry.

(Do you have an opinion to share with MortgageOrb? Get in touch! Send an email to pbarnard@zackin.com.)

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