Margin Pressure, Declining volumes, and the Challenge
2018 is a very different year compared to last year with rising interest rates, overall volumes are seeing a decline, and managing origination costs during periods of declining volume is leading to margin pressure. Also, a low inventory of new homes is driving stiff competition amongst lenders to respond quickly and better. In order to sustain the business, lenders have to find ways to deliver a differential borrower experience without increasing fixed costs. Faster turnaround times, improved quality, borrower transparency and reducing cost are all vital to grow in this significant market conditions.
The question here is how? What must lenders do in these challenging times? The answer lies in understanding your target audience’s psychology; their behavior, needs and expectations. In this case, the millennials, typically first time home buyers in the market.
Responsiveness and Communication Needs
Let’s face it, millennials today are known for their lack of patience. If they have a question, they need an answer now. That is what lenders need to understand to step up their game. Buying a home, for most, is one of the largest investments and the biggest financial decisions that they will make. A mortgage today is a daunting task that requires a lot of time, energy, and seemingly never-ending requests for documentation. All of this is extremely stressful and involved, something that millennials do not have the patience to deal with in the near instant world that they reside in. So, how do you make the mortgage process better, simpler and faster?
============================================================================The average Millennial mortgage borrower in August 2017 was a 29.4-year-old who took out a conventional loan of $185,919 to purchase a home with an average appraised value of $223,882, according to a data analysis from Ellie Mae, which also determined the average homebuyer in this demographic had a FICO score of 724 and closed on their home in 44 days. ============================================================================
Lenders must first start by looking deeper into their current processes. Yes, you are doing well, but that doesn’t mean there is no scope for improvement. Identify processes that can be reengineered or replaced with smart, quick transformations. By transformations, we don’t mean just technology. Transformations can be achieved by simple steps that re-align your process flows. For instance, we have created ‘parallel’ processing paths enhanced by technology that reduce time to get a quality prepped file to an underwriter.
No millennial wants to wait in line or expect answers by “snail” mail. It’s all mobile and transactional interactions that need to feed on demand. One significant requirement is streamlining communication and proactively discovering and addressing requirements. Loan origination can be complicated and requires multiple rounds of document exchange and correspondence between the borrower and the LO (Loan Officer). Every time the processor reports a missing document, the LO must go back to the borrower asking for it. This not only extends the lender’s time to fund but also results in an unhappy and cumbersome borrower experience. A simple step like communicating with the borrower only when you have all the requirements in place can streamline the entire transaction. Using innovations in mobile tech only enhance borrower experience and leveraging trusted outside partners to help with the process can give you the extra edge you need to focus on high touch service while providing your internal team with a low touch straight through process.
Thoughts on Quick Solutions
While all of this might seem very simple, the lender must introduce vital changes in their standard operational procedures. However, like millennials who want results quickly, we know that lenders too need results quickly, and may not have the resources to micromanage all of this.
That’s where specialized third-party partners come into play. Today, the market is flooded with companies that promise to deliver all of this and more. So how do you choose the right partner? The right partner will bring a combination of technology, holistic process management, lots of mortgage expertise, consistent metrics, steady clientele and the proven ability to help companies re-engineer processes that achieve results. In this market, you need to be selective and choose a partner that can cover you across the entire mortgage value chain. This way you can navigate a fluid market and scale needs on demand with minimal effort and maximum confidence.
SLK Global Solutions is a business transformation company that has been operating in the mortgage space for more than a decade now. Founded in 2001, the company is supported by 3,000+ professionals in the financial services area, its executive leadership team has 200+ years of combined mortgage experience, and it services 4 of the top 25 U.S. Banks. SLK Global’s proprietary MMaaS [Mortgage Management as a Solution] offering is a suite of technology led solutions covering the full spectrum of the mortgage life cycle designed to enhance customer experience, lower cost to fund, and accelerate loan processing while at the same time improve quality control with zero tolerance compliance.
A partner like SLK Global ensures that lenders will be able to focus on their core business of growing market share while SLK Global takes care of the rest. This includes administering key learnings, having worked with top U.S. mortgage leaders, and bringing in best practices and innovations based on current and future industry trends, to boost throughput while decreasing costs.
Let us know your thoughts on the above, and write to us at firstname.lastname@example.org to have a detailed discussion on how we can keep you abreast in 2018 and in the future.