Why You Need Automation — A Case Study
Why do you need automation?
Automation saves you a ton of time AND reduces any potential human errors. Manual inputs not only take a lot of time but each input is subject to an error — automation ensures these processes are quick, easy, and accurate.
Here's a real example of the consequences of not automating your processes.
It was a dark and stormy Friday afternoon. A broker was asked by their client to calculate the yield maintenance for a loan they had originated four years prior; they wanted to double check before signing a PSA.
The estimate received was $1.6mm but when we calculated it, it was $2.2mm — a $600k difference!
Obviously, we looked into it.
At first, we assumed it was a function of rates changing or timing from March to June, but that wasn't the case.
Instead, nearly all of the $600k in difference was due to an error in the inputs to the online prepayment calculator...
And the issue was... "Amortization Months".
In this case, where they were supposed to put an amortization of 360 months, they put 120 months. (A reminder that each field that has to be manually inputted is subject to error.)
In effect, they ran a calculation on a 10 year, fully amortizing loan. This made them underestimate the yield maintenance calculation by more than $600k!
Had they not double checked, they would have ended up with $600k less in their pocket all because of an input error.