An experienced third party (or “contract”) processor can provide substantial benefits to brokers and loan officers. Having a talented resource available without adding fixed overhead allows the flexibility to manage volume fluctuations and maintain focus on the front end origination. Brokers and loan officers are able to hand off the file and know that it’s still being worked while focusing on what’s most important, finding new deals. The best part is that none of the cost has to come out of your pocket. The fee can actually be added onto the LE and CD and paid at closing with the transaction.
One thing to keep in mind is that it is essential to properly document the use of a third party processor on loan documents. Here are some tips to consider:
- Contract processors should be NMLS licensed and provide an invoice for their services
- Fees for processors who are affiliated with the broker count in the 3% QM test (processors paid by W2 from the broker)
- Fees for un-affiliated processors do not count in QM (1099 processors)
- When looking for a contract processor make sure they have mortgage experience. Your goal is to free up your time, not create more work for yourself.