November 2012

TheMReport — News and strategies for the evolving mortgage marketplace.

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COVER STORY in five households, or 24 million households with 51 million adults. Bricks-and-Mortar Benefits S from high school and college today is far more comfortable transacting over the Internet compared to older individuals who tend to be a little more suspicious about entering their personal data, such as their income and Social Security num- ber, online," said Rich Alterman, SVP of business development at GDS Link, which provides risk management technology and consulting services. Younger people who have grown up with the internet are more comfortable sharing information through so- cial platforms such as Facebook; they have a higher level of trust in these channels, Alterman says. Even Willard acknowledged some—"maybe many"— consumers are nervous about, which likely will persuade them to continue to prefer personal interaction provided by traditional lenders. "The generation graduating till, Taylor said borrowing remains something that that trust equity built by many banks and lenders could give them a boost among at least some consumers. While Annette Tirabasso, Netting Results E the Internet is the "American way of life, and that usage has skyrocketed," age or income notwithstanding, Tirabasso explained. Furthermore, consumers are more comfortable with the Internet when applying for a loan, so making the loan application process less daunting would be to do it through the Internet, Tirabasso says. "That way, consumers can spend as much time as they want searching, researching, and exploring—not with a salesperson," she said. ven at that, though, banks and lenders must recognize Associates Research, which specializes in market research and forecasting. That makes the process much more convenient, he notes. 'Code' Not Yet Cracked U to the escalating popularity of online lending might be another question. Tirabasso conducted a study, Deloitte's "The Silver Lining in Online Lending," to capture practices by lenders and to test how consumers react to those practices and how banks "Ideally, the originator's role should change to become more of a broad-based relationship banker—not a loan originator." —Annette Tirabasso recently retired from Deloitte Consulting, said that, in the long term, online lenders could make originators obsolete, "Ideally, the originator's role should change to become more of a broad-based relationship banker—not a loan originator." She said the role of the latter requires a different skill set; instead of "selling loans," they'll need to be more educated about a wealth of products and better understand customer needs. "They'll move from a salesperson to a relationship person," she continued. 24 | THE M REPORT salespeople out of the equation, Willard says consumers prefer online banking because they don't have to sit in front of a loan officer and feel as if they're being evaluated, as they do with more traditional lending. They also consider online lending less invasive. "They convince them- selves that they're just submitting [personal information] to some automated processing system, even though someone online is [evaluating the information]," he said. "But it doesn't feel that way to them, so it's less emotionally jarring." Borrowers can complete the Besides the fact that it takes applications at home where their documents reside, says Victor Crain, senior partner at Crain can benefit from satisfying customers. She found a gap between what consumers are looking for and what online lending capabilities lenders offer. For his part, while Willard ltimately, whether banks and lenders are paying heed particularly well engineered; you still have to fight through the clutter of what's often a very messy kind of website environ- ment, or of a consumer website environment that's trying to do too many things," Willard said. Adds Tirabasso: Banks need websites with a clean design and intuitive navigation. Among other things, they also should include educational resources—or tools to help them choose the right product—and pre-filled applications to allow the user to save information so they don't feel pressed for time and com- pelled to complete the process all at once. Online Apps Set for Takeoff A Lending: The New Reality, by Lieberman Research Group, a market research organization serving business-to-business and consumer markets, and Mortgagebot, which provides integrated point-of-sale solutions for mortgage applications from every business channel, among major transactions under way in the adoption of online mortgage- lending technology, 71 percent of bank executives believe that, at some point, they'll need to offer a smart online mortgage application. Additionally, mortgage ap- ccording to a 2010 study called Online matic [issue] as much as it is execution. Their websites aren't thinks banks and lenders are doing more to engage consumers online, he says their efforts have fallen short. That might be partly because of residual resentment consumers have for traditional lenders for rejecting their loan requests, he speculates. Further, Willard believes that while major banks want to, by in large, they haven't the "cracked the code" as far as how to most effectively pro- vide online lending to consumers. "It's not really [a] program- plication volume from the online channel will grow dramati- cally. By 2013, banks expect their online allocation volume to grow from 4 percent to 13 percent—a 225 percent increase. Further, of lenders that have adopted or are planning to adopt smart, online, consumer direct lending technol- ogy, up to 61 percent say they're primarily doing so to better serve borrowers. Wells Fargo declined to com- ment for this article, while Bank of America and JPMorgan Chase didn't respond to a request for a response.

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