Pricing solutions for small volume lender – Why?

Written by: Paul Bates - Technology & Capital Markets Consultant

In the many years of assisting lenders with leveraging their technology, the discussion  of the pricing engine is always an interesting topic.  There is often hesitancy - many organizations put pricing technology into the “nice, but not necessary” category.  From my experience as both a lender and consultant I place pricing technology in the core group that every lender needs.  Let’s look at four of the most common pushbacks and why you should consider a pricing solution no matter your volume.

1. “We’re not big enough.” 

This is probably the most common comment that I hear when the discussion arises.  You may be a small volume organization, but you are subject to the same regulations as your peers.  Consider the risk management advantages of deploying a pricing engine.  Every loan is priced and based on the empirical data in the request, mitigating any potential Fair Lending issues.  The lock form that is produced is then able to be stored seamlessly in most popular Loan Origination System solutions.  The lock form documents all of the criteria as to why Applicant A obtained one rate and Applicant B received a different rate on the same day, for the same loan product. 

2. “We’re a portfolio Lender.”

There are several community lenders who do not participate in the secondary market (a topic for a later date). And there are lenders with very limited participation who originate most of the production for their portfolios, which has been quite prevalent in these past couple of years.  In this scenario, a robust pricing solution is still a solid strategy.  Eligibility criteria and risk adjustments can all be configured in the solution, and can be based on rate, price, or a combination thereof.  A robust pricing solution will also allow you to process and track your exceptions.

3. “This only helps the back office.”

Pricing solutions can be seen as technology that is geared for the loan officer and the secondary department.  One of the main strengths of a robust pricing solution is in enhancing the borrower’s experience.  Many solutions in the market allow for seamless integration with your online application system. When your borrower spends the time entering their information to submit an application, and then is required to have a separate discussion to address pricing options, you have already diminished the experience.

4. “Solutions are too expensive.”

When pricing technology first appeared in the marketplace several years ago, the technology in fact was expensive. Solutions were designed more for the large volume lenders.  As with most technology, prices have significantly decreased while feature functionality has significantly increased.  In reviewing the manual processes involved in a prudent pricing workflow, the savings in time and labor alone will usually justify the cost. 

For more information in discussing lending technology and just how pricing engines can benefit both your institution and your customers, please feel free to reach out to me at: PBates@scapartnering.com.