PERSON OF THE WEEK: How important is it for mortgage lenders to invest in mortgage technology, considering that the mortgage process, in a high percentage of cases, remains a manual or hybrid (digital/manual) process?
Take the lead process for example. A borrower tells a friend who is shopping for home about a great experience he had working with a loan officer. The home shopper walks into the local branch, meets with the LO, and the process begins.
Yes, this scenario still happens. No internet involved.
But today, in all likelihood, the home shopper has already begun the process online – especially if he or she is a millennial. And, no doubt, that home shopper has been served-up some online ads with enticing rates from various lenders. One click lands the home shopper on the lender’s portal/POS. This borrower has now essentially been intercepted – i.e., drawn away from the traditional process – by the ease and convenience of an online process. And research shows that if they are a millennial, they are more likely to take the all-digital route.
So does that mean every millennial will complete the mortgage process completely online? It depends on the millennial’s circumstances. It also partly depends on how smooth the online process goes. Some firms are now successfully combining the real estate shopping experience with the lending experience to deliver a completely seamless home buying process. The point is, lenders must embrace the e-mortgage – it’s either that or miss the opportunity to intercept business online from the largest borrower cohort.
To learn more about the role technology plays in the lender/borrower relationship – particularly when it comes to millennials – MortgageOrb recently interviewed Frederick Townes, chief technology officer and co-founder of NestReady, a one-stop digital real estate technology firm that builds innovative tools in the real estate market.
Q: Recent articles indicate that millennials will account for 80% of real estate transactions during the next decade. How can mortgage lenders get ready for the shift in the industry?
Townes: Mortgage lenders must improve their brand experiences so consumers will remain loyal. This means banks need to find ways to stand out to new and existing customers, most of whom are turning to the internet as their first step in finding a home.
Pre-approvals and pre-qualifications are self-service and are more automated. They are now the first two steps in the mortgage origination process.
Many mortgage lenders are online today with their own self-service experiences – however many are perceived by borrowers as incomplete and not seamless.
Home shoppers often must hop from site to site to get information on a home and then calculate what they believe they can afford, then shop for a loan. Having this many steps makes the process arduous. It is time for lenders to create a more seamless and intuitive process and technology can enable them to do just that.
Q: Studies suggest that millennials are less loyal to their banks than other generations. How can financial institutions encourage and motivate millennials to continue to use their services?
Townes: The concept that financial institutions can become trusted partners before, during and after major financial transactions is one that should be adopted with millennials. The industry has started with the home buying journey, but banks need to offer engaging experiences and add value around the other borrower journeys.
For example, banks already see credit card providers making it easier to shop on Amazon.com by using reward points or providing credit health services/tools to grow the lifetime value of their portfolio. Mortgage lenders can provide value-added services such as introductions to real estate professionals or others who may support the homebuyer journey in a personalized way.
Q: What should be a bigger priority for banks, new customer acquisitions or to protect against losing their own millennial customers? Why?
Townes: Larger banks need to maximize their portfolio revenue – the customers they’ve already acquired. Therefore, growing revenue from existing customers has been a priority. Having success there would make a better business case for new borrower acquisition as a next step.
For smaller organizations the playbook is a bit different – new borrower acquisition may be a higher priority than to grow and retain the portfolio. At scale, the same tactics used to retain a portfolio will also attract new borrowers.
Q: What is the most important technology advancement for the mortgage industry today and how is it being used?
Townes: Right now, using machine learning (ML) and artificial intelligence (AI) to scale the performance of loan originators and personalize their marketing automation are the biggest opportunities to unlock revenue and maximize profit margins.
Enhancing the performance of mortgage professionals means they are enabled to provide the level of service borrowers expect without re-tooling or investing more to deliver.
When it comes to marketing automation and relationship management, changes are made to improve the targeting, timing and content of messages presented to consumers so they can make the most informed decisions.
AI and ML bring forward the next generation of personalization, which means a more engaging self-service experience for borrowers.
Q: Mortgage lenders are always looking for viable leads. What is a compliant way to ensure the leads they receive are indeed viable?
Townes: Integrating with services that help lead generation platforms understand more about borrowers at the start of their home buying journey is the key.
Qualifying a lead starts with knowing the borrower, and pattern-matching the attributes of a lead against ideal borrower behavior. This allows lenders to better engage borrowers at any stage of the journey – and adding value to both support and incentivize them.
Adding value at various touch points in the journey generates a more qualified lead. However, there must be automated systems in place that allow originators to nurture potential home buyers, as sometimes life gets in the way and intent to buy is delayed by unforeseen events.
Q: How can lenders maximize the borrower data in their existing portfolio?
Townes: Leveraging the history and behavior in the portfolio to identify patterns for cross-sell or upsell of products and services will always be the go-to move, even when the market has consolidated into fewer competitors with more capabilities. The wealth of data lenders have captured allows them to create more certainty in their customer acquisition and account expansion initiatives.
Revenue can also be optimized by moving customers between new products better suited for borrower behavior. We see that the telecom industry is very good at iterating product offerings and incentivizing customers to adopt them. Lenders will move at a pace similar to the telecom space and will behave similarly in the future.
Q: Why is it important for lenders to add more value in their services, and what should they be offering?
Townes: There are quite a few services that lenders can add, based on their existing resources. Personalization in the services will be key. Lenders should go a step beyond personalization in the borrower experience, as mentioned previously.
Answering this question properly requires considering traditional banks vs mortgage lenders vs credit unions, as they have different objectives and value propositions.
For example, credit unions are typically non-profit, while banks are for profit. Modern mortgage lenders are highly digital in order to maximize margins, but they do not offer the other financial products banks do. Hence, these philosophical differences affect the financial institution’s strategy. A good example of providing more value is what we already see in the market and proven to be very beneficial: lenders providing live, educational programs for borrowers.
