A Lender's Pipeline

A lender’s ‘pipeline’ is typically the total of all of their loans that are in some form of process. This would be a loan that is either in processing, underwriting, or closing.

Normally being in the pipeline refers to a loan that has a locked interest rate, an ordered or completed appraisal, title, etc. This is a loan where a borrower has made a formal loan application, and provided all necessary documentation. They may also have paid an application fee.

The pipeline would typically encompass any and all loans on which a formal application has been started, but the loan has not yet closed and funded. Definitions may vary slightly in using the term pipeline; some loan officers or lenders will count anyone they have taken an application on, or anyone they have pulled credit on.

Ultimately a loan that is in the ‘pipeline’ is one on which work is being done, and it is expected to close. This is a loan where the borrower is actively pursuing the application and is anticipating closing their loan in the near future.

Each loan in the pipeline requires work and near constant attention, and as such each lender is limited to the amount of ‘pipeline capacity’ that they may have. This could be due to either the number of employees and man-hours available to process/underwrite/close mortgages or a capacity due to funding restrictions. A funding restriction example would be a case where a lender only has a certain amount of money to lend, or a warehouse line of credit that can only carry a specific amount of loan volume before it is full.

Pipeline management is one of the most important jobs for a bank or mortgage banker as it is a constantly moving target that must be maximized but not overstressed to allow the lender to profit without over-taxing their operations. Some lenders will even raise or lower interest rates outside the normal terms of the current market to either gain more loans, or limit the number of loans going into the pipeline. This would be referred to as “buying the market” (offering lower than market interest rates to generate more loan volume), or “pricing yourself out of the market” (raising rates beyond what they should be to discourage loan applications, and therefore moderate the amount of new loans coming in). While not all lenders will use either of these tactics, they are 2 exmaples of some that may be used to help control inflow of new loans.