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Cracking the Code in Digital Mortgage Lending

digital lendingAs technology transforms and simplifies more industries, consumers are expecting the same ease of use from their mortgage provider. In fact, data from Ellie Mae’s recent annual Borrower Insights Survey (BIS), which polls more than 2,000 renters and homeowners, found that borrowers across all generations expect to be provided with digital solutions such as mobile apps and online portals as a foundational part of their loan process. 

However, providing a true digital mortgage experience isn’t just about the technology offerings. While the mortgage industry has made great strides to incorporate big data and automated systems to improve the overall loan process, understanding the needs of the consumer is still imperative in order to marry digital innovation with personalized customer service. 

To provide a true digital mortgage experience, lenders must learn to prioritize the use of all available technologies, digital tools, and communication channels to foster strong borrower relationships throughout each step of the loan lifecycle. 

 Go to Where They Are

Increasingly, borrowers are finding their lender digitally. According to the BIS, 43% of borrowers who have taken out a home loan in the last year found their lenders through online searches, compared to existing bank or lender relationships, advertisements, or direct mail, which continue to decline in popularity. 

Borrowers are also considering multiple lender options via online research and comparison. Thirty-six percent of borrowers considered three or more institutions in the last year, compared to 3-5 years ago. For lenders to continue to attract borrowers, it is imperative to appeal to potential customers online and highlight unique and customized loan processing offerings. 

Digital Tools and Processes

Borrower demand for online options has increased by 18% in the last two years. As millennial homebuying continues to rise and the first true-digital generation (Gen Z) of consumers comes of age, lenders can expect the demand for digital options to increase exponentially in the coming years. 

Specifically, consumers demand ease-of-use when it comes to technology and they are drawn to online portals, which make it easy to upload necessary documents to apply for a mortgage. Fifty percent 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. Furthermore, 47% of respondents said access to an online portal for uploading documents electronically was a factor in their decision in choosing a lender. Likewise, the majority of borrowers who were not offered online or electronic options from their lenders would have preferred those options.

While online portals are still the preferred digital tool, mobile apps are also expected to grow in popularity, particularly as Gen Z ages, as they are accustomed to this kind of convenience across their other financial transactions.

Prioritize Communication

Borrowers also continue to show a strong desire for a variety of communication options with their lender. Frequent communication across multiple channels between lenders and borrowers has increased by approximately 20% for those who took out loans within the last year when compared to borrowers who obtained their loan in the last three to five years. Direct communication with a lender can be especially important to younger borrowers and those who are applying for a mortgage for the first time, as they can have their questions answered and feel reassured that the loan process is on track in real-time.

According to BIS survey data, borrowers still largely prefer more traditional forms of communication, such as email and phone. Millennials and Gen Xers, in particular, prefer communication with their lender via email. While millennials were more likely to communicate with their lender via phone than baby boomers.

However, this doesn’t mean that newer forms of communication are not gaining popularity across generations. Surprisingly, of the homeowners that applied for a home loan in the last five years, Gen X communicated with their lenders via chats and online portals more frequently than any other age group. 

As a lender, it can be difficult to know how frequently to reach out. The line between providing thorough service and pestering the borrower can be difficult to discern. BIS data found that while millennials were the generation most contacted by their lender (11 times for those that applied for a mortgage in the last year), they were most likely to feel that their lender did not communicate with them enough even though they received more communication than any other generation. 

Tailoring communication tactics and frequency to the individual borrower’s preferences will help create a strong relationship and smooth closing. Efforts to automate repetitive aspects of the application process can help free up a lender's time so they can reinvest it to build a relationship with their client and learn their individual needs and communication preferences.  

The speed at which technology is transforming commerce can feel intimidating, however, lenders should remember that while digital tools are attractive to a potential homebuyer, a human touch and a personalized experience can make all the difference in being able to successfully close a loan.

About Author: Joe Tyrrell

Joe Tyrrell oversees technology, product strategy, product management, and Ellie Mae's business and corporate development efforts involving its network of current and potential business partners and merger and acquisition strategies. He has been with Ellie Mae since 2002 and previously held the position of EVP of corporate strategy, SVP of corporate strategy, and SVP of client management and business development. Prior to joining Ellie Mae, Tyrrell served as VP for Providian Financial in addition to other executive positions within the mortgage industry. Tyrrell holds a Bachelor of Art in Business Management from St. Mary’s College.

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