PERSON OF THE WEEK: With historically low mortgage rates and a sudden wave of relocations due to the pandemic, 2020 saw one of the strongest housing and mortgage markets in decades.
Those trends are expected to carry into 2021. But with surging home sales, competition among mortgage lenders will heat up, making it imperative to differentiate.
To get perspective from an industry veteran who has worked with hundreds of mortgage companies to streamline processes, reduce costs and ultimately be more competitive, MortgageOrb interviewed Adam Batayeh, president of Lodasoft, a digital workflow platform designed by mortgage veterans to revolutionize loan origination and task automation.
Q: What do you believe the housing and mortgage markets will look like in 2021?
Batayeh: Coming off a great year for home sales, the housing and mortgage markets will likely hold strong this year. In fact, according to Lawrence Yun, chief economist with the National Association of Realtors, mortgage rates will remain stable in 2021, though there may be a slight increase from the record-lows seen last year.
Even then, home sales will continue to surge. Zillow is even forecasting a nearly 22% increase in home sales this year from last year.
Beyond low mortgage rates, there are other factors that will drive home sales in 2021. First, the Millennial generation is moving into their mid-30s, which will contribute to a conversion of renters to first-time homebuyers. Additionally, new-home construction surged to the highest levels in October since the Great Recession, as demand remains strong.
Mortgage lenders have a huge opportunity, but their success hinges on the type of customer experience they deliver – and how fast they can create it.
Q: What can lenders do to remain competitive and capitalize on strong market demand?
Batayeh: Not surprisingly, consumers rank interest rates and no or low fees as most important when selecting a lender, according to a poll commissioned by Fiserv. However, those factors depend on the economy. Fiserv’s study further revealed that the other factors that determine choice are all about the customer experience. That is where lenders must focus.
The challenge is that competing on experience with companies like Rocket Mortgage is practically impossible without building a custom platform. And building a custom platform is practically impossible unless you have a budget like Rocket Mortgage. It becomes a Catch-22.
Instead of custom building, mortgage lenders must leverage open architecture and APIs to seamlessly and quickly create a platform that is unique and competitive. Rather than building one-to-one integrations, an open architecture platform allows lenders to plug and play virtually any widget to build a custom technology stack. Lenders can add various functionality to differentiate and improve the customer experience with speed, efficiency and a lower investment.
As a result, lenders are able to effectively compete for market share today by seamlessly implementing the latest technology, but without the headache and extraordinary cost of building a custom system.
Q: What if market conditions change? How can lenders quickly adapt?
Batayeh: By leveraging a vendor agnostic platform that is built on an open architecture, lenders can “future proof” their business. In other words, lenders can not only add functionality as needed, but they can also easily remove functionality that becomes outdated or irrelevant. Additionally, they can make adjustments consistent with changing economic conditions.
This also opens up the opportunity to experiment. Lenders can more easily explore and try out new ideas. If a widget or technology does not meet customer expectations or yield beneficial, lenders can quickly remove it with hardly any loss, allowing them to remain exceptionally nimble while also cutting-edge.
Q: Are there other areas lenders should consider to be more competitive?
Batayeh: The customer experience is crucial, but lenders must also focus on increasing efficiencies, eliminating chaos and reducing costs for originating loans.
With what we at Lodasoft call an enterprise intelligent loan manufacturing (iLM), lenders can drastically reduce the cost to originate. Leveraging a Workflow Automation Engine allows for task-automation at all phases of the loan process (prospect, in-process, post-close) to speed closings. With a task-based workflow engine, lenders have greater visibility and transparency to grow their business.
Training employees is also much more streamlined, freeing branches and internal staff to focus on growth. And business process management solutions give lenders complete control of their borrowers, users, agents, partners and their bottom-line.
As the market continues to boom, it is important to not only differentiate with the customer experience, but lenders must also consider operational improvements to efficiently manage increases in demand and business. But this must be done carefully and in a way that allows for market contractions. Simply adding resources and more people to handle increases in business will only lead to problems down the road when demand plateaus.