Lisa Springer is a Senior Partner and CEO of STRATMOR Group [1], a data-driven mortgage advisory firm. As CEO, Springer oversees all corporate initiatives, sales and marketing strategies, client experience, advisory services, knowledge sharing programs, and STRATMOR’s technology and data strategies.
MReport had a chance to chat with Springer about the shift taking place as the mortgage market adapts in a post-pandemic world.
How did the pandemic affect consumer financial behaviors?
Springer: As U.S. consumers were told to stay at home in lockdown, they stockpiled resources, and personal savings shot up like a rocket, according to data from the Bureau of Economic Analysis (BEA). Americans went from being among the worst savers in the developed world, to now holding nearly three times as much in savings as they did pre-pandemic. In May, personal savings as a percentage of disposable personal income was 12.4%, according to the latest figures available from the BEA.
What does this mean for home lenders?
Springer: If consumers are in “save mode,” then help them save. Advise them of products that require less cash up-front and offer loan products that complement this new mentality to be more financially responsible. Builders can design new home options that connect with the growing market surge of millennial who are new to homebuying. Millennials want flexibility, smart technology, and environmentally friendly choices.
What does a post-pandemic real estate finance market look like?
Springer: Rates are forecasted to rise, and millennials are expected to hit their prime homebuying age—putting more pressure on an already tight inventory. Still, roughly six million home sales are expected this year, an improvement on the fewer than 5.7 million closed transactions in 2020.
Home lenders are expected to generate approximately $3.47 trillion this year in residential production, according to the June origination forecast from the Mortgage Bankers Association (MBA). That’s up from the MBA’s May forecast of $3.4 trillion, with much of the additional production coming from increases in refinance volume.
While the total doesn’t climb to the $3.8 trillion closed in 2020, it still represents one of the best years in history.
What does this mean for lenders?
Springer: For lenders, it’s important to look at business from multiple angles to better manage this transitioning market. Focusing on the customer experience includes both the consumer and the lenders’ employees. In other words, to better satisfy consumers and help them achieve their goals, lenders also need to avoid employee burnout by giving them the support they need. While the early pandemic increase in productivity and customer satisfaction due to processors working from home was promising, it was short-lived. Those gains were ultimately buried by problems with overwhelming volume. Lenders should plan to develop better training programs to enable new hires to get up to speed quickly. They also need to provide the right incentives to motivate their teams.
Also key: maintaining connections with borrowers. Winning new business in the future will largely be a factor of the lender’s existing relationships. STRATMOR’s customer experience data shows that 27% of borrowers chose their lender based on an existing relationship with the originator. Another 21% cited their relationship with their lender, and 18% said they made the choice based on a friend or family member’s referral. Compare that to only 22% that said the real estate agent drove them to the financing. Lenders have the power to win more business if they focus on these relationships.
Mortgage lenders should also create a technology roadmap and follow it to focus on strategic business objectives to avoid falling into the “buying that shiny new thing” trap. To be successful, new technology must be adopted both internally and externally.
How do purchase borrowers differ from refinance customers?
Springer: Their motivations are different, and their journeys are very different. Unfortunately, refinances have been the focus for originators for so long that fewer loan professionals have the skills to source, sell, and close purchase loan applications. It’s going to be a tough transition for many lenders.
Again, creating robust training programs and implementing technology that will make the process smoother for both loan originators and borrowers will be critical.
How should lenders prepare for a pivot to purchases?
Springer: Build the skills needed to manage purchase loans in your staff right now. Purchase leads can stay in the pipeline for a long time while borrowers look for their new home. Compared to a refi application, purchase applications can be more complicated, take more time to do, and require coordination with a lot more parties. The refi tsunami is coming to an end, and lenders need to plan for a market more like 2018 (with 25% in refinances) than 2020 (with over 50% in refinance transactions).