The hidden cost of fee cures: an industry cost analysis of a preventable expense

By ICE Mortgage Technology

November 27, 2024

ICE conducted an analysis on nearly 90,000 loans from eight lenders over a six-month period to find out how often fee cures happen and to quantify their expense to lenders. The study found that fee cures contribute considerably to the cost of loan production — an average of $1,225 per loan. By mitigating fee cures, lenders in the study could recover more than $1.2 million for every 1,000 loans produced. Here is an excerpt from our whitepaper, The hidden costs of fee cures.

The mounting challenge of loan profitability and the unknown cost of fee cures

The lending industry is grappling with a significant challenge: profitability is eroding at an alarming rate. According to the Mortgage Bankers Association’s (MBA) Annual Mortgage Bankers Performance Report, mortgage lenders averaged losses of $301 a loan in 2022, down from a $2,339 profit per loan in 2021. Even more concerning is that mortgage lenders reported an average net loss of $1,972 per loan in Q1 2023 as production costs reached a high of $13,171 per loan.

MBA economists point to lenders’ inability to curb production expenses in line with declining production volume as the main catalyst of the problem. Despite resorting to drastic measures like mass layoffs, the steps lenders are taking have not proven sufficient to address the issue at hand.

Anecdotal evidence has long suggested that fee cures are commonplace and cut into lenders’ profitability. An estimated 28% of closing disclosures had significant revisions as cited by a lender in the 2020 CFPB TRID Rule Assessment Report. In addition, the CFPB’s Loan Offer Survey asked how often respondents thought the Closing Disclosure was an accurate representation of final loan terms and costs. Approximately 31% responded “Almost Always” compared with about 47% who responded either “Often” or “Sometimes.” The remaining nearly 16% responded either “Rarely” or “Never.” However, the impact that fee cures have on lenders’ bottom lines has long been unclear due to a dearth of published data on their frequency, common causes and costs. The ICE study results published in this whitepaper show that there is a largely untapped opportunity to improve profitability by reducing the expenses associated with fee cures.

Read the full whitepaper here.