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Setting Up Origination and Servicing Channels

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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. 

  

 

Origination Channels 

  • 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.

 Here are the Origination Channels options that you can customize based on your institution's needs

 

Enable

  • Checking this box will allow the lender to customize the origination expense by:
    • Entering a Percentage of Fees in the Origination Popup.
    • Entering a Percentage of the loan amount in the Origination Popup.
    • Entering a Custom Origination Channel.

Default

  • The origination channel with the checked box will be the channel that is selected for this product when a lender creates a new loan.

Name

  • The name of the origination channel
  • If you have Relationship Awareness the names of the origination channels must be same for all commercial loan products. 

Target ROE Adjustment

  • The ROE Target will be adjusted by this amount when this origination channel is selected.

 Amount

  • Loan Amount or Commitment that the related origination expense is valid for.
  • More Tiers can be added by clicking the blue down arrow button at the bottom of this column.

Origination Expense

  • Expenses associated with originating a loan in the associated Amount Tier.

Percent of Amount

  • Allows you to set a percentage of the amount for the associated tier

Percent of Fees

  • Allows you to set a percentage of the fees for the associated tier

 

Servicing Channels

 

  • 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. 


Here are the Servicing Channels options that you can customize based on your institution's needs 

Enable

  • Checking this box will allow the lender the option to customize the servicing channel instead of choosing from the options setup here.

Default

  • The servicing channel with the checked box will be the channel that is selected for this product when a lender creates a new loan.

Name

  • The name of the servicing channel
  • If you have Relationship Awareness the names of the servicing channels must be same for all commercial loan products.

Amount 

  • Loan Amount or Commitment that the related servicing expense is valid for.
  • More Tiers can be added by clicking the blue down arrow button at the bottom of this column.

Annual Servicing Expense

  • This is the annual servicing expense to the bank for this loan.

Percent of Amount

  • Allows you to set a percentage of amount for the associated tier

Percent of Average Balance

  • Allows you to set a percentage of average balance for the associated tier

 

 

 

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