Default Assumptions in PrecisionLender

Periodically, PrecisionLender publishes updated recommendations for overhead cost assumptions and makes these available to all clients within the software. These involve loan origination and servicing channel levels and several deposit related assumptions. While we urge our clients to use assumptions directly related to their institution, this can be difficult to obtain, and therefore most of our clients use the PrecisionLender default assumptions.

We encourage our clients to follow the link below and download the updated Default Assumptions document showing annual origination and servicing defaults and deposit recommendations.



Implementing These Assumptions

Currently there is not an “easy button" that can be pushed to allow all of these new levels to be instantly placed in a client’s account. However this is something we are working to change.

In the meantime, you can use the "Replace With" functionality in product settings to update Origination and Servicing assumptions within in each product. For more information see Setting Up Origination and Servicing Channels.

For deposit products the number of modifications is much less than the origination and servicing channel values. However, these need to be changed individually. See Setting Up Deposit Products for steps on how to edit your deposit product assumptions.


Potential Pricing Impact

Changing to the new origination and servicing levels may result in a lower loan ROEs. Some institutions will expect their lenders to raise their pricing to achieve the same Target ROEs.  This option may put the lender at a disadvantage in competitive markets.  Others will adjust management’s expectations by lowering the Target ROE.  Institutions may want to establish a few test loan types to determine the difference in ROEs under the recent and the newly-recommended defaults.


Related Articles: