Understanding The Borrower’s Experience

The mortgage landscape has changed. There are whispers of 2021 being ‘the year that banks get digitized’. Borrowers now expect far more from their financial providers, and competition between banks and lenders has become more intense than ever before. With so many different banks and lenders vying for the same borrowers, how are you differentiating yourself from the competition? According to Salesforce’s 2019 “State of Connected Customers” report, “84% of customers say the experience a company provides is as important as its products and services.” How are you creating a uniquely superior borrower experience?  

The Profile of a New Home Buyer

The type of movement seen during the Pandemic was unprecedented, in that – COVID created home buyer motivations and behavior patterns never previously seen or experienced before. NAR’s 2021 Buyer and Seller Trends reported that “the main reason for purchasing was the desire to own a home of their own. Among the 66 and older age groups, the desire to be closer to friends and family was the top reason to purchase, followed by the desire for a smaller home.” Understanding key motivators for moving will best enable you to connect, serve and build repeat relationships in your market.

There are many reasons one would decide to move or buy a home. These can range from generational behavioral patterns, understanding and use of technology and financial circumstances (i.e., student dept or credit card debt), to lifestyle choices, the value of a ‘home’ and the groups involved. The same NAR report also states that “first-time buyers made up 31% of all home buyers, the same as last year. 82% of buyers 22 to 30 years and 48 percent of buyers 31 to 40 years were first-time home buyers. Behind these groups, 22% of buyers 40 to 54 years were also first-time home buyers.” While a chunk of the buyer population may be repeat borrowers, there is a significant opportunity for lenders to build repeat relationships with the incoming buyer pools. To do this, lenders must understand each group and the challenges they face, as well as their communication preferences, to efficiently connect with them and serve their needs.

For most new home buyers, shopping for a loan rate is part of the educational curve. While this process is becoming increasingly automated, the purchase of a home, especially for first time buyers, is a highly emotional journey. Automation and digitization, while crucial, cannot replace the value of human interaction and professional experience that loan officers and real estate professionals provide for their clients. If 2021 is ‘the year banks get digitized’ then this is also the year that borrower – lender relationship expectations reach unparalleled heights.

The Current Profile of a Homeowner

With mortgage rates hitting historical lows in 2020, mortgage refinancing activity has reached its highest annual total since 2003. According to Freddie Mac, borrowers who refinanced their first lien mortgage in the fourth quarter of 2020 lowered their rate by more than 1.25 percentage points, the largest reduction since the second quarter of 2015. Like many Americans this past year, I ended up refinancing my home in the so called ‘Mortgage Refinance Boom.’

Securing a low and competitive rate was a fairly quick and easy process. I spent an afternoon almost entirely on my computer, researching my options and shopping around for the best rate I could find.  

Surprisingly, I got a great rate and ended up selecting a slightly higher option (roughly $1,000 more fees). While the banks technology made the application process a breeze, and having my income, assets and employment information automatically pulled into the application was efficient and stress free, the ultimate decision maker was the overall experience I had years prior with that same lender.

There is a roughly 30-day window between the time a borrower hits ‘submit’ and the time the loan closes where the lender needs to truly differentiate themselves. The ability for the lender and borrower to communicate seamlessly in real-time and easily understand updates is key in providing an outstanding borrower experience.

Lenders need to proactively learn how their technology provides transparency and supports their borrower to the fullest extent. All too often, borrowers are stressed out by the many ‘tedious’ aspects of the mortgage process. They log into their online account only to find a proverbial black hole of information saying, ‘my loan is in processing’, or ‘my loan is in underwriting’, etc. They are not given the tools to understand what these messages mean, or the potential impact they might have on the timeline of their loan application. Lack of understanding and clarity during such a high stake, emotionally driven purchase typically leads to unwanted and excessive communication between borrowers and lenders, which ultimately end up either making or breaking the relationship between the two parties.

Transparency within each specific loan stage provides an understanding of exactly what has happened, followed by what needs to happen next, greatly reducing stress and saving time for all parties involved.

The type of automation I experienced during the process is quickly becoming the industry standard. If you are not digitizing and automating the loan process, you are already quickly falling behind. The technology you use, or don’t use, now directly impacts borrower experiences and customer satisfaction.

Technology and automation in banking now provide the transparency everyone has been starving to have. This newfound clarity eliminates questions, and thereby borrower hesitation and(or) anxiety associated with the mortgage lending process. This gives time not previously available for loan officers to focus on building up customer relationships. Here are a few ideas for consideration:

Lenders should start by proactively educating their existing clientele and prospects on technology changes coming to their banking institution and processes. Informing them in advance of their potential refinancing needs will demonstrate value and help maintain trust that keeps them loyal to your bank in the future.

Ask your clients what they are hearing and seeing surrounding big Banktech transformations. Provide insights on industry developments to keep them well informed of overall trends that could impact them in the future. Attending a webinar or conference? Tell them about it. Always be a resource.

Finally, get close with your network of local real estate professionals (agents, appraisers, inspectors, handy people, etc.). “2021 means new challenges for mortgage lending – Relationships with referral partners are more important than ever.”  Empty promises and poor communication have been notorious pain points in the agent-lender relationship. Leverage new technology and automation practices available in the market to improve your process, flow, consistency, and in turn, your relationships. Stop doing things by hand that can now be automated. It will save you time, eliminate errors, make you more money, and either strengthen or solidify your relationships. Building and maintaining these relationships is the key to a successful lending career. ‘Your network is your net worth’– dive in.

If mortgage providers have any hope of standing up to the rest of the industry, then lenders must provide an outstanding customer experience for borrowers and improve overall customer satisfaction. Utilizing technology to offer a more transparent mortgage lending experience can be a gamechanger for any borrower and will provide lenders with a unique, competitive edge.