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Saving money with an MBL CUSO is not as crazy as it sounds

Cori Schmidt- Zdrazil

In this cost-conscious business world, we are always trying to find ways to cut expenses to maximize our bottom lines. We walk a fine line between proper staffing of areas versus risk mitigation. So, am I crazy when I say you may very well save money by engaging an MBL credit union service organization (CUSO)?  Absolutely, not. Of course, how much your credit union may be able to save will depend on your volume of loans.

Using our historical partner volumes and sizes, I will walk you through what it would cost to use an MBL CUSO like MBS. As no one credit union is exactly like another, the costs in the first table below are presented by asset-size tiers.  I have taken the average number of loan packages received from each tier and calculated the average underwriting and documentation costs. In addition to per loan package (“widget” fees), each partner pays an annual fee, giving them access to MBS’s services. It is important to note the only fixed cost presented in the table below is the annual fee; all other costs are variable and dependent upon volume of loan packages submitted to the CUSO. The fees include complete underwriting, appraisal process management, documentation, and permanent electronic credit/loan file hosting in our secure environment.

Table 1: Costs to use an MBL CUSO (by asset-size tiers)

  Asset Size $50MM Asset Size $200MM+ Asset Size $500MM+
Number of Loans 20 50 100
Annual Fee $5,000 $10,000 $15,000
Underwriting Fees $12,700 $31,750 $63,500
Document Fees $3,180 $7,950 $15,900
Total CUSO Fees $20,880 $49,700 $94,400

 
Now let us compare the CUSO expense to what it might cost you to manage these MBL services in house.  Again, the information in the following table is categorized by asset-size tiers. In the staffing instances below, the administrator is assumed to be part-time for the first two asset tiers. All other staffing assumes full time, using a 30% burden rate.

Table 2: Costs to manage MBL services in house (by asset-size tiers)

  Asset Size $50MM Asset Size $200MM+ Asset Size $500MM+
Documentation Software $6,500 $17,100 $30,600
Analysis Software $2,500 $5,000 $5,000
Training $1,500 $3,000 $6,000
Staffing:
   Admin $22,750 $22,750 $45,500
   Underwriter $58,500 $71,500
   Doc Prep $58,500
Total In-House Cost $33,250 $106,350 $217,100

 
Based on comparing these two tables, you can clearly see the demonstrated savings when using an MBL CUSO.  In addition, a wealth of intangible benefits arise when you engage an MBL CUSO, especially a CUSO like MBS. Some of these benefits include the following:

  1. Independence

    Management can rely on MBS to provide independent underwriting and document preparation services free from undo borrower or lender influence. Underwriters are only evaluated on speed and accuracy of analysis. Fees paid for underwriting are not contingent on recommendation. This independence can play a key role in fulfilling management’s obligation under Regulation 723 to appropriately manage the risk in the commercial portfolio.

  2. Experience

    All but a few of the largest credit unions in the country could afford or justify the depth of experience available through partnering with MBS. Our staff of 10 underwriters range from junior bank analysts with five years of experience to 30-plus-year veterans, many of whom have been commercial lenders, credit managers, bank executives or examiners.

  3. Depth

    Most credit unions could afford a single underwriter and/or a single documentation prep specialist, making their programs susceptible to turnover and absences. These single positions also limit the knowledge base of the respective credit union. A file processed by MBS will be assigned to the appropriate skill level as dictated by the complexity or uniqueness of the file.

  4. Reputation

    Federal and state MBL exam specialists are familiar and comfortable with the MBS product, potentially making the exam process easier for partner credit unions.

Based on our historical information, our partners saved approximately $2.3 million by engaging MBS versus trying to duplicate the underwriting and documentation functions in house, which is an average savings of $36,000 per credit union. The savings of using an MBL CUSO, coupled with the ability to re-deploy credit union staff while strengthening the soundness of your commercial underwriting and documentation, provide powerful support for considering the services of MBS.

About the Author

Cori Schmidt- ZdrazilCori Schmidt-Zdrazil is responsible for all of the accounting and financial statements for MBS. Cori has a BBA with a concentration in Accounting from the University of Texas at Arlington and a Master’s in Accounting – Taxation from Florida State University. Cori is a Florida CPA and a Chartered Global Management Accountant. Prior to joining the staff of MBS, Cori was the Chief Financial Officer of Florida Press Service, Inc. and the Domestic Controller for Mainline Information Systems, Inc., an Inc. 500 Hall of Fame Member. Her mix of both not-for-profit and for-profit business experience over the course of her 18-year career places her in a unique position to understand the traditional commercial market and that of our partner credit unions.View all posts by Cori Schmidt- Zdrazil →