The Nomis Narratives

As the housing market exploded amid COVID-19 stay-at-home orders, the mortgage industry saw a huge shift in how consumers approach lending. Now, lenders are doing everything they can to meet evolving customer expectations and stay ahead of the curve.

Meanwhile, consumers quickly adapted to the ‘new normal’ of shopping online for a mortgage, driving an increasing demand for digital mortgage services. As retail lenders rush to catch up, direct-to-consumer (D2C) lenders have excelled at meeting customer expectations during the pandemic. Let's examine how D2C lenders are poised for success in 2022 and what strategies traditional lenders can adopt from them moving forward.

The future of mortgage lending in 2022

This year, the Federal Reserve will play a major role in determining whether new home purchases or refinancing will dominate the marketplace. If rates go up, borrowers may be more reluctant to buy as houses become less affordable, especially in areas where housing prices have skyrocketed and bidding wars became more common. Considering home prices across the U.S. increased by 17.2% year over year from July 2020 to 2021, affordability is already a concern, especially those living in areas with limited housing availability. Should the Fed forgo a rate change, demand for new mortgages will likely taper off with some borrowers still interested in refinancing opportunities.

D2C lenders, who often excel at reaching buyers early in the research process, deliver valuable customer experiences that simplify the origination process, offering pre-qualification in 3 minutes or less. As borrowers share their experience with fast and easy loan origination processes, traditional lenders will need to both play the rate game and adapt to new standards for exceptional customer service. 

So, what do borrowers expect moving forward? 

• The ability to locate the most competitive rate online.
• A clear and easy to understand mortgage origination process.
• Faster process times and response times.
• A fully digital experience that allows borrowers to complete forms and upload documents from any device.
• Various communication options for shoppers who may have a lot of questions.

Where the mortgage industry is delivering this experience… and where it’s not

While retail lenders focus on building relationships with borrowers, opportunities are still in large part driven by sales teams or loan officers. The role a mortgage lender plays in the lead generation process is changing, and traditional lenders have always depended on referrals to be the main lead driver. Meanwhile, D2C lenders are taking a digital-first approach, connecting with borrowers online and through social media.

Where D2C lenders can sometimes fall short is in the customer experience. While D2C lenders can provide personalized communication at scale, they may not be able to provide the customized support that comes with a traditional mortgage lender.

As per-loan profit continues to drop every year, many traditional lenders struggle to compete with D2C lenders on rate charts, where many borrowers are starting their research process. Traditional lenders who adopt new technology and analytics to stay competitive on rates have a unique opportunity to bake exceptional customer service into more scalable digital processes.

D2C strategies that improve margins

We all know more leads can drive higher revenue. But, as origination costs continue to increase, digital acceleration is the only sustainable way traditional lenders can maintain market share and strengthen their value proposition.

Now, retail lenders must shift from a growth mindset to a scale mindset to remain relevant. By leveraging intelligent automation, there are a number of ways retail lenders can increase their margins and reduce costs. 

• With the right technological support, lenders can reach many leads simultaneously without compromising personalization.
• As warm leads begin the pre-qualification process independently, lenders can spend more time providing borrower support.
• LOs that can adapt to a more seamless mortgage process are better equipped to assist with customers' evolving expectations. 

The dedication and knowledge traditional mortgage lenders bring to the table are valuable assets to digital-savvy borrowers. However, without adopting digital tools to support lead generation and efficiency, retail lenders will find themselves struggling to find new borrowers in 2022.

For more detailed coverage on this topic, access the complete white paper titled Can Lenders Catch Up to Consumer Demand in 2022?