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 servicing defaults.
Implementing These Assumptions
Unfortunately, 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. However, in the case of the loan origination and servicing channels there is a less time consuming means than just typing each one in individually.
- Click on the Administration button and select Products.
- Click on a Product name to open it (e.g., Commercial Construction) and then click the Edit button in the upper left. Select either the Origination Channels or Servicing Channels.
- Select the “Replace with” button and choose from the available sets.
Changing Assumptions for a Deposit Product
For deposit products the number of modifications is much less than the origination and servicing channel values. These need to be changed individually.
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.