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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.

 

In this article we will look at:

 

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 Adjustment

    • The 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

 

  • Note: If values are entered in multiple fields for an amount tier, the origination expense will equal the total of all those values. For example, if there is both an origination expense and percent of amount, the origination expense of the loan will equal the origination expense + the % of the loan amount.

 

Creating Origination Channels

 There are 3 main ways to create Origination Channels: 

 

Insert PrecisionLender Standard Origination Channels

  • From the Products Pane of the Administration Section, click on the name of the product that you wish to add or edit origination channels for.

  • Click "Edit" in the top left corner.

  • Click "Origination Channels" in the menu at the top of the page.

  • Click "Replace With...". Please note that following these steps will replace all of the origination channels that are currently available with this product.

Origination_Channels_Replace_With.png

  • Click on the 'Standard Set' and select the set of origination channels you would like to populate with, then click 'Next'. 

Origination_Standard_Set.PNG

  • If you'd like to apply a factor to the expense amounts, enter the percentage in the field.

Origination_Standard_Set_Expense_Factor.PNG

  • Click Finish. All origination channels will be replaced with the set you selected.

  • Remember to click "Save" to keep the changes you have made.

 

Copy Origination Channels From Another Product

  • Once origination channels have been created for one product, they can be copied from one product to another.

  • From the Products Pane of the Administration Section, click on the name of the product that you wish to add or edit origination channels for.

  • Click "Edit" in the top left corner.

  • Click "Origination Channels" in the menu at the top of the page.

  • Click "Replace With...". Please note that following these steps will replace all of the origination channels that are currently available with this product.

Origination_Channels_Replace_With.png

  • Click on the 'Other Products' and select the product you would like to populate with, then click 'Next'. 

Origination_Other_Products.PNG

  • If you'd like to apply a factor to the expense amounts, enter the percentage in the field.

Origination_Other_Products_Expense_Factor.PNG

  • Click Finish. All origination channels will be replaced with the set you selected.

  • Remember to click "Save" to keep the changes you have made

 

Create Origination Channels Manually

  • From the Products Pane of the Administration Section, click on the name of the product that you wish to add or edit origination channels for.

  • Click "Edit" in the top left corner.

  • Click "Origination Channels" in the menu at the top of the page.

  • Select "Add New Origination Channel"

Origination_Channels_Add_New.png

  • Enter the name of the channel, Target ROE adjustments if applicable, the Origination Expense and/or Percent of Amount and/or Percent of fees. If costs vary by commitment amount, select 'Add Expense Tier' to enter the commitment amount the cost will be applicable for.

  • Remember to click "Save" to keep the changes you have made

 

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. 


servicing.PNG 

  • 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.

  • Percent of Revenue

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

 

  • Note: If values are entered in multiple fields for an amount tier, the servicing expense will equal the total of all those values. For example, if there is both an annual servicing expense and percent of amount, the servicing expense of the loan will equal the origination expense + the % of the loan amount.

 

Creating Servicing Channels

There are 3 main ways to create Servicing Channels: 

 

Insert PrecisionLender Standard Servicing Channels

  • From the Products Pane of the Administration Section, click on the name of the product that you wish to add or edit servicing channels for.

  • Click "Edit" in the top left corner.

  • Click "Servicing Channels" in the menu at the top of the page.

  • Click "Replace With...". Please note that following these steps will replace all of the servicing channels that are currently available with this product.

Servicing_Channels_Replace_With.png

  • Click on the 'Standard Set' and select the set of origination channels you would like to populate with, then click 'Next'. 

Servicing_Standard_Set.PNG

  • If you'd like to apply a factor to the expense amounts, enter the percentage in the field.

Servicing_Standard_Set_Expense_Factor.PNG

  • Click Finish. All servicing channels will be replaced with the set you selected.

  • Remember to click "Save" to keep the changes you have made.

 

Copy Servicing Channels From Another Product

  • Once origination channels have been created for one product, they can be copied from one product to another.

  • From the Products Pane of the Administration Section, click on the name of the product that you wish to add or edit servicing channels for.

  • Click "Edit" in the top left corner.

  • Click "Servicing Channels" in the menu at the top of the page.

  • Click "Replace With...". Please note that following these steps will replace all of the servicing channels that are currently available with this product.

Servicing_Channels_Replace_With.png

  • Click on the 'Other Products' and select the product you would like to populate with, then click 'Next'. 

Servicing_Other_Products.PNG

  • If you'd like to apply a factor to the expense amounts, enter the percentage in the field.

Servicing_Other_Products_Expense_Factor.PNG

  • Click Finish. All servicing channels will be replaced with the set you selected.

  • Remember to click "Save" to keep the changes you have made

 

Create Servicing Channels Manually

  • From the Products Pane of the Administration Section, click on the name of the product that you wish to add or edit servicing channels for.

  • Click "Edit" in the top left corner.

  • Click "Servicing Channels" in the menu at the top of the page..

  • Select "Add New Servicing Channel"

Servicing_Channels_Add_New.png

  • Enter the name of the channel, Target ROE adjustments if applicable, the Servicing Expense and/or Percent of Amount and/or Percent of Average Balance and/or Percent of Revenue. If costs vary by commitment amount, select 'Add Expense Tier' to enter the commitment amount the cost will be applicable for.

  • Remember to click "Save" to keep the changes you have made

 

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