Editor's note: This feature originally appeared in the July issue of MReport.
Eric J. Schuppenhauer is President of Home Mortgage at Citizens Bank, overseeing all aspects of the residential mortgage business including mortgage sales, operations, strategy, secondary markets, digital/technology, and risk teams. Schuppenhauer is a member of Citizens Bank’s Consumer Executive Leadership Team, which guides all aspects of its consumer banking strategy. He joined Citizens Bank in March 2018 from Capital One, where he led their mortgage originations and servicing businesses. Schuppenhauer spoke to MReport on the cyclical nature of the industry, innovation in a higher rate environment, and why it’s important to be passionate about your work.
M // You have seen the housing industry at its worst and its best. What trends do you see in the market moving into the second half of the year?
SCHUPPENHAUER // Right now, we have conditions where rates are going up and the supply inventory is tight. We are seeing an increase in construction activity, but it’s concentrated in certain communities. While sales of existing homes have been tepid, we will need to analyze how the spring selling season materialized to get a clearer picture of housing sales for the remainder of the year. Though there’s an increased demand, the supply constraints continue to drive home prices up, and the price and affordability issue is an interesting trend that’s being monitored closely by the industry. Regarding mortgages, I believe we’re going to be mostly a purchase market, with very low refi activity for the remainder of 2018. I anticipate that the purchase market will be dominated by first-time homebuyers and rapidly increasing home prices.
M // How can lenders keep up with the ever-changing mortgage landscape?
SCHUPPENHAUER // One source of anxiety for borrowers is the uncertainty of getting a loan. Lenders can use digital data to help answer customers quickly and focus on the intuitive design of their application and underwriting process to make home financing a seamless, problem-free experience for all. It might sound as easy as pie, but the reality is that lenders who absolutely put their heads to the practice of innovating on behalf of the customer will be winners in the long term. It is important that lenders do the right thing to make people qualify, their finances aren’t stretched, and they can sustain homeownership. Lenders must be responsible and help customers understand what their financing looks like. This can also be a tricky period, where we see the emergence of some players who think they can make volumes and cut corners. It is therefore imperative to put credit and customer service at the heart of the lending business.
M // Do you think millennials are the key driving force behind lenders to update their digital platforms?
SCHUPPENHAUER // While we always use millennials as the reason, almost everyone wants to interact digitally first. However, consumers don’t want a digital-only interaction as buying a home is too big a commitment in a person’s life. People want to talk to people; they want to know that someone’s there to explain the complexities of the process they would otherwise find full of tripwires.
M // The industry is anticipating more hikes in mortgage rates. How do you see these increases affecting borrowers’ sentiments?
SCHUPPENHAUER // Refis will get affected as the number of people looking at these loans decrease. Many homebuyers will also start considering whether they can afford the down payment for a home in the rising purchase market. But despite the psychological impact of rate increases, as homebuyers compare a mortgage against rent they would pay, they will see that even with rising rates, buying a home would be the cheaper option. Still, down payments will continue to hold some people back from making this transaction.
M // What do you think are the important challenges facing the mortgage industry today?
SCHUPPENHAUER // First and foremost, the market will shrink in terms of the number of competitors if we go through this rate cycle. When volume starts to lag like this year, some lenders will have a tough time continuing to move forward due to capital funding limitations. The issue in a down volume market, is who will continue to invest to make the process better and simpler, and drive transparency for consumers? Second, players who introduce products that are meaningful in the context and serve their customers’ changing needs will continue to thrive and will be the disrupters who accelerate the pace of change. Those who do not innovate in this period will find it very difficult to compete in the coming years. These challenges also create huge opportunities for people who get their strategy right, putting the customer first, continuing to invest and innovate, and staying true to who they are as a business. All too often, mortgage cycles cause organizations to cut jobs, trim costs, and stop innovating. Lenders must resist this temptation.
M // What advice would you give a young professional just entering the mortgage industry?
SCHUPPENHAUER // Be passionate about what you do every single day. You must be driven by a sense of purpose; this will add so much meaning to your work. If we think about it, housing is a major decision in people’s lives. As soon as one understands how critical buying a home is to a family, the U.S. economy, and to everything we do, housing starts to become more than just a job; it becomes a purpose. That’s what motivates me, and why I want to continue to innovate in the mortgage space.