In the mortgage industry, the term “digital mortgage” has been the term that everyone can’t seem to stop talking about. Lenders know that mortgages will become more and more digitized, but the majority of the industry is still originating and servicing loans the same ways it did at the turn of the millennium. Some even claim that a friendly smile and a nice office is still a better sales tool than any digital mortgage could offer. (We don’t agree.)
There still remains a healthy skepticism within about the future of mortgages and exactly how “digital” will change the borrowing process.
This leaves loan originators with some difficult decisions to make. Primarily, how much should originators invest in improving technology. If we approach this question from the customer (i.e., home-buyer), loan originators want to know – is there really a demand for digital mortgages?
A new report from Velocify is shedding light on that critical question. The research team interviewed 500 mortgage borrowers to gain insight into their customer journey and experiences getting a mortgage or refinancing their existing loan.
Here are some of the team’s findings (emphasis added):
- Borrowers are 3.7x more likely to find a lender online today vs. 5-10 years ago
- Millennials are 45% more likely to find a lender online when compared to baby boomers
- Only 10% of borrowers found their lender though a Realtor referral in the last year
I find this last statistic the most surprising. When conducting industry research for Nest Mortgage, I went around to 20+ loan officers in the San Antonio and Austin, TX area. As I asked around to LOs’ best methods for getting clients, a full 100% cited realtor referrals as their primary source of business. This represents a very large disconnect in the way lenders and borrowers are reaching other through the customer journey.
Further along the journey, Velocify found that communication preferences follow the difficulty of each phase of the buying process, with a plurality of borrowers in the research phase preferred using self-directed online tools to gather information. However, in the loan application phase, phone and in-person tied as the preferred methods of communication. After closing, borrowers preferred e-mail.
There is also a clear link between technology and positive borrower experiences. Overall, borrowers were 2x more likely to think technology improved the loan process when provided an online portal. Surprisingly, baby boomers were 3x more likely to think technology improved the loan process when provided an online portal.
With baby boomers still driving a large share of home purchases in the US, this finding has important implications for lenders. Primarily, there is now an expectation of technology as the borrower, usually in the form of an online portal. As borrowers continue to prefer these tools and new methods of communication, they will select their lenders based on previous experiences and expectations with other lenders.
Lenders who stick to their old ways are going to miss out on more and more business as the industry shifts online to provide an improved borrower experience.