MReport October 2018

TheMReport — News and strategies for the evolving mortgage marketplace.

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26 | TH E M R EP O RT COVER STORY they have taken a bit longer to enter the home buyingmarket. A study by eHarmony found that American couples aged 25 to 34 knew each other for an average of six-and-a half years before marrying, compared to the average of five years for every other age group. "You may not trust eHarmony as the analytical resource going forward, but their results accurately reflect a consistent trend towards later marriages documented later by the U.S. Census," said Jonas Moe, EVP, Market Strategy, Ellie Mae. "The dynamic of the changing family whether it be marriage or kids, is a huge driving factor into why both millennials and Gen Xers choose to buy a house." Most of these aspiring buyers, a survey by Fannie Mae found, are also young American renters, who are looking to upgrade from leasing to owning. "Young renters in our surveys continue to aspire to own," said Mark Palim, VP and Deputy Chief Economist at Fannie Mae. "Over 90 percent of renters surveyed said that they expected to own a home at some point in the future." What concerns them though, Palim said, was having sufficient credit scores, having saved up enough money for a down pay - ment, and the ability to actually carry debt. "The millennial segment still holds a dated belief that a first- time homebuyer needs 20 percent down payment. In many cases, they're putting 20 percent down or even more," said Jorge Davila, VP, Direct Lending, Flagstar Bank. "The lack of understanding of the payment assistance options available in the market for them is preventing millennials in many cases from being able to get into the housing market." Despite these concerns, when they're looking for information on the mortgage process, younger buyers often turn to mortgage lenders as a trusted source of in - formation. "Given everything we went through with the housing crisis and the negative publicity about the industry at that time, it's actually encouraging to see that for young buyers, mortgage lenders, along with realtors, are the two dominant sources of information that they trust to get advice about how they're paying the mortgage and what's required to qualify," Palim said, adding that this was an aspect that lenders could use to reach out more ef - fectively to millennials. Millennial Expectations D espite this trust, there exists a gap between what millenni- als expect from the homebuying process and what lenders are cur- rently giving them. According to Marion McDougall, EVP, Chief Loan Administration Officer, Cali- ber Home Loans, millennials are investigators of options and use micromoments to explore home- ownership, preferring a balance of self-service and personal service. "They have strong expecta- tions of what should be available at the touch of a button. If they get stuck or have a question and need a lender's help, they want to engage in a manner of their choosing, whether that's text, chat, IVR, or co-browsing with an agent," McDougall explained. "Millennials expect the lender with whom they're engaging, to deliver personalized options and insights, and they want to do all of this while they're in line at the grocery store, getting their car washed, or picking up their kids." "Although they do like automa - tion when it makes their lives easier, many millennials, like baby boomers, also insist on being able to speak to a live person to get their questions answered," Cummings said. "The ability to transition from a digital applica - tion midprocess to speaking to a lending officer to get questions answered, a.k.a., the omnichannel high-tech, high-touch experience, is key to delivering the solution clients want." A recent eBook on the digital mortgage experience published by Ellie Mae also cleared some misconceptions about millennials and digital mortgages. It said that borrowers wanted a mortgage experience that combined speed, convenience, and security with personal interactions that are reassuring and convenient. "This means that a digital mortgage has to be more than just an online application," the eBook said. Looking at the most impor - tant aspect for millennials when they applied for a mortgage loan online, Moe said that young Americans ranked security as the most important factor. When asked what needed to be im- proved, millennials ranked more face-to-face interaction as the second highest factor in improv- ing their application process. "Although millennials may have grown up as digital natives, we need to realize that they face the same core challenge that every other generation has faced in terms of homeownership. This is the biggest transaction of their lifetime, and while technology and automation are key to creat - ing a great experience, we can't lose sight of the human experi- ence," Moe said. When it comes to the type of loans that millennials prefer, the Ellie Mae Millennial Tracker found that over 62 percent of all loans done by millennials were done using conventional loan programs, 24 percent took advantage of FHA programs, and less than 10 percent took advantage of VA programs. "There may still be some edu - cation opportunity in the market, in general, as we try to allow future homebuyers, like millen- nials, to understand the benefits of FHA programs and, for our young veterans coming back, the benefits of VA programs. But con- ventional loan types seem to be the focus for millennial homebuy- ers," Moe said. According to Davila, lenders must help millennials understand these various loan options to help them overcome their concerns over down payment. "It is time for us to really get behind USDA, FHA, VA, and other nontraditional prod - ucts that are available right now that will help those millennials get into their first house," he said. Filling the Gaps D espite the growing impact of millennials in homebuy- ing across the country, there re- mains a gap in the perspectives and process as far as lending to them is concerned. One of those gaps, according to Palim, is the diversity in the job profiles of millennial borrowers. "Although they do like automation when it makes their lives easier, many millennials, like baby boomers, also insist on being able to speak to a live person to get their questions answered. The ability to transition from a digital application midprocess to speaking to a lending officer to get questions answered, a.k.a., the omnichannel high-tech, high-touch experience, is key to delivering the solution clients want." —Kathy Cummings, SVP, Bank of America

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