recruiterchuckcowan

What exactly does being different and adapting to the new mortgage buying environment look like for the loan officer in the future?

After posting this article: Real talk: The mortgage industry is changing, and some of you won’t make it, written by Jason Frazier:  https://www.housingwire.com/blogs/1-rewired/post/43272-real-talk-the-industry-is-changing-and-some-of-you-wont-make-it?eid=311686869&bid=2090489  on Social Media, I was recently ask the following question: “What exactly does being different and adapting to the new mortgage buying environment look like for the loan officer in the future to you Chuck Cowan?”

A very complex question with a lot of variables and influencers (A very complex process with a lot of different players involved (Real Estate, Mortgage, Title, Appraisal, Insurance etc.), an ever shifting regulatory environment, constant changing compliance landscape, rapidly advancing technology, increasing manufacturing cost base, the constant moving perception of the real value ($$) of the cost of services provided (fees, commissions etc.), potential new entrants(Amazon, Facebook, Zillow etc.). And this response is written with an attempt at an extremely over simplistic explanation that provides an overview with a slant to the purchase transaction not the refinance transaction (as we are entering a prolong period of declining refinance volume- refinances are estimated to only be 20-22% of the 1.6 trillion overall total loan volumes in 2018 and declining further in 2019). Of Quicken Loans industry leading first quarter 2018 volume of $20.5 billion, only 25% was purchase transactions. So, they have not demonstrated that their technology has given them the ability to win the customer in a purchase transaction at the same conversion rate of a winning a refinance customer.

But what I hear, see and read about, it is a change in consumer shopping and buying behavior regarding the whole home buying process.  These fall into three basic categories: 1. 100 % Self-Serve (smallest segment Est at under 20%), 2. Partial Self-Serve (largest segment Est at over 55%) 3. Desired Professional Representation (middle segment Est at over 25%). Those are today’s estimates and they are changing with growing regularity, with the first two segments growing by far the quickest. Consumers are going online over 98% of the time to start the process from day one, but it is how they are finishing that process, that is what is in play or up for grabs. The latest numbers say that over 70% still do and have the desire to speak with a local professional. A supposed accountability partner per say to help guide the consumer through all the moving pieces. Now when (not if) will that number change, and to what degree up or down is the million-dollar question. Who will have the influence and become the advocate for the consumer is what every player in the whole home buying process is trying to win. Centralizing and/or bundling as many of those different pieces for a simpler process will have an ongoing edge in that battle. The main disrupter is the consumer’s shopping and buying behavior regarding the home buying process, not just the companies that provide all the home buying services. Machine Learning, AI and Blockchain will all play a major role in the customer experience and the reduction of manufacturing cost of a loan. But they all are in early stages of integration. In the end, technology is supposed to make it a more efficient transaction, provide a quicker loan process, a better customer experience and save money for all involved. And this should mean that there will be less overall number of loan officers doing more transaction per loan officer as they are more efficient, involved in a shorter process on a different compensation model providing a better customer experience. That is a big ask but not impossible, and it is the direction the home buying process is headed.

A simplistic overview, historically you use to contact a realtor based on a referral from friends and/or family and start looking at homes they selected based on the information you provided. Then you would select a home and then start the mortgage shopping process, identify a lender and apply. And the realtor would have a huge influence on who you initially contacted. The truth is, that sequence of events was always backwards as your realtor would give you a guesstimate of how much home you could afford or best-case scenario you would do a pre-qualification with a lender based on the realtor’s recommendation. Then they “the realtor” would select the homes you looked at, based on an educated guesstimate and/or pre-qualification- but it is still a pre-qualification or guesstimate not a preapproval with a guaranteed commitment. That part has changed drastically with the amount of quality information available today online.

Today, most consumers start researching homes online through the Zillow, Home.com, Realtor.com or some similar type of site. Then they start to want to know “how much can I afford” and start the mortgage investigation process with or without selecting “that one home” and they do this with or without a realtor and/or a mortgage professional. Who has influence with this consumer? And who will lead them through the home buying process and become their advocate? All of this is now up for grabs, those professionals that have this influence will be the survivors and the future stewards of the of the home buying process. One example of this change in behavior, it is bringing into questions the cost of the real estate commission. Is a 6% or 7% a fair commission for the realtor? Previous they had control over almost all the information, but now they do not have control over all that information. As it relates to mortgages, using online rate quotes and calculators are useful but not binding. When does the need of professional advice become relevant?

Technology is a game changer, but it is all going to be driven by the consumer shopping and buying behavior, the consumer dictates the rules going forward. This is as it should have always been.  In the USA, we use to have a manufacturing driven economy but now we have a consumer consumption driven economy. Consumers want Mercedes, Apple like quality coupled with Amazon, Uber like pricing. That just will never work financially for the companies (Real Estate, Mortgage, Appraisers, Title, Etc.) providing all these different fragmented services, so at some point the consumer will follow basically one of two paths: One is where you get a concierge level service with high quality creating superior customer experience or they chose the second path which is the lowest price point and the do it yourself experience. I am sure there will be many other options that attempt to blend this divergent, and they will come and go (some will stick) but they will basically be influence by either of these overarching themes. Quality experience or price point will be the influencers. Yet, no company has been able to provide the absolute best quality at the lowest price point in any consumer consumption driven industry.

As for the different platforms and business models, there will be a lot of options as there has always been. Some will excel, and others will falter but at the end of the day, companies and loan officers will need to constantly re-invent and redefine their value and justify their contributed cost of the home buying process as will other players involved in the overall process.

I do know the consumer today, are more fickle and demanding than ever and this is due to the information available they can access. Whether they truly understand and can apply that information to insure the best possible transaction based on their desired preference has not been proven. Especially in a transaction as complex as the home buying process. This is the good news, there is still the need for local professional advice and guidance. Depending on the consumer’s desired level of service, will dictate which path they choose to follow as a home buyer and having a clearly defined value will be of the utmost importance to the loan officer to win that consumer’s trust and hard-earned money in the form of fees and commissions. Interesting times we are in and as in all major industry shifts, huge opportunities lie ahead for those that are prepare and have a willingness to adapt.

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May 8, 2018 Posted by recruiterchuckcowan | Home Buying, Housing, Mortgage, Mortgage Banking, Real Estate, Uncategorized | Leave a comment