Article Summary
Mortgage Bankers Association data shows cost per funded loan increased 57% over 10 years, reaching $11,094 in 2025. The piece points to stacked point solutions and handoff-heavy workflows as drivers, and outlines a batch and task-based operating model.
The underwriter then checks the work of the processor and loan officer and hands it back with a list of things that need to be completed. And, the cycle continues…
Three people review the same documents. Each of those hand offs adds time to our process that leads to frustration for our customers (and likely our teams). This doesn’t have to be the process any more. In 1913, Henry Ford studied slaughter houses and how they produced meat. Then, he brought that process to the automobile industry. We all know about his famous moving assembly line. This moving assembly line is very similar to our process today…113 years later. Years later, Toyota rethought the automobile manufacturing process by breaking work into small batches and pushed decision making authority down to the people doing the work. Same product, radically lower cost. Then, again, years later software manufacturers announced their Agile manifesto that allowed for collaborative, task-based work speeding up the delivery time drastically from their former model. If we combine what we learned from Toyota and software manufacturers, we have a new model available to us. And, this is where the magic lives. Small batches and faster feedback loops We can break down the work that we do into “big rocks,” “small batches” and “tasks.” Then, your team collaborates to complete the tasks that are needed. Once all of the tasks are completed within a small batch of work, you’re done with that batch. Now, let’s apply this to our industry. Fannie Mae and Freddie Mac say that our industry has to analyze the borrower (big rock #1), the property (big rock #2), etc for eligibility. When we analyze the borrower, we have to analyze credit (small batch #1), income/employment (small batch #2), etc. When we analyze income/employment, we need to review paystubs (task #1), W2s (task #2), etc. Here’s where this process change flips everything we’ve ever known on its head. Regardless of where the borrower is in their home buying journey, if we have all of the data/documents we need to make a decision on the income/employment for that borrower, we can make a DECISION (with expiration dates of course) on that component of the loan. Designing your process this way allows for borrowers to have faster feedback loops on critical components of their loan. It lets us queue work to our team exactly when it’s needed on smaller components of the loan. And, it allows for us to place AI or technology exactly where it needs to go, not waiting on a hand-off or milestone to complete the work it’s built to do. The financial impact of a new operating model This doesn’t eliminate the need for the loan officer, the underwriter and auditors to review the loan file holistically, but everything else can be queued work. Now, how does this actually lower our cost of origination? This operating model puts the work that needs to be completed in front of the decision maker right away. It doesn’t take for example a loan officer, then technology, then processor, then finally underwriting to make an income/employment decision.See what I mean? Our current process forces redundant work and a delayed, frustrating customer experience.
It has inflated our cost structure. This new operating model allows us to do more with the same amount of teammates. You can grow volume effectively without adding more overhead. However, this isn’t just an efficiency play. In 2025, the MBA reported an industry average cost per funded loan at $11,094. The most profitable 20% of lenders during that same period had a cost of $10,074. So, even if this model could only allow the industry to be as effective as the top 20%, we would see $5.5 billion in savings. Melissa Langdale is chief executive officer and founder of Praxis Lending Solutions. This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners. To contact the editor responsible for this piece: zeb@hwmedia.com.
