STRATMOR Group: Consumer Direct Lenders Need To Act Now To Prepare For Success In Purchase Business

Consumer Direct (CD) lenders have done very well capturing the bulk of refinance business over the past few years. With the mortgage business shifting to purchase money loans, CD lenders will need a different strategy. That’s the conclusion STRATMOR Group’s Senior Partner Garth Graham reaches in his article, “Consumer Direct: It’s Nurture vs Nature in Purchase Business” in the January issue of the advisory firm’s Insights Report. 

Consumer Direct lenders who think they can just pivot and start a purchase business are in for a rude awakening, Graham says. Even when the lender can capture or buy purchase leads, they will take six to nine months to convert.

“To make it work, CD lenders are going to have to understand the needs of purchase money borrowers and craft marketing messages that will appeal to them, tweak the processes for purchase money loan origination and then train their LOs to close this business,” says Graham.  “Success in the purchase money market will require CD lenders to understand the emotional drivers for all borrowers. Originators will need to be taught how to emotionally connect with borrowers and agents, and it falls to the lender to provide this training.” 

The drivers are significantly different for purchase money borrowers. Unlike the refinance process, where the borrower just wants a better rate on an existing loan, purchase money buyers are dealing with much more emotionally complex problems. These borrowers need the loan officer to begin a dialogue with them and their agents to find their versions of success, and then have a process that will deliver it.

Unfortunately, most originators don’t know the right words to make this connection. Recent STRATMOR Workshop surveys show that 78 percent of CD lenders ask the same originators to work both purchase and refinance business instead of setting up a separate trained sales team. Only 14 percent have separate teams to meet the needs of these borrowers. 

This means these originators probably haven’t been trained to see the differences between borrower profiles, and they are significant. Typically, there are only two types of refinance journeys but there are six types for purchases.

Lenders must also work with real estate agents, the most powerful source of new purchase money business leads. Unfortunately, many loan officers have not cultivated relationships with these important business referral partners and may not even know how to talk to them about their businesses. 

“It may seem overwhelming when the complexity of the preparation process comes into focus, but it is possible to retool a Consumer Direct shop to be competitive in the new purchase money mortgage market,” says Graham. “Lenders who start now, create a strong plan and adopt the right strategies will be the ones who maintain their strong market position relative to retail lenders in 2022.”