It’s less about rates than the experience.
If there’s one thing savvy lenders have learned, borrowers want guidance and convenience when it comes to obtaining a mortgage. “It’s not all about rates,” says Tammy Trefny, senior account manager/single-housing unit for Fannie Mae, Washington, D.C.
“Borrowers want to be guided through the process and feel confident in their decision. But they also want to conduct business using their mobile device,” she adds.
Rates aren’t a differentiator, but mobile convenience is. “Mortgages are transforming digitally as rapidly as everything else, and it’s a shift in societal expectations,” adds Keith Kasmire, VP/sales for CUES Supplier member CU Members Mortgage, Addison, Texas. “Moving to mobile means improving your entire mortgage process. Consumers not only want but expect a mobile app to make getting a mortgage easy.”
Start by defining your digital mortgage strategy. “Outline your best practices to assure a fast and easy process for your members,” advises Trefny. “Include a website that’s rich with information about the home-buying process and your products. Align with vendors that are technology-driven and can assist with your transformation to mobile.” There are ample technology solutions to support the digital process—from loan origination software to online and mobile apps to third-party vendor expertise.
Mobile delivery is just one factor affecting the mortgage market today. When promoting mortgages, marketers need to consider everything from consumer preferences for fast approvals and closings, to market influences and product design.
Digital, the New Paradigm
Once Quicken Loans introduced Rocket Mortgages, mobile became the minimum bet to sit at the table. “The old delivery method will soon become extinct,” says Barry Malone, SVP/sales for mortgage software provider FICS, Addison, Texas. “However, for many lenders, the weakest link remains the expediency of the process, the ability to move every aspect of the mortgage application to digital, including the appraisal and title search.” Still, he adds, approvals can be immediate, even if closings can’t.
MISMO files (Mortgage Industry Standards Maintenance Organization), a common set of files used by the mortgage industry, will encourage automation, says Malone. According to the MISMO website, standards allow for “integration, improved data quality, and a common language for exchanging data and information with mortgage partners.”
Any vendors you choose should be MISMO-compliant, advises Malone. “MISMO files can include appraisals, title work, income and insurance verifications, and more.” With the help of these standardized files, he believes successful mortgage lenders will eventually become 100 percent electronic.
“The technology is there. And today, e-signature and e-docs make digital just as secure as paper transactions.” But will the paper shuffle truly go away?
Look for technology to assist with automated verifications as well as apps that search third-party data to autofill an applicant’s assets—all can pare down the process.
For example, Fannie Mae’s Desktop Underwriter Validation Service (tinyurl.com/y7ppwvh6) provides automated validation of income, assets and employment. And its Collateral Underwriter® provides automated property appraisals.
“Leveraging your data will be the solution to less paper and the validation of loan approval will accelerate dramatically,” adds Kasmire. “The key is to align with vendors that can help you to extract from the vast amount of third-party data.”
New DTI Standards May Impact
In August, Fannie Mae expanded its guidelines for DU approval, allowing for more loans with debt-to-income ratios between 45 and 50 percent to be eligible. The adjustment, explains Trefny, is designed to encourage lenders to take full advantage of the credit box, to reach for the “corners” rather than hovering somewhere in the middle. “Credit unions know their members,” she adds. “Even before this adjustment, it’s wasn’t uncommon for CUs to alter loans outside their parameters to serve members. CUs have always excelled at assessing the risk and structuring niche products to serve their members’ needs.”
Market Influences to Watch
In the housing market, prices have stabilized, but supply is low across the U.S. “And people aren’t picking up and moving like they used to,” says John Theobald, VP/lending at $373 million Day Air Credit Union, Kettering, Ohio. “After locking in on the low rates of the past decade, many consumers are content to stay put. Instead of moving, they’re improving their properties with home equity loans.”
The job market has also had an impact, he notes, with more people telecommuting to jobs without the need to relocate.
Student debt is a challenge other generations haven’t faced, adds Trefny. Combine that with limited housing stock and stagnant wages, affording a home can be difficult and can keep younger buyers out of the market. “But as millennials grow older and start their families, their aspirations of home ownership increase.”
Conversely, the demand for refinances has been shrinking. “We’ve seen the refinance market depressed for about 10 years now, which is not unexpected after a period of historically low rates. Most loans that could have been refinanced probably have been by now,” says Malone. Still, it makes sense to offer a refinance product for those who need it, but it probably shouldn’t be the focus of your marketing. “Instead, focus on the ease of the mortgage experience and your expertise,” he adds.
