Keeping track of all the different financial transactions that accompany an average mortgage loan application is likely one of the significant barriers keeping more credit unions from growing their housing finance programs.
Brian Lynch, president of Advantage Systems, an Irvine Calif.-based software firm, believes his company has a product that can eliminate that obstacle.
“My background is in accounting, but not only accounting,” Lynch said, adding he also has a focus on software and the use of technology to improve systems.
While working in banking in the mid-1980s, he noticed that banks had a problem when trying to handle the accounting for all the transactions involved in a mortgage loan.
“They kept all the mortgage loan transactions with standard accounting software and spread sheets” Lynch recalled. “Every entry into the spread sheets had to be made by hand and this resulted in many working hours and it was highly inefficient,” Lynch said.
As a result, adding he was determined to find a better way to handle mortgage finance accounting and in 1986 launched Advantage Systems.
The for-profit company now has roughly 200 financial institutions that use its housing finance accounting software, which is called Accounting for Mortgage Bankers. Lynch said approximately 10 credit unions are using the product. The firm also has several CUSO clients that use the software to serve their own client credit unions' needs.
Lynch maintained that the real power of AMB in an overall accounting system was its ability to provide to credit unions with the capability to track transactions and accounting data by mortgage loan. This would enable a credit union to see whether all the different transactions that are part of the average mortgage loan had been calculated and settled correctly. The software would also allow credit unions to understand whether or not originating a given mortgage loan has cost or made the financial institution money.
As an example, Lynch said there are different sorts of appraisals and appraisal fees that are included in a mortgage origination. The most recent round of financial service reforms requires that mortgage lenders use third party appraisers to help cut down on the possibility of fraud.
The fees for these appraisals are usually around $400. They are typically paid for by the borrower with the credit union keeping track of when the fee is generated, when it is paid by the borrower and when it is paid to the appraiser. A credit union that does not keep careful track of these transactions, among others, could find that it is losing money on originating mortgage loans.
In addition, loan level accounting allows a credit union to track which branches are generating more profitable mortgage loans, the loan officers processing those loans and which loans are generating the most income. This can help improve efficiency sharply, Lynch pointed out.
Keeping loan level data sorted by loan officer may reveal that one staffer closes more profitable loans for the credit union more often than others, Lynch said. After identifying this loan officer, the credit union can ask him or her to share tips and best practices with other branches.
Meanwhile, the financial reforms of the last few years have also had an impact on how mortgage loan officers are paid. Lynch said AMB helps a credit union keep track of and calculate the commissions that can be paid to loan officers through a couple of add-on modules.
For the $2.5 billion Wright-Patt Credit Union Inc., the efficiency and cost savings have been among the chief benefits of using the AMB package, said Tim Mislansky, chief lending officer at the Fairborn, Ohio-based cooperative and president of MyCUMortgage, a Wright-Patt wholly-owned CUSO.
The housing subsidiary handles Wright-Patt’s mortgage program as well as that of roughly 140 other credit unions. Mislansky said MyCUMortgage did about $900 million in housing finance last year and is on track to do more than $1.2 billion this year. He gave a lot of credit to AMB for helping the CUSO facilitate its lending.
Wright Patt had stumbled upon AMB soon after the company began production. Mislansky said he had was searching for a similar housing finance accounting program because he had figured out that if the credit union wanted to grow its mortgage lending it was going to need a more efficient mechanism for keeping track of mortgage accounting.
“Without AMB, using the old system, I think I would need probably 10 full time employees and lots of spreadsheets to keep track of the same data that I can track with two,” Mislansky said, adding the software provided a much better aspect of mortgage originations and how they were performing.
MyCUMortgage discovered that AMB’s use with loan originating systems such as Prime Alliance was especially helpful, Lynch said. Advantage Systems learned that Prime Alliance and other loan origination system producers were very cooperative because there was no competitive overlap.
“They don’t see us as competitors,” Lynch said.
The CUSO exported data from its Prime Alliance system each morning that reflected the new mortgage applications from the day before, loans that had closed and any that had changed as new fees were generated and paid.
Mislansky said MyCUMortgage also used AMB to track accounting data at the loan level at each participating credit union as well so that it could use that data to help the credit unions improve their own mortgage efforts.