The pace of innovation in residential lending has undoubtedly been slower than other areas of financial services, but in recent years the industry has taken a few massive steps forward.
We’ve digitized much of the mortgage application process, solving for many of the pain points that plagued homebuyers for years. Borrowers don’t miss the days of bringing large folders to their bank with paystubs, bank statements (even the blank pages!), years’ worth of tax returns and other paperwork that a human would patiently photocopy before sitting down to process – sometimes for hours and days to come. And we can nearly all agree that typing our own name into a self-service tool is more efficient than spelling it out loud for a loan officer.
But the idea that LOs are becoming less vital to the process is simply not one I can get behind. It’s true that the days of the LO functioning as a data gatherer are rapidly fading away, but their role is shifting to an even more critical one – an expert counselor for homebuyers.
Moving forward, successful LOs will take up the mantle of educator, problem solver and confidence builder. They will embrace the technologies that make their jobs easier and allow them to put their skills to the best and highest uses.
EXPERT GUIDANCE AND HOMEBUYER EDUCATION
It’s expected that many homebuyers will consult an online mortgage calculator to evaluate their loan options before sitting down with an LO. Yet, product selection continues to be an area where knowledgeable LOs can answer questions that buyers can’t find on Google – because they’re specific to the buyer’s personal financial situation.
For example, consider a homebuyer who has significant student loan debt but has deferred payment for two more years. When evaluating his mortgage options, the buyer may not understand how to account for a future change in his cash flow. It takes a human to determine how the buyer’s mortgage debt will fit in with the rest of his personal balance sheet, and to recommend a product and establish a monthly payment that will be manageable for the foreseeable future.
Homebuyers also need LOs to ask the questions they don’t think to ask. Take the example of a buyer in the early stage of her medical career. An LO may take the right steps to examine her student debt burden and her earning potential and place her into a high financing physician loan product offered by many lenders today. But in the same breath, the LO should also flag that based on the borrower’s profession, she may want to consider a nontraditional method of title vesting – like a land trust – to protect her home in the case of a legal event. Asking these questions upfront and explaining the costs and processes involved is where LOs can provide irreplaceable value.
As long as homebuyers need expert guidance, LOs will have an important role to play.
NAVIGATING COMPLEXITY
It’s important to remember that humans can go above and beyond the call of duty to make things happen, in ways that machines simply can’t.
For example, through its online restaurant reservation service, OpenTable seats more than 120 million people every month, and it’s no wonder why. Diners would rather tap a few times on an app than call a restaurant, get put on hold, struggle to hear the hostess and negotiate seating times.
So when I need to make a quick reservation, I instinctively open my OpenTable app. But when I have a last-minute group dinner to schedule on a busy Friday night, I call the hostess – because I know they can look at the puzzle of reservations and figure out how to squeeze me in.
It can be argued that some mortgage applications are straightforward enough to be processed by digital means alone. And while I believe every mortgage applicant deserves the attention of an expert LO, it’s even more critical for those who have special circumstances or complex needs to connect with a human who can guide them through the process. For example, a high-net-worth homebuyer may need help with complex income and tax documentation to secure a jumbo loan to purchase a luxury residence.
And in an age where the gig economy and “side hustles” are prevalent and workers spend just four years in their jobs, more and more borrowers require the expertise of an LO to sort through complicated income-verification data. The old days of homebuyers having one job for 10 years and one W-2 per year to demonstrate income are truly over.
For example, if a mortgage applicant has a steady, salaried job and supplements their income as an Uber driver or Airbnb host, it takes an LO who understands how approval guidelines are written to properly evaluate the applicant’s qualifying income.
What’s more, LOs now have to consider that the borrower’s mortgage will likely outlive the job that qualified them for the loan. It’s up to LOs to ensure borrowers have thought through how a future job change could cause payment shock or stress in the future. Oftentimes, determining a borrower’s future liquidity means looking beyond the application details to learn more of their story. Are they a spender or a saver? How about their spouse? Is their car on its last legs? Does the home need a kitchen remodel?
As long as buyers continue to have complex needs, LOs will be needed to interpret them.
SERVING THE NEXT GENERATION OF HOMEBUYERS
We’ve been predicting it for years, but I believe it’s finally upon us: Millennials are entering the housing market and promise to be the largest home-buying cohort in U.S. history. Last year saw the highest homeownership rate in four years among Millennials, as HousingWire previously reported.
In our industry, we hear ad nauseum about how Millennials want digital tools, and that’s true. They want to use digital channels to do research and speed up the process. But perhaps surprisingly to some, a recent TD survey found that 52% of Millennials who intend to purchase their first home in 2020 would prefer to start their mortgage application in-person with a lender. While they love to self-educate, Millennial buyers also want expert advice from people who know best. This is a generation that has popularized the TED Talk, and they want that TED Talk, so to speak, when it comes to the home-buying process.
Technology will continue to add value at nearly every stage of the mortgage process, but it doesn’t mean the best customer experience is one that is solely digitized from application to close. Borrowers will continue to need LOs to create clarity around their options and guide them through the process.
