Changing Consumer Needs Answered with Technology

by 21 Jun 2012

With Gen I on our heels, lenders need to commit to more sophisticated practices

(TheNicheReport) -- The demographics and preferences of consumers have changed drastically in recent years. Mobile devices provide a level of convenience that is expected in every aspect of life. Almost all retail stores sell items directly through their websites, and the propensity for shopping online does not stop with clothing or electronics, but now includes home loans and closing services.

According to a 2011 October Research study, 95 percent of homebuyers 44 years of age and younger use the Internet to search for homes. Lenders need to cater to technology-savvy consumers by offering online lending solutions. They will find that these tools not only create satisfied customers and customer loyalty, but can be the key to gaining much-needed operational efficiencies and meeting today’s stringent regulatory requirements.

Time to Consider Gen I

The mortgage industry, and every industry for that matter, currently focuses on meeting the needs of Gen Y consumers, accommodating their desire for immediacy, expectations for convenience and a high level of comfort with technology. However, we must keep in mind Generation I, individuals who were born after 1994 and are, according to one blog, described as the connected, communicating, computerized, click-all-the-time people. They are already entering college, becoming our economy’s spenders and will be the next wave of homebuyers. Gen I is the first generation born with the Internet; they simply do not know life without it. Not only do they want access to a vast amount of content; they expect information tailored to their personal preferences and unique circumstances. Finally, no surprise here: Gen I members rely more heavily on portable devices than previous generations.

Accustomed to having desired information at their fingertips, Gen I will settle for nothing less when it comes to researching home loan details. Lenders that ignore the need for online lending services risk losing potential customers, especially as a new generation with even higher expectations starts to look at home ownership. More than ever customer experience will translate to a lender’s bottom line. As social media fanatics, Gen I consumers frequently share their experiences, positive and negative, via status updates on their various social networks – a happy customer with a positive story can spread his or her experience like wildfire. Conversely, lenders that forgo the technology that creates a fast and pleasant home-buying experience also pass up this opportunity.

Financial Literacy to Boost Personal Shopping

In today’s unpredictable economy, consumers are willing to take the time to shop around for the best rates available. Despite this affinity for price shopping, a December 2011 poll of 1,300 homebuyers conducted by market research firm Harris Interactive indicated that while 96 percent of Americans regularly comparison shop, only 61 percent did so for mortgages. Although nine out of 10 indicated they knew lenders’ rates vary, they received just one quote before taking out a loan.

Similarly, when it comes to closing service providers, currently the majority of homebuyers defer to their lender’s and/or real estate agent’s suggestions; however, this tendency is likely to change. Many consumers are not aware that they can select closing service providers. Others simply wish to avoid the burden of making the decision themselves. However, consumers are becoming more educated on home buying and closing processes, and therefore feel less overwhelmed and more in control of these decisions. They are also finding they can save money when they shop for and compare service rates. In the near future, Gen I homebuyers will demand access to this information quickly and easily, so lenders must have the resources in place to allow these educated home buyers to conduct their own home loan research and price shop at any time of the day or night.

What Borrowers Want

Lenders should not wait for Gen I to mature to adopt new technology –consumers of all ages already anticipate convenient and customized services. With tight budgets and limited resources, many lenders perceive technology implementations as unrealistic; however, developing a proprietary, in-house system is not necessary. Some industry providers already supply the data, technology and expertise that can enable lenders to deliver sophisticated online solutions that satisfy customers and attract prospective homebuyers, all while improving internal processes.

What exactly do borrowers want from a lender’s online service? They want to visit an easily navigable website that offers user-friendly tools, allowing them to input minimal details and receive information pertinent to them. In addition to shopping for home loans, they want to be able to proceed to the application process. Notoriously lengthy, time-consuming loan applications are no longer acceptable – a borrower overwhelmed by the process will not move forward. But an interactive application that automatically populates fields according to the user’s previously provided information creates a streamlined process. As a consumer moves through the subsequent steps, various systems available today even deliver incentives for continuing, such as discounted closing costs.

Finally, borrowers want the option to stop working and return to the application at any time – day or night. Constantly attached to a mobile device, they also demand access to their application status via a smartphone or tablet. Uploading documents and performing transactions remotely must become the standard for serving the upcoming Gen I population.

Facilitating Compliance

While consumers demand convenient service and access to information at their fingertips, lenders today require efficiencies and cost savings. In an unstable economic environment, further complicated by regulatory change, technology adoption is placed on the back burner. Fulfilling requirements properly and on time has become more than a task; it is a primary component of lenders’ businesses, forcing them to unfortunately place greater focus on compliance than customer service.

As lenders brace themselves for even more legislative changes down the road, implementing new technology can simultaneously contribute to meeting compliance objectives. Today’s advanced online solutions and data technology are designed to deliver accurate information in real time – which means consumers receive correct quotes and lenders reduce the risk of expensive RESPA tolerance violations associated with providing misinformation. These systems take both federal as well as specific regional regulations into account and adapt immediately as changes occur, allowing lenders to truly solve the significant compliance concerns affecting their businesses. They must take advantage of flexible technology to keep up with the constant legislative changes and keep the focus on their business objectives and customers.

Forward Thinking

Forward-thinking lenders better equip themselves to keep consumers informed, and by providing the information potential borrowers want and the tools to access that data, they can gain more business. Deloitte’s 2008 study, Silver Lining in Lending, indicated that 70 percent of consumers shopped for mortgages online – and that was four years ago. At the same time, lenders using online technology experienced up to an 80 percent reduction in origination costs as compared to traditional methods, not to mention greater confidence in the quality of service provided and customer relationships they developed.

Moving forward, industry professionals and consumers do not want to repeat the mistakes of the past. Prospective borrowers want to arm themselves with all of the facts necessary to make sound financial decisions. Lenders that are ahead of the curve and already taking their processes online are empowering consumers and gaining market share, not to mention positively affecting profitability by completing more loans in a shorter amount of time and reducing overall expenses. Ultimately, improved consumer technology is beneficial for everyone involved – and it does not have to break the bank.

Cathy Blaszyk

Cathy Blaszyk, CMPS, RMA, is Vice President of Lender Services for ClosingCorp, a real estate information and data services company based in La Jolla, CA. ClosingCorp develops Web products to serve the needs of real estate professionals and consumers, including the SmartClosing Mortgage Calculator, the SmartGFE Service for loan originators and Blaszyk has spent two decades in the mortgage banking industry, representing direct lenders such as Bank of America and CitiMortgage, as well as serving as a mortgage broker.


Should CFPB have more supervision over credit agencies?