How to deal with margin compression

“We went back and just perfected our systems, made it more streamlined, figured out the flow and introduced more technology, and more spreadsheets analyzing the cost of a loan from start to finish,” he revealed.

He said he worked backwards to find out how much it cost to do a loan, based on an estimate by Freddie Mac. On average, it costs approximately $8,600 to close a transaction, although, for Consumer Direct, which takes the loan officer out of the equation, it’s around $6,500.

If it had previously taken two-and-a-half hours to underwrite a loan, he reduced that by a whole hour.

Cahan reckoned that he was now targeting the cost of a loan to about $2,100 from start to finish. He admitted he had no qualms about reducing staffing levels, either. From the 27 underwriters he employed back in August 2021, he reduced to 12. Four closers and five staff dedicated to pre-processing were also laid off, the net result being that he slashed operational salaries by around 40%.