PrecisionLender provides a great deal of flexibility in establishing origination and servicing channels, including stratification by loan amount, to capture associated origination and servicing expenses in order to calibrate overall assumptions.
How Should I Set Up Origination and Servicing Channels?
PrecisionLender has default settings for Origination and Servicing Expenses that many of our clients choose to use.
- We partner with a third party firm that performs an annual survey across numerous financial institutions of various costs including Loan Origination and Servicing Expenses.
- An initial provisioning of PrecisionLender will have the most recently available assumptions from the third-party survey.
- For more information on this study, please see: Default Assumptions In PrecisionLender.
However, since some institutions may have accounting functions or processes that have already established methodologies for Activity Based Cost Accounting (ABC) or standard FAS91 approaches to establishing these cost assumptions, we encourage you to use your internal assumptions, if this makes the most sense in aligning with other areas of the bank in terms of analytics and reporting, and if it also fits well with loan pricing and profitability management.
- Provide the capability to establish upfront origination expenses associated with originating a new loan.
- The recommended approach is to allocate the pro-rated direct expenses associated with originating the next incremental loan put on the books
- For example: Pro-rated Originator, Processor, Operations expenses related to loan origination.
Target ROE Adjustment
Percent of Amount
Percent of Fees
- Provide the capability to establish annual ongoing servicing expense assumptions
- For example: payment remittance processing and operation tasks such as mailing statements, IRS tax reporting, and collections.
Annual Servicing Expense
Percent of Amount
Percent of Average Balance