The Future of Mortgage Lending is Upon Us

Mortgage lending has always been cyclical, albeit, not always predictable. Lenders, accordingly, have well-established, traditional strategies for each of these unique cycles.

…during high volume refinance cycles, many will ramp up staffing, open the production pipelines and do everything possible to improve capacity. The job of the loan officer (LO) is critical when it comes to advising clients and creating a smooth process in spite of high application volume.

…in competitive purchase markets, the LOs job becomes more complex. In those as typically been a bigger challenge. In those cycles, a mortgage professional will focus in deepening their REALTOR relationships.  Speed and service become paramount to both the client and the business partner.  Housing inventories, housing prices and rates impact affordability, thus it takes a knowledgeable loan officer with strong relationships with agents and builders to be successful in this cycle.

…in counter cycles (higher default rates) and periods of decreased volume, lenders seek alternative revenue channels. Some turn to selling servicing rights. Others look to M&A activity. Many focus on their margins, including reducing staff.

While these approaches have many times proven successful, times are changing. In all likelihood, the way we conduct business is already beginning to change, too.

The graying of the industry and the growing priority on retention and recruitment

In 2021, the average age of a loan officer was 44 years old. It’s very likely that, if we were to determine the average age of all mortgage lending employees, that number would be higher. This is a growing issue in a number of industries, not just mortgage lending. The Baby Boomer generation, long the largest generational segment of the US workforce, is beginning to age. Today, the youngest of the Boomers are almost 60. As more and more of them retire and leave the industry, we’ll need to turn  to the younger generations. And while there are slightly more Millennials (born between 1981 – 1994) in America than Baby Boomers, the mortgage industry hasn’t always done the best job of recruiting and developing younger employees. This is what many would politely refer to as a “traditional” industry. More than a few decision-makers still believe that working-from-home (WFH) has no place in our industry, or that “lavish” benefits or more flexible PTO are simply a waste of money. Yet Millennials and the subsequent generation, Gen Z (1997 – 2012) have already made it clear that those are exactly the types of benefits and opportunities they’re prioritizing when it comes to employment.

Something’s got to give. Most likely, we’ll begin seeing the businesses with policies aligning with that Millennial/Gen Z perspective winning the best talent; keeping it longer and, ultimately, succeeding.

Mortgage lenders are becoming true financial advisors

The way we do business is already changing in the way we position ourselves with customers and the services we provide.

Mortgage lenders are increasingly bundling a variety of home-buying services. Some are striving to build a one-stop shopping experience for the home search, mortgage, warranty, inspection, title and escrow, movers and even homeowner’s insurance, whether via in-house capabilities or partnerships. It’s also an opportunity for loan officers and consumer-facing specialists to cross-sell—something unthinkable to a mortgage banker years ago.

Some lenders have already begun to serve in the role of a financial advisor, rather than loan producer. Instead of constantly seeking new clients for a particular product, more of us are beginning to serve as many of our clients financial needs as possible. We’re trying to attract more lifetime clients and getting much better about tailoring our products to what they need, rather than just what’s profitable. We’re finally investing much more in customer-focused technology and putting a real effort into improving the entire borrowing experience. And we’re listening to feedback from both consumers and employees about what our borrowers want.

At the same time, there are seemingly countless fintech firms pursuing the same limited customer base. While borrowers want a seamless experience, they also want a human touch. After all, buying a home is, for many, the biggest transaction of their lives. The most successful lenders will not only provide a smooth experience and wide array of product options, but also, readily available, professional expertise.

The pandemic of 2020 forced the mortgage industry to rethink some of the changes it had previously resisted. We saw things work that we never thought could. We’re more digital now than ever. And we’re examining just about everything about the ways we do business. Instead of sticking to “it’s always worked in the past,” we’re evolving to “what can we do better, and how?”

In the long run, that approach will be of great benefit not only to the people we serve, but to the people within our industry as well. It’s certainly the path Certainty Home Lending will be striving to follow.