Making a Case for Third-Party Loan Origination

By Jeff Schmid, CRCM

Not long after FIPCO created a business model for shared compliance and risk management in 2019, the demand for shared loan processing and origination spiked. It only made sense as in the years that followed, we saw the lowest mortgage loan rates in nearly a decade. Unfortunately, our ShareFI services were not equipped to offer this assistance back then, even though our ShareFI team had more than twenty years of experience managing loan processing and origination departments in both large and small institutions.

Fast forward to 2025, and I think we will see the next cycle of low rates with high refinances, especially as a recession is possibly on the horizon. Think back to 2020 when loan processing departments across the country were swamped with loan
applications. It was very dynamic too because loan processors were mostly working remotely and the concept of PPP loans created quite a stir within our commercial departments. For the first time, we had to prioritize customers in both loan products. I am not sure if we have all recovered, but more importantly, I am not sure banks are ready for the next low-rate cycle. In this article, we explore the case of outsourcing third-party origination (TPO) to help you prepare.

The case for compliance: while most Loan Origination Software (LOS) vendors tout their systems as the most compliant with federal regulations, we all know it really comes down to knowledgeable staff making the right decisions. When you have an inexperienced staff who process less than five mortgages a month, will they be able to keep up loan demand next year while at the same time, keep your bank from regulatory scrutiny? TPO services can keep you compliant and so can ShareFI.

The case for staffing: look around and ask yourself, “do we have the same level of staffing as we did in 2020, even though loan demand has declined sharply?” If this is true in your bank, I offer you the concept of TPO services and saving your capital. After all, the next cycle will not last long and then you are back to overstaffed departments again. Or conversely, did you find a void in loan processing and now wondering where you are going to find talent to help you through the next cycle?

The case of backup: maybe you are part of the lucky few who are currently right sized with your loan processing department. But what happens when one or two processors, especially those who survived 2020, decide that being retired is much less stressful. We know it can take weeks, if not months, to find a replacement who is just as talented. And do not forget how expensive training can be. There is no additional staff training necessary when you deploy TPO.

The case for profitability: instead of purchasing all software origination modules, with extraordinarily high annual costs, consider a TPO partner who has made the capital investment and ride their wave into the next refinance craze. The costs associated with outsourced processing and origination do not have to rest with you as the lender. Consider passing on this cost to the borrower as compensation for speed and delivery.

The case for efficiency: well, readers get my point. Sharing professional services, whether its compliance, risk management, or loan processing, bank management teams across the country will find value in low cost, high yielding solutions. Whether it is today, tomorrow, or even next year, planning for TPO services now will give you the competitive advantage as demand begins to soar. You just simply need to make the case.

Whether you are a small bank with minimal origination or a large bank with high loan volumes, our ShareFI team is ready to partner you with the right TPO vendor. While this can be as simple as loan documentation preparation (which FIPCO has done for customers for years) or full-scale processing, we are ready to help you make the right decision.

To learn more about TPO or shared professional services, please contact Jeff Schmid at jschmid@fipco.com or 608-
441-1220. There is value in ShareFI.

Schmid is director of compliance and management services at ShareFI. FIPCO is a subsidiary of WBA and a WBA Gold Associate Member.