According to PricewaterhouseCoopers’ Home Lending Experience Radar 2018 report, customer satisfaction for mortgage lenders lags behind other financial services providers, especially in industries where FinTech has established deep roots. But how can this be, with all this talk about how technology companies are “disrupting” the mortgage industry?
Mortgage lenders have improved the ability to reach an initial credit decision quickly, but there’s still a long way to go before funds can be disbursed after a few taps, clicks or swipes. If we truly want to improve the borrower experience, then I believe we need the entire process — not just the application — to meet the demands and expectations of a shifting consumer base. Based on my experience in the industry, here are three steps lenders must take to get from where we are today to where the industry needs to be:
Put the customer first.
For decades, the mortgage origination process has been linear and heavy with paperwork. But today’s consumers expect a very different experience when interacting with companies: They want access to services on their terms and answers to questions when it’s convenient for them. For mortgage lenders, this means that the process must increasingly take place online, not on paper.
According to our annual Borrower Insights Survey, which polls more than 2,000 borrowers and renters, 50% of borrowers who applied for a home loan in the past five years chose their lender based on whether or not they offered an online portal. Lenders have reacted accordingly: A separate survey from HousingWire and Maxwell shows that just 14.3% of lenders don’t use online applications for their borrowers.
Right now, online portals are the most popular electronic option for applying for a mortgage, according to our survey. But as Gen Z ages into the market, I believe the experience will need to not only become mobile-first, but also more convenient. Lenders need to invest in mobile technology and borrower communication, to increase functionality as well as to ensure ease-of-use.
Younger consumers have grown up in an era where digital — including mobile — transactions are intuitive, fast and seamless, and they will expect the same level of comfort when applying for and closing a loan. Additionally, many consumers, especially first-time borrowers, have a desire for frequent and personalized communication with lenders that keeps them informed and addresses their questions about the mortgage process.
To get started, lenders should ask themselves whether they are offering borrowers a true digital mortgage experience that not only simplifies the application process, but also shortens time-to-close and gives borrowers faster access to all the information they want, every step of the way.
Automation has come a long way, but most borrowers still want help from another person when completing a mortgage application. After all, buying a home is often the largest financial transaction that most people will make.
It’s imperative that lenders communicate effectively and efficiently via email and phone during the origination process, as well as through available online portals and chat features. Online chat may not be used as frequently as phone, email or online portal messaging, but as the artificial intelligence (AI) that powers chatbots continues to evolve and improve, chat functions will see increased use. Post-origination, email becomes key.
Lenders also need to make concentrated efforts to communicate with borrowers more often, taking into account that different demographics have different preferences. For example, according to the Borrower Insights Survey, millennials prefer to be contacted more often than baby boomers. In addition to frequency of communication, lenders also need to keep in mind the speed of their responses. According to the J.D. Power U.S. Primary Mortgage Origination Satisfaction Study, customer satisfaction declines sharply for each day spent waiting after inquiry for contact from a lender.
Increased automation empowers lenders to spend less time crunching numbers or filing paperwork, and more time building deeper relationships with borrowers so they can offer a truly seamless, high-tech and high-touch mortgage experience.
Become an educator.
One of the biggest opportunities for mortgage lenders is to help their clients become aware of all their options. The No. 1 reason that millennials do not own homes, our survey found, is because they haven’t been able to save enough money. This is echoed in Apartment List’s 2018 Millennial Homeownership Report, which reports that 72% of millennial renters who plan to purchase a home cite affordability as a reason that they are delaying homeownership.
A combination of historic personal debt and tight inventory in major housing markets has made homebuying more difficult, particularly for millennials. Educating all generations on different loan types, how much money is actually needed for a down payment, and credit score requirements for various loan options will help drive homeownership rates and business for lenders.
Homebuyers can feel overwhelmed and are often tempted to rush through the mortgage process, but a good lender will take time at the outset to provide easily digestible material and personal communication detailing the different loan types available, and will work with borrowers to find the right loan for them. Almost half of potential homebuyers believe you need to put 20% down to own a home, per Bank of America’s 2018 Homebuyer Insights Report. As this could deter consumers from the homebuying process before they even reach out to a lender, it’s also important to make sure educational materials are put front and center on lender homepages where borrowers may begin their research.
To enhance the customer journey and increase customer satisfaction, lenders need to offer a strong mix of customized communication and online offerings. Increased borrower communication and education could help drive completion rates for online applications, leading to more market share and a more robust customer pipeline for lenders.