As big lenders swallow up customers and competition, local relationships and smarter outreach will separate winning brokers from the rest
Mergers, acquisitions, and partnerships have become more frequent across the business landscape in the last year.
The mortgage industry has seen its fair share, with Rocket’s expansion and other companies recently scooping up servicing companies.
For those who are affiliated with one of these large companies, these new deals will likely help provide better pricing, enhanced technology, and potentially more leads.
However, for those who are independent of the large mortgage companies, each story that comes out touting a new merger or acquisition brings a sense of concern. The consolidating market could shut out the small originator if they don’t have a good plan in place.
Bruce Gehrke (pictured top), senior director of wealth and lending intelligence at JD Power, said much of this consolidation is about lead generation and recapture.
“I think it is something you definitely have to keep an eye on,” Gehrke told Mortgage Professional America. “On the origination side, I think it’s a competition for leads. I listened to Rocket talking about what they’re doing with leads and how they’re sharing leads. And now that they have this tie-up with Compass. It’s a bigger and bigger funnel that they’re pulling leads in from.
“From a smaller lender or a broker standpoint who doesn’t have the same access, and if you’re competing against that, I think naturally there’s going to be less out there for you. You’ve got to up your lead generation game. Where is it coming from? How are you going to do it? How are you going to get out there earlier in that sales process?”
Early outreach is key
Gehrke offered some insights that could help smaller brokers be able to connect with customers before larger mortgage companies can scoop them up.
One thing he said is that younger borrowers are more likely to shop around for their purchase loan more frequently than older borrowers. They’re also hearing about lenders and brokers in different ways.
“We’ve seen some changes year-over-year in how younger borrowers, in purchase loans, are behaving,” Gehrke said. “They are much more apt to shop multiple lenders first of all, than older borrowers are. They’re about 25% more likely to do that. They do more research online. They discover lenders in different ways. Younger borrowers are going about this sort of discovery process a little bit differently.”
Not only are younger borrowers finding different ways to discover lenders and brokers, but they’re also getting started in the loan process earlier than older buyers.
“They’re still doing it sooner in their buying decision process,” Gehrke said. “They’re still reaching out to lenders earlier, where older borrowers are pulling back to where they used to be when they get to the point where they decide they need a loan. Younger borrowers are still reaching out before they even think that they’re going to be buying a home.
“They’re getting the lowdown on what financing is going to be, what the numbers look like, affordability, and things like that. So there’s a difference there.”
Surge in borrowers using AI
One area many mortgage executives are telling their brokers to make sure they have covered is in AI searches. Many borrowers are now looking for their next mortgage broker through chatbots like ChatGPT. If a broker doesn’t show up there, they may be missing out on leads, especially from younger borrowers.
“We see 20% of younger borrowers finding their ultimate lender through artificial intelligence,” Gehrke said. “That number came out of nowhere. It practically didn’t exist two years ago. So that’s another aspect of, what does your footprint look like? SEO has changed, and now you have to focus on how artificial intelligence chatbots read your social media presence and your web presence.”
Gehrke said things are getting more challenging for those not tied to these large companies. However, he’s still a big believer in the advantages a local broker has over someone trying to win your business from outside of your area.
“Some of what we’re seeing definitely makes it more challenging to be a smaller lender, just in terms of economies of scale,” he said. “When it comes to origination, it’s really a battle for eyeballs. What they call the ‘attention economy’ is getting more and more critical here. It’s a dynamic market, but there’s always been strength in that local player who knows how to do that.
“I think the evolution that has to happen is that they have to keep an eye on what is going on. How younger borrowers who are starting to be bigger players have a bigger percentage of that market. They think and act differently, and brokers need to be creative about how they’re meeting those customers where they are. We still see strong support for having local interaction and personal engagement as part of the process. It hasn’t gone away yet.”
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