Review your mortgage offerings. Do you have the products today’s borrowers need? Do you have the right content online and staff to help the member through the process? Are you making home ownership easy and accessible?
Down Payment Key to Affordability
“Don’t let money down be an obstacle to home ownership,” stresses Kasmire. “If you consider the millennial segment, many are just starting out, and many have large amounts of student debt. These borrowers, perhaps more than any other segment, need additional flexibility with their mortgages.”
Malone believes the key is to offer extended terms, including 30-year loans, so getting a mortgage is affordable for this segment and others. “While some CUs don’t offer longer terms, or don’t want the risk of a 30-year term, I think it (the mortgage) is the most important product you can offer, and it may be the only way to get your member into a home they can afford.”
Obtain Federal Home Loan Bank, Fannie Mae or Freddie Mac investor approval, he adds, so that you can sell these 30-year loans to the secondary market while retaining the servicing. “Then hire the right people who understand the industry—many experienced mortgage professionals are looking for opportunities. You’ll benefit by preserving the member relationship, plus earn a nice sum of fee income (from the servicing).”
Trefny concurs, adding that a 30-year term will typically be your most attractive product for most borrowers, especially younger ones, because of payment stability. However, she notes that established members may like a 15-year term because of its lower rate and faster payoff.
Day Air CU developed its No Money Down Mortgage to serve its millennial borrowers. Structured as a 20-year mortgage, 80 percent of the loan amount is set at a fixed rate. The remaining 20 percent is set at a slightly higher rate to cover the private mortgage insurance.
“We position the loan as having one low fixed rate (as a weighted average) available with no down payment,” says Theobald. “It has wide appeal to members, and most have found it more advantageous to take the $0 money down offer rather than a traditional loan with PMI.”
For his CU, mortgage marketing has been most successful via email campaigns—for both the no-money-down product and refinances. We track clicks and open rates—what’s working—and we adjust the message and timing of our campaigns,” explains Theobald. “The campaign is targeted mostly to first-time home buyers, and the refis to those who have been in their homes a while, have a 30-year term, but the potential to cut their terms in half.”
The re-fi message hasn’t resonated yet, he adds. “But we’re retooling and broadening our sample using predictive analyses recommended by our credit bureau.”
The CU is also taking steps to do more with local real estate agents—inviting them to lunch, attending loan closings and participating in shared community events. “We’re doing additional e-marketing to Realtors as well,” says Theobald. “We focus on our no-money-down product, and that we underwrite here (in Ohio).”
While the No Money Down Mortgage is only eight months old, Theobald is encouraged by the increase in mortgage activity. “August was our highest closing month since 2013, with 70 percent of the loans being new purchases. The No Money Down message is resonating. Not only do members like the freedom of $0 down, they like the fact that their equity will build faster.”
What Messages Work?
Not those leading with rates, “simply because rates don’t make an emotional connection,” says Kasmire. “Sure, they’re important, but not as (important as) the central theme of your campaign.”
What buyers want is a connection with the place they’re doing business. They want guidance throughout the sales journey and a trusted expert to teach them about the process, not minute details.
When shaping your message, focus on delivering the information your members want in the way they want it. Kasmire suggests learning from the auto industry where the goal “is to create an emotional connection between the buyer and the car— and for the buyer to feel good about their choice. You can apply this same strategy to your mortgages.”
Should the channels you advertise in be strictly digital? It depends on your audience. But most successful lenders use multiple channels to market their mortgages. Trefny likes an old-school mix of personal phone calls, robust email campaigns and maybe some direct mail. Social channels are also imperative.
“Think like the home buyer you’re speaking to,” she adds. “If they’re a first-time buyer, they may need education. Older or more experienced buyers may not need the hand-holding but want assurance of a streamlined process. For refinances, the focus may be ease and convenience and lower cost, but less on mortgage education. Also understand that the refinance group is more likely to shop around.”
How well you craft your message, says Trefny, will ultimately come down to how well you understand your members.
“You have the distinct advantage to customize or create niche products that mortgage companies and bigger banks can’t,” says Trefny. “Leverage this uniqueness. Offer affordable strategies and a diverse product mix that cater to different members in different financial situations.”
Finally, ask yourself if members feel good about doing business with you. If this can become the common denominator for your marketing messages, mortgage or otherwise, you’ll find success.
Stephanie Schwenn Sebring established and managed the marketing departments for three CUs before launching her business. As owner of Fab Prose & Professional Writing, she assists CUs, industry suppliers and any company wanting great content and a clear brand voice. Follow her on Twitter @fabprose.