Mortgage messengers

Old-school approaches and new tech tools can keep community banks competitive in the turbulent mortgage market.

By Kelly Pike

It’s been a rough few years for mortgage lending at community banks. Increased regulation has pushed many banks out of the business, while nonbank lenders have come to dominate the market.

But that’s not the end of the story for community banks. There are plenty of opportunities for those that can combine digital tools with the human touch to guide consumers through what’s often a confusing and overwhelming experience.

While the homeownership rate is the lowest it’s been since the US Census Bureau began tracking it in 1965, TransUnion estimates that 14 to 17 million first-time homebuyers will enter the market over the next five years, including three million this year. The majority will be between the ages of 20 and 39.

Millennials comprise most of this group—digital natives who associate megabanks with foreclosures and are more likely to start their homebuying journey by Googling “mortgage” than contacting their local bank. The good news for community banks is that millennials are information seekers who want to be taught how to buy a home. That opens a door for those willing to go beyond the general and enhance the customer learning experience with tools such as webinars, says Joe Dombrowski, director of product management, lending solutions, at Fiserv, a financial services technology provider in Brookfield, Wis.

“Millennials really enjoy that personal touch,” he says. “They want it to be thought of as their situation, even though it mirrors others’.”

Part of enhancing that learning experience should involve outlining the process and requirements early on, so borrowers know what to expect, says Ron Haynie, ICBA senior vice president, mortgage finance policy and executive vice president of ICBA Mortgage. With the average mortgage taking more than 40 days, according to Ellie Mae, and lenders delving deeper into borrowers’ finances than before, constant communication is key.

Mobile connections
Cumberland Bank & Trust in Clarksville, Tenn., introduced a mobile mortgage app two years ago to give customers another way to interact with the bank. Located near Fort Campbell, an area with a military installation and a fair amount of turnover, the $170 million-asset bank thought the app might give it more reach and help spread its name, says Tammy Trice, vice president of the mortgage department.

“We felt like it was something we needed to do,” she says. “We’re customer-service oriented. Anything we can do to ease concerns and help them, we do.”

The app connects directly to the community bank’s front-end software and makes it easy for customers to see exactly where they are in the loan process or upload documents. They can also communicate with their loan officer, share the app with their realtor and save loan payment and affordability calculations.

Cumberland Bank & Trust is still testing the app, which hasn’t been widely adopted despite a six-month ad rollout in a local real estate digest. While its primary purpose is to give borrowers more channels to connect with lenders, it’s also helped lenders, who get an alert when a new customer downloads the app or an existing one runs new calculations or asks a question. That gives originators the opportunity to proactively check in and see if there is anything they can do to help, says Trice.

It’s an approach mirrored by Quicken Loans, the largest nonbank lender in the mortgage arena, notes Dombrowski. “They assume you know what you’re doing until you stop in the process,” he says. “Then they will reach out and, via text and email and calls, reengage you.”

This two-layer approach of both digital and human interaction is a smart strategy to adopt, even after credit is granted. Changes with servicing, payments or problems with taxes are all chances to follow up, even if it’s just a video explaining how escrow analysis works.

Going digital
Another valuable technology is online origination tools, which make the application process faster, more accurate and more compliant, says Haynie. These tools guide customers through the process, intuiting whether the loan is a purchase or refinance, so they only ask relevant questions. They also flag errors so loan officers can follow up and fix problems early on.

Electronic closings can also improve customer satisfaction, a study from the Consumer Financial Protection Bureau found, making the process easier to understand and more efficient while making consumers feel empowered.

Meanwhile, business intelligence tools can help bankers shape customer responses based on borrower personas, such as a first-time 20-something borrower with a postgraduate degree. There are also business process automation tools (sometimes called robotics) and predictive analytics to identify potentially delinquent borrowers and get ahead of the problem, says Dombrowski.

One problem is that millennials saddled with student loan debt may not be able to gather a 20 percent down payment, and risk-averse bankers may be hesitant to make those loans. One solution for community banks could be to partner with online lenders with a joint brand or some other arrangement, says Dombrowski. Banks can retain the right to check in with these borrowers and try to graduate them to one of their loans when the time is right.

Millennials aren’t the only ones seeking a guide through the mortgage process, says Dombrowski. Baby boomers are looking for advice on how to manage their most valuable asset as they transition to retirement and evaluate whether to refinance, seek a reverse mortgage or downsize. The key to serving these and other customers is finding solutions that work for them and keeping communication open.

That, however, is going to cost money. “The mortgage business is no longer a business you can do on the cheap,” says Haynie. “You’re going to have to invest in the business—technology, people and training—but it will pay off.”

Kelly Pike is a writer in Virginia.