Winning Back the Mortgage Borrower
While some could reduce their own origination fees in order to capture business, that is not a sustainable strategy in a market with fewer mortgage loan prospects. If the lender hopes to attract more business, they must focus on meeting the unique needs of today’s mortgage loan borrowers.
It’s not realistic for lenders to compete on rate or even loan fees, as all lenders are tied to the same secondary market investors and third party service providers. In fact, in the eyes of the borrower mortgage lenders are the same. In an article that ran in Value Insured in January of this year, a survey revealed that when borrowers were asked how they felt about the mortgage industry, over 53 percent said they could not see any differences between lenders.
The survey also revealed that nearly 55 percent of homebuyers think the mortgage industry lacks innovation and that lenders are operating today in virtually the same manner as they were 10 years ago.
Meanwhile, federal regulators are also finding it difficult to approve of the way lenders operate. The government continues to levy heavy fines and judgements against industry participants. The nation’s biggest banks are grappling with massive settlements. Meanwhile, consumers’ satisfaction with the mortgage lending process fell this year, according to J.D. Power’s 2017 U.S. Primary Mortgage Origination Satisfaction Study.
Meeting the needs of today’s mortgage loan borrower will require change because there is ample evidence that today’s consumers do not like the traditional mortgage process. Lenders will have to offer something different in order to get the new borrower’s attention. This is a fantastic opportunity for lenders to truly set themselves apart from all competitors. But failure to make a change now will carry serious consequences.
According to a report by McKinsey Global Banking Annual Review entitled, “The Fight for the customer,” cited in a study published by Genpact Research Institute, banks could lose over 20% of their margins over the next 7 years.
“With a volatile market and changing lender landscape, mortgage lenders must balance the need to capitalize on growth opportunities against cost and risk. By driving transformation efforts through a combination of Lean principles, agile development practices, and advanced process-centric digital technologies, mortgage lenders can transform their operations to become more nimble, efficient, and ultimately, more competitive.”
Most experts agree that technology will be the key to engaging more borrowers. It is certainly the key to controlling operating costs. While there are ways you can control your costs and improve your margins by improving processes and leveraging the right technology, the best way to offset the margins challenge is to ensure sustained growth.
That suggests that the key to success in 2018 and beyond will be to apply technology to customer acquisition, which is exactly what the most successful brands in the mortgage lending business are doing today.
Bellar, C., Bellar, C., &Bellar, C. (2018). What do homebuyers think of the mortgage industry?.ValueInsured – Down Payment Protection for the modern homebuyer. http://www.valueinsured.com/trendsource/2018/1/11/what-homebuyers-think-of-the-mortgage-industry
Wiener-Bronner, D. (2018). Wells Fargo could face $1 billion penalty for auto and mortgage abuses. CNNMoney. http://money.cnn.com/2018/04/13/news/companies/wells-fargo-mortgage-auto-fine/index.html
J.D. Power 2017 U.S. Primary Mortgage Origination Satisfaction Study. (2018). J.D. Power. http://www.jdpower.com/press-releases/jd-power-2017-us-primary-mortgage-origination-satisfaction-study
 “Can Mortgage Lenders Stay Competitive with Better Process and Technology.” (2018). Genpact.com. http://www.genpact.com/downloadable-content/insight/can-mortgage-lenders-stay-competitive-with-better-process-and-technology.pdf