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09/12/2017

The Key to Mastering the Evolving Mortgage Marketplace

Eugene Geis September 12th, 2017

The Key to Mastering the Evolving Mortgage Marketplace

Mortgage application volume dropped 7.4 percent in July on the heels of the Fed raising its federal funds rate, CNBC reports. With Federal Reserve Chair Janet Yellen announcing the central banks will likely soon begin reducing its $4.5 trillion balance sheet, long-term interest rates could continue to rise and further affect the mortgage marketplace.

While the impact on consumers may seem gradual, for financial institutions heavily invested in building their mortgage business, the rate increase and its side effects will be game-changing.

Factors in play

Other trends are also influencing the evolution of the mortgage market and how financial institutions will have to navigate the new landscape, including:

  • The potential impact of the anticipated easing of Dodd-Frank regulations.
  • The probable re-entry of some big players into the mortgage marketplace if regulations ease.
  • The widely reported shortage of inventory in housing markets across the country that is spurring increased competition among consumers as well as lenders.
  • A limp refinance market is spurring increased competition in the purchase market.

If you’re a financial institution marketer tasked with supporting your bank’s efforts to build mortgage business, how will you refine your tactics to cope with the changing mortgage marketplace?

Market smarter, not harder

Sixty-six percent of the financial institution marketers surveyed for the Digital Banking Report “2017 Financial Marketing Trends” report said marketing mortgage loans and refinancing was their second-highest priority for this year. What’s more, 70 percent of community banks said they’ll focus on building mortgage business, and 43 percent of big banks expect to do so.

Clearly, competition is increasing. Yet among the surveyed financial institutions, less than a third of the average bank’s marketing budget goes toward the kind of initiatives that could help build mortgage business — new customer acquisition. So while competition is growing, chances are good budgets for mortgage marketing initiatives will remain flat.

In this environment, it will be more important than ever for financial institution marketers to strike the perfect balance of aggression, precision and timeliness — and place exactly the right offer in front of the right prospects at the perfect time to elicit the desired response. Strategic use of data, analytics, and consumer signals will be critical to successful mortgage marketing.

Data modeling for mortgage marketing

The good news is your financial institution already has much of the information you need to refine your mortgage marketing strategies. The challenge is in how you optimize that data to help meet your marketing goals. This is where data modeling comes in.

Data modeling can help you:

  • Identify prospects already interested in mortgage products.
  • Identify those with the highest potential to respond favorably and profitably to marketing touches.
  • Score groups of prospects based on their interests, needs, and qualifications.
  • Identify prospects’ preferred channels where they’re most likely to respond.
  • Assess incremental gains in ROI and identify the optimum number of prospects to target.

Your data modeling efforts should take into account a range of signals that prospects are in the market for a mortgage; these signals should include credit information, event triggers, consumer information, property deed and tax information, and valuation information. Most signals fall into three types:

  • Behavior-based — The consumer takes an action that indicates he or she might be looking for a mortgage, such as conducting an online search for mortgage information.
  • Event-based — A consumer whose current adjustable rate mortgage is about to reset to a higher rate might be shopping around for refinance opportunities.
  • Predictive — Passive signals such as a savings account balance reaching a certain level, or a consumer who’s locked into a higher-rate mortgage may indicate the prospect will be receptive to your marketing touch, even though they haven’t yet actively exhibited intent or interest.

Data modeling and analytics can help ensure you identify and connect with the right prospects with the right products at the right time for every campaign — and that translates to higher conversions and greater ROI.

First steps

With the mortgage marketplace evolving on a daily basis, financial institutions need to move quickly to implement effective data modeling and data analytics to support their mortgage business goals. To help you get started, we created a white paper called “Supporting Customer Acquisition Through Effective Data Modeling” to help you understand in detail some of the ways you can use data modeling to support your marketing.

After reading that you should review what you’re currently doing, including what’s working right now. Next, evaluate if those working strategies are likely to remain viable in the long term as the market continues to change or if you’ll need to adapt them to market influences. Identify potential gaps between your current strategies and what you need to do going forward.

Data modeling and analytics should be leveraged to help you identify the prospects most likely to respond to your mortgage marketing efforts.

With the Fed poised to continue making adjustments throughout the year, and the federal government looking at retooling key regulations, the mortgage marketplace is likely to be a volatile landscape through the rest of 2017. Will your financial institution’s marketing strategies keep pace to help your organization stay competitive?