We talk often here about the mortgage lending industry putting more emphasis on the borrower/consumer experience, and using better or more technology to support that. Well now, as the market begins to change a bit, the ability to do that could very well help lenders find success in spite of change. In fact, they’ll find success because of change, and their ability to embrace it.

The quest for new markets

You wouldn’t necessarily know it from some of the doom-and-gloom stories about the origination volume forecast, but we’re still expecting a $2.6 trillion (with a “t”) overall mortgage volume for 2022. That’s the 5th highest historically. Three years ago, most of us would be drooling in anticipation of such a market!

Yes, there will be more competition for market share. But there will be business out there. In the past, when we’ve seen volume slip, we’ve seen lenders get creative with their product mixes and seek new markets. Remember the reverse mortgage fad? Non-QM lending? Risk-mitigation products? 203K lending? Manufactured housing?

An opportunity that’s been here all along

You already know our thoughts about lender marketing to Millennials. All indications are that there are still plenty of Millennials out there looking for houses, and that number is growing. But they’re not playing the same game the previous generations did once entering the real estate market. Millennials are moving cautiously. They’re only ending their leases when they find a property that works for them at a price that works for them. They’re not jumping for joy at adding debt. But they’re willing to do it if that debt is justified by homes that fit their lifestyles and lending products that truly fit their needs. Maybe that’s 15- or 20-year fixed loans for some. Maybe it’s better, bigger home offices. Maybe its environmentally friendly construction. Heck, maybe it’s barndominiums! The point is that they’re out there, willing to spend. But only with a lender willing not only to talk to (not at, but to) them, but to listen to their needs as well. 

And definitely don’t try to start that conversation with tone-deaf marketing. Get to know your market!

An opportunity for lenders willing to adapt

Another trend, in terms of where lenders focus their marketing efforts, we’ve seen briefly before—although it was for some reason just dropped and forgotten.  The face of America is changing demographically. That’s not just a trend. It’s a fact. In the next 20 years, there will simply be more and more new Americans in the buyer pool than ever before. Not all of them will have English as a primary language. Not all of them will want a 3,000 foot, single-family home deep in the exurbs. Some of their credit profiles may look different (not necessarily bad, but different) than the borrower chased by most lenders today.

And yet, it