TheMReport — News and strategies for the evolving mortgage marketplace.
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20 | TH E M R EP O RT COVER STORY They're also most concerned about qualifying for a loan and getting to closing, according to Kapfidze. A huge borrower concern is "not knowing whether they will get approved or not," said Schuppenhauer. However, according to Dibble, borrowers don't want to be told "No." Lenders need a good com- munication strategy so homebuy- ers understand the difference between "Maybe we can do the loan," and "Yes, but here's what the rate is to do it." Educating the borrower is another important aspect to help alleviate their concerns. Over the past year, Lenders One has seen its members come up with programs focused on building a path to affordable housing for borrowers who don't fit the traditional mold. For example, a program called Duty to Serve spearheaded by the co-op has helped provide more education and paths towards re- sponsibly expanding credit to low- and moderate-income homebuyers. Education and counseling is also important for many first-time homebuyers who are coming out of the recession with student-loan debt, and according to Kuentz, education is key to "matching borrowers with a product that can set them up to build a better financial future." According to Mark Revard, Market President of Oklahoma at Gateway Mortgage Group, borrowers' main concerns when shopping for a loan are interest rates and closing costs. "For ex- ample, a borrower may want an FHA loan, so they'll shop around to different lenders, looking for an outstanding rate. But when inter- est rates increase, borrowers get very concerned, so they shop and compare lenders extensively." In fact, shopping for rates is increasingly being looked as a beneficial exercise for customers. LendingTree, which recently introduced a Mortgage Rate Competition Index, found that even as mortgage volumes fell 10 percent last year, shopping activity for mortgages on the platform grew 25 percent. One of the reasons, Kapfidze said, was because the industry itself was transforming with increased digitization of the mortgage process that reduced the impediments of searching for and assessing multiple offers. "As more mortgages are digitally fulfilled, and a younger demographic, the millennials, account for the majority of the housing market, shopping activity will grow," Kapfidze predicted. But rates aren't the only thing that borrowers want. According to Dibble, for every borrower who wants to get a loan without ever sitting across from somebody, there's another borrower who wants to compare products and work on a loan face-to-face. The right thing is to strike a balance between the two. "When borrow- ers shop, they'll find rates, but I still think at the end of the day, bor- rowers look for people they want to do business with," Dibble said. Lender Concerns L enders are feeling the heat of drying up refinance volumes and tough market conditions on their profit margins. "Where am I going to get my next loan?" is a question that loan officers are often asking as they look at replacing the volume void left by the slowdown in refinance volumes. "A lot of loan officers are in the process of reinventing themselves to win cus- tomers who are purchasing new homes in a tight purchase market," said Schuppenhauer. Kuentz agreed. "Generating leads is the number-one worry for loan officers, as it's the lifeblood of their business. Referral relation- ships with realtors are still a mainstay for most, but many are exploring new ways to market and reach the elusive first-time homebuyer, " he said. The employment numbers for mortgage officers are as worrying. According to Kapfidze, employ- ment of mortgage and nonmort- gage brokers, which was in an upward trend since 2011, peaked at 94,900 in February, and is declining now. The Fannie Mae Lender Sentiment survey says as much, with cost-cutting jumping from the second-least-important priority in 2017, to the third-most-impor- tant one for lenders, coming in after consumer-facing technology, and business-process streamlining. As companies face the difficult tasks of cutting costs as quickly as possible in a low-volume environ- ment, loan officers are also wor- ried about unexpected changes brought on by corporate decision- making. "In tough markets, some companies make rash decisions without input from origina- tors," said Michael Lee, EVP, National Sales at Planet Home Lending. "They don't realize that it's critically important to include branches and sales leadership when making important decisions that can directly affect a loan officer's business—for example, pricing changes to address margin compression and process enhance- ments to reduce operating costs." Planet Home Lending is encouraging its loan officers to come up with creative ideas to differentiate themselves in today's competitive market instead. "Our job is to help them identify and execute boutique strategies that will win over potential customers and referral partners for them," Lee said. In fact, "the challenge of sus- tainable origination volumes is what's getting many originators to see the value of offering non-QM products, so they can help more borrowers," said Hutchens. Additionally, "Inventory levels also trouble loan officers, and the inventory issue is a result of what we're seeing with lenders softening on down payments and property types," said Revard. However, according to McQuaig, it's time for loan officers to adapt instead of worry in the new rate and volume environments. "Loan officers as a group must step up their game and focus on adding value to the mortgage transaction for partners and borrowers alike, instead of serving as a stepping stone in the overall process," he said. Towards Sustainable Homeownership T he lending landscape wit- nessed today has changed since 2017. As regulatory guide- lines continue to evolve, lenders, instead of shutting out potential borrowers, are introducing more customization and an increase in products, as well as flexibil- ity around down payments to widen their pool. "Agencies are now operating with a more flexible approach to nontraditional single-family homes like manufactured housing," Revard said. "There is now more of a focus on low- to moderate- income households and affordable housing." Education is another important aspect to ensure sustained home- ownership across a diverse set of borrowers. "Lenders who teach borrowers how to build their credit and find the right loan are making the dream of homeown- ership a reality for more people across the country," Kuentz said. "We're at one of the lowest homeownership rates in U.S. history right now and I think it's really important that we continue to look for ways to enable people to put down roots and live the American dream," Schuppenhauer said. RADHIK A OJHA Online Editor at the Five Star Institute, Ojha is a graduate of the University of Pune, India, where she received her B.A. in Commerce with a concentration in accounting and Marketing and an M.A. in Mass Communication. Upon completion of her master's degree, Ojha worked at a national English daily publication in India (The Indian Express) where she was a staff writer in the cultural and arts features section. Ojha also worked as Principal Correspondent at HT Media Ltd and at Honeywell as an executive in corporate communications. She and her husband currently reside in Dallas, Texas. You can contact her at Radhika. Ojha@theMReport.com.