The operating model redesign opportunity of the century

In 2015, it cost the mortgage industry $7,046 to fund a loan. In 2025, it cost $11,094. That’s a 57% increase in 10 years. Source: Mortgage Bankers Association’s Annual Performance Report Series. Cost per Funded Loan is defined as “Fully Loaded Loan Production Expense: includes personnel expenses, occupancy and equipment and miscellaneous expenses for sales, fulfillment and post-closing activity. Also includes corporate allocations.” If we go back even further, our lowest cost of origination was in 2009 when our industry closed a little less than $2 trillion in volume with a $3,685 cost per funded loan. There was no generative AI in 2009 and we were in the middle of the Great Recession. So, why have our costs gone up so much? The easiest explanation is that cost per loan is just math. It’s fixed cost spread over the units of funded loans. When volume drops, cost per funded loan naturally will rise. The data unfortunately suggests there is more to it. A problem beyond simple math 2020 and 2021 were two of the largest origination years in my career. If this is just math, you’d expect those years to have the lowest cost per funded loan, but the cost actually increased from $7,535 in 2...