TheMReport — News and strategies for the evolving mortgage marketplace.
Issue link: http://digital.themreport.com/i/522162
20 | Th e M Rep o RT Feature I n today's environment, all retail lenders should be asking themselves, "What value am I truly offering a borrower?" We know that more and more consumers use an online, self- service option when making any retail purchase —mortgages included. When such convenience is available, why would a customer pay more to get a home loan from a retail lender instead? Most originators would likely respond with answers like "They'd get better service and communica- tion," "They could receive help in comparing options," or "They'd get assistance in qualifying for better terms or a larger loan amount." That kind of thinking is about 20 years outdated. In today's tech- nology-driven world, there are a plethora of resources at our finger- tips; customers can get tax tips by using Turbo Tax and rent-versus- buy calculations from sites such as Trulia, Zillow, or Bankrate, and there are even mortgage rate com- parison tools from the Consumer Financial Protection Bureau (CFPB) website and, soon, Google. To have a future, the distrib- uted retail sector of the mortgage industry needs to update its way of thinking—both culturally and technologically. Before we consider what independent lend- ers must do to stay ahead of the curve, let's first look at the forces putting pressure on the traditional retail model in today's market. The 3 C's: Challenges Facing the Mortgage Industry T oday, the mortgage industry is being challenged by the three Cs: consumers, competi- tion, and the CFPB. 1. Consumers are more self-service oriented and more tech-savvy than ever before. According to the 2015 National Association of Realtors' Home Buyer and Seller Generational Trends study, more than half of Millennial homebuy- ers find the home they eventually purchase via online research. 2. These homebuyers are also going online to shop around for the best rate. This is creating more competition, and it's forcing traditional lenders to keep a tight control on price in or- der to stay in the game and remain competitive. 3. But, not only do home- buyers want more insight into the cost of their mortgages, the CFPB wants them to have it, too. It has already implemented rules on loan originator compensation. Earlier this year, the Bureau also introduced a new interest rate comparison tool. Its critics have suggested that the tool is mislead- ing consumers, and many have questioned why a government agency would create a tool that doesn't inform borrowers of the other costs, especially those that lenders are mandated to disclose under Truth In Lending Act-Real Estate Settlement Procedures Act (TILA-RESPA) requirements such as closing costs and APR. These are just a few steps the CFPB has taken to allow for greater trans- parency to the consumer. And despite what some in the industry may think, this trend of transpar- ency is here to stay. So what can retail lenders do to stay in the competition? First, they'll need to justify their position on pricing, which means they'll need to be experts on what prices are most relevant in their market and how those compare to the prices of their competitors. More so, they'll need to offer true added val- ue to the consumer to substantiate Keeping Up with the Customer Evolving the Retail Business Model to Stay Ahead of the Curve By Howard Michalski