Opinion: Is the lending market getting too correct on technology? Can

Rates are rising. Refinancing is declining. Inventory contracts. The fallout from the app is getting worse.

It gets more difficult there. Deteriorating market conditions will only accelerate an already highly competitive mortgage lending industry that is still learning to adapt to post-pandemic home buying behavior.

Technology has been the focal point of this development out of necessity more than some consensus that homebuyers don’t want to interact with their lenders at all. Don’t get me wrong – I’m technical at heart, but that doesn’t mean the answer to every problem should always be the deployment of new technology – it could be something as simple as a phone call and a timely response to a customer’s question.

Customer-facing technologies, in particular loan creation and decision-making programs, are now the standard in the range of mortgage lending technologies. But it’s also possible for a home buyer to apply and get a mortgage loan approved without actually talking to another human being.

This is not an Amazon order

There are two critical problems with this. First, it is not necessarily what the buyer wants – we are talking about one of the most important investments in a person’s life, not one of the most important in life Amazon Request. Second, for all the value lenders place on offering simplicity through technology, convenience doesn’t always equal loyalty, and it’s certainly not the only factor that separates a great customer experience from a bad one.

It’s easy to assume what customers, especially younger ones, want in today’s ever-present digital lifestyle—and still easier to adopt business practices that remove the human-to-human dynamic of transaction. If customers want digital experiences, who are we to turn them down, especially when we can cut some costs, automate the flow of our deals, and scale them more quickly in the process?

Now, you’ll never hear me spell out what role technology can and should play at critical moments in the home buyer’s journey. Yes, the customer must be able to fill out the pre-qualification application digitally. Yes, the customer must be able to upload documents to the portal or receive a digital approval letter. They must be able to explore price options and educate themselves about the intricacies of buying a home.

We are not cave people.

But an over-reliance on technology, as we’ve increasingly seen, has a lot of shortcomings to make the exclusive digital home buying experience sustainable.

What the borrower wants

The most obvious argument against a completely digital approach to lending — which requires the least amount of rationale — is that customers don’t want it. When you’re making the most important investment in your life, don’t you want the option of talking to someone who knows what they’re doing? Of course you do.

Market research supports this. According to JD Power’s 2021 Primary Mortgage Creation Satisfaction Study in the US, only 3% of homebuyers have relied exclusively on digital services for a loan. John Capel, Director of the Financial Services Practice at dinar strengthhas the only quote I’ll need to finish this quickly: “Technology alone is not a magic bullet in this market; the key is knowing where to tap and where to layer in more traditional forms for individual support.”

If customers don’t want it, don’t give it to them.

Giant monsters made by us

There’s a scene in “Captain America: Civil War” where Paul Rudd’s Ant-Man transforms into a 40-foot-high giant. But he can only take it for a few minutes before he is completely out of the fight and must take a three-day nap to recover.

Mortgage lending faces the same uneven dilemma that technology can, in many ways, make worse. It’s also very similar to the private equity mentality: expand as quickly as possible, focus on KPIs to secure more capital regardless of any underlying issues you might be hiding, and when you need to cut costs, start layoffs.

Technology can often be the catalyst for all three of these business principles. It enables scope, makes KPIs like loan creation and loan volume look great on paper, and serves as a kind of proverbial safety net when costs need to be cut.

If you look a little closely, this mentality has more plot holes than a bad superhero movie (Ant-Man is awesome though).

The scale for scalability means nothing if a company has to contract at the first sign of market pressure. Pricing increases, inventory decreases, and fewer clients experience lenders’ flexibility and sustainability as well as their ability to meet the needs of their existing clients. In such scenarios, human contact points are often the only service that can make a home buyer feel comfortable and confident enough to sign on the dotted line.

This means having enough loan officers on staff to proactively engage with clients, educate them and build trust that can only be achieved between two people. This means reducing response times from days to hours. This means reflecting the values ​​that customers share: community, empathy, timeliness, and service. There is still a piece of technology that can do these things better than people.

However, an overreliance on technology often means there are fewer mortgage experts to delight customers and provide a great home buying experience. There is no one to answer questions about DTI percentages, down payment amount, or closing costs at the most important moments. Customer satisfaction goes down. Customer acquisition costs are rising. KPIs take a hit. It ensues layoffs and goes back to where you started.

We haven’t seen a market like the one we’ve been in for over a decade. A lot has changed since then, most notably in how lenders serve clients and loans. Next year, we’ll find out exactly who is most vulnerable to market shifts and who has tempered the rush to tech adoption with a model that relies as much on the human touch as on tech-driven comfort.

Just look for those who take a three-day nap.

Michael Bernstein is the co-founder and branch manager of LendFriend Home Loans, an Austin-based mortgage lender.

This column does not necessarily reflect the opinion of the editorial department of RealTrends and its owners.

To contact the author of this story:
Michael Bernstein in [email protected]

To contact the editor responsible for this story:
Sarah Wheeler in [email protected]

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