We all know that 2018 was a tough year for the mortgage industry, and we should be braced for more of the same in 2019—with a slight increase in purchase volume being offset by a drop in refinance volume.
This was the takeaway from Garth Graham’s session at Deluxe Exchange 2019. Garth is Senior Partner at STRATMOR Group, a data-driven mortgage industry advisory. Garth Graham heads STRATMOR Group’s marketing strategy and execution practice, which focuses on lead generation and lead management methods and practices primarily for the consumer direct and retail mortgage origination channels. Garth has more than 25 years of experience in sales and marketing, ranging from Fortune 500 companies to successful startups, including management of two of the most successful e-commerce platforms.
A rising tide will not lift all boats
With fewer and fewer originations to go around, 2019 is shaping up to be a zero-sum game, with market share being the true prize in 2019. Successful companies will focus on optimizing their marketing, sales, community ties, and close rate. On the other hand, those companies that aren’t able to keep pace with this optimization will struggle, and some will exit the market. We already saw significant consolidation in 2018, and that is set to continue.
Rate adjustments have not fundamentally changed the outlook
Despite the Fed’s recent rate adjustment, continued refinancing originations are unsustainable, with little remaining volume to go around. To protect your existing refinance opportunities, strong analytics are needed to identify prime prospects.
Successful lenders are those that execute better
The most successful lenders will be those that optimize their execution across the board. The best purchase lenders are investing in marketing and technology and are making drastic improvements—not only in the borrower experience, but also in the tools they provide to their internal stakeholders.
It’s no longer possible to differentiate your company by closing loans on time. In such a competitive landscape, the ability to close a loan tomorrow is no longer a differentiator—it’s table stakes. Instead, companies need to be sharper at sustaining marketing campaigns over time, ensuring that they can engage borrowers early in their purchase experience, and keep them engaged throughout the long purchase cycle.
An experienced loan originator equipped with market-leading tools and strong backing from marketing is a formidable thing. Given the challenges ahead in the market, and the reality that the pool of outstanding originators is not getting bigger, enabling your top talent for success is paramount.
Technology: on the rise, and not slowing down
Technology spend has been increasing steadily for almost a decade. But whereas early on, lenders were focused on regulatory compliance—today, the number one reason companies are investing is to improve the customer experience.
The most successful companies will be those that are not only willing to invest in the customer experience, they also have the metrics in place to measure the impact of these improvements.
The industry under-invests on marketing
As an industry, mortgages under-spend on marketing and over-spend on sales and commissions. Over 50% of the revenue on a mortgage transaction goes towards sales commissions; not many industries can sustain this expenditure over a long period. More to the point—as consumer habits change, with a dramatic increase in online engagement and a decreased reliance on the realtor to guide them through the process—the premium on sales will decrease. Across all industries, the most successful companies are those that invest in marketing and technology.
The role of data
In such a competitive landscape, if you’re relying on sales to compete for a realtor’s referral, you’re missing out on engaging with consumers when their purchase process is just beginning. The trick, then, will be how to find them. Is a renter’s lease expiring? Is a consumer searching for homes online? These are critical signals that the top institutions will use to engage early, with well-developed marketing campaigns.
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