PERSON OF THE WEEK: Home equity loans are becoming an increasingly profitable source of business for mortgage lenders. By the end of last year, more than 14.5 million properties in the U.S. were equity rich.
The question is, are the mortgage lenders that offer these products doing all they can to capture this business via digital channels?
As Tedd Smith, CEO and co-founder of Austin, Texas-based FirstClose, tells MortgageOrb, lenders have a huge opportunity to target these borrowers by identifying them via a digital platform.
Q: What is the significance of digitizing the lead generation process for home equity loans?
Smith: Capturing leads is one of the most important steps in the home equity lending process, simply because it is where the entire process begins. The leads that a loan officer or broker identifies and how he/she targets them is what sets the stage for each step that follows. Lenders often overlook how crucial this first step is but it is the key to higher pull-through rates.
Lenders offering home equity loans or HELOCs currently have a huge opportunity by identifying equity-rich borrowers through a digital platform. This can be especially beneficial to lenders that operate in areas with a high concentration of equity-rich properties.
In addition to capturing home equity leads, technology can create new efficiencies for lenders. Automation has demonstrated the ability to save lenders time and money in all other facets of the mortgage business – lead generation included.
Today, technology and automation are helping lenders improve lead quality. With software, lenders can identify more high-quality leads, thus increasing closing rates.
Q: What can lenders do to convert more leads into borrowers?
Smith: By identifying the best leads via digital platforms, lenders can significantly increase the number of closed loans. Instead of casting a wide net that may not be reaching the right people, software is able to examine information about potential borrowers and identify which ones would be a good fit for a home equity loan or HELOC. In essence, software can help lenders target prospects with greater precision.
Once qualified leads have been sourced and identified, lenders can utilize technology to deliver a customized application process. Via digital platforms, they can encourage prospective borrowers who started the process but didn’t finish to continue. More importantly, lenders can deliver to prospects instant feedback on how much equity is in the borrower’s home and how much they are approved for. This includes, of course, instant information on the interest rate and estimated monthly payments – which is critical in today’s fast-paced lending environment, where borrowers want their money yesterday, not next month.
Automation and personalization keeps communication with borrowers relevant and useful. It can also play a part in driving them to take out the right type of loan, based on what the lender is offering or promoting.
When a borrower feels they are being serviced as an individual and offered relevant services, it is more beneficial for both lender and borrower, with a higher probability of closing.
Q: How can lenders ensure the borrower experience flows seamlessly from lead generation to application and beyond?
Smith: When a borrower interacts with a lender via digital channels, it allows their experience to flow seamlessly across each step of the process. When lender and borrower interact via a single platform, there is continuity in the experience.
When leads are generated digitally, it also helps information flow more easily throughout the mortgage process. The information submitted via the digital loan application and any other relevant information that has been captured digitally can be automatically pushed into a lender’s loan origination system (LOS). This can greatly reduce the need to ask borrowers for duplicate information and thus improves the borrower experience.
Q: What ROI should lenders expect to see from digitizing the entire home equity lending process?
Smith: With the efficiencies created by an entirely digital process, lenders can expect savings in both time and costs. With technology, the process will move faster and require less manpower, which helps lenders to stay profitable.
This digital process will also aid in borrower satisfaction, because using technology enables lenders to target the right borrowers for the right reasons while keeping their communications relevant.
Not every borrower will be a good fit for a home equity loan, but identifying prospective borrowers with equity in their homes and subsequently automating the application to closing experience will provide lenders with a competitive advantage.
Not only does going all-digital help lenders increase home equity and HELOC application volume, it also helps increase overall customer satisfaction.