Human lenders are more valuable than ever
JThe Mortgage Bankers Association (MBA) estimates that lenders helped homebuyers with $1.6 trillion in loans in 2021. Consumer demand for mortgages in the United States has soared, driven by the increase in savings, interest in nesting and home ownership during the pandemic, and low interest rates.
These low interest rates have also made refinancing attractive over the past two years. And, although a rise in rates will reduce refinancing at a better rate and term, banks, non-bank lenders and mortgage investors will likely continue to see strong demand from the purchase market. According to a recent MBA report, the industry is expected to generate more than $2.5 trillion in each of the next three years, 40% more than the annual average between 2010 and 2019.
Simplified and responsive
Fortunately for homeowners and homebuyers, lenders have improved marketing, processing, underwriting, financing and servicing technology to streamline the process of financing a home. The customer experience becomes smoother and faster. Investors can facilitate further improvements at the point of loan origination, processing, underwriting and administration, as well as expand consumer access to finance and home purchase services.
Non-bank lenders, most with Mortgage Loan Officers (MLOs), continue to grow their market share. In fact, the share of non-banks in total issuance has been rising for years. Five years ago, non-bank lenders accounted for about half of total originations. Two years ago, this figure was almost 60%. In 2020, the share of originations by non-bank lenders jumped to almost 70% and when the 2021 figures are tallied, it should be even higher.
This growth has been driven by lenders who have a strong digital focus and a differentiated value proposition with loan officers helping borrowers: the personal touch.
Rather than replacing individual MLOs, companies have invested heavily in digitized interfaces that make it easier to submit an application, upload documents, and communicate with the lender. MLOs can continue to offer their customers speed, convenience and transparency.
Lenders have not only increased their own technology services, but have brought in third-party technology and data providers that further streamline the mortgage process to help consumers. This is timely, as borrower expectations for digital engagement have increased significantly over the past 18 months, as have expectations for rapid closures and any subsequent service handovers. Better: Lenders and loan officers will continue to streamline all origination and service processes that are still slow, manual, labor intensive and fragmented. MLOs benefit from these innovations and investments, and this translates into benefits for customers (borrowers).
Real people, comments and railings
In terms of product offerings, MLOs provide direct feedback to senior management on the types of loans and terms that will best help their customers. For example, the advent of “non-qualified (non-QM) mortgages” which consumers need for a variety of reasons (self-employed, too much debt), is a direct result of MLOs informing management of the need for the product.
At the start of the pandemic, lenders stopped accepting non-QM applications as credit guidelines tightened and the availability of capital dwindled. But liquidity has returned to the non-QM market, prompting lenders to take out non-QM loans again. MLOs see how non-QM liquidity plays an important role in expanding consumer access to mortgages by providing options for borrowers whose income stream or other financial attributes prevent them from accessing mortgages. traditional loan programs.
Loan officers are often the “contact person” when it comes to questions borrowers have, or any confusion that may arise, if and when service is transferred. Borrowers appreciate that personal touch and “having a friend in the industry”. This will increase as new lenders and mortgage servicing rights holders entering the industry may lack in-house management capabilities and will consider outsourcing to retain mortgage servicing rights.
Although the MLO is not directly involved in the service, it is the person the borrower knows and will contact often. An MLO’s ability to be the subject matter expert for their customer, rather than the customer returning to a generic, non-personal website for help, is a major reason why MLO-centric lenders continue to increase their market share.
Borrowers can take comfort in the fact that MLOs are subject to rigorous guidelines and extensive training. In addition to knowing their core business, they also learn consumer law. MLOs must pass both a national exam and one for each state in which they practice. (These state licenses must be renewed annually.) background check.
From connection to closure
As all interactions during the pandemic have become more complex, personal interactions have become more vital: being able to speak to someone who is available, willing and knowledgeable about a mortgage, for example. Whether it’s refinancing an existing loan or financing a new home, people love dealing with people. Having questions answered online is helpful, but borrowers continue to appreciate working with a lender that has loan officers to help them achieve their dreams of homeownership and home financing.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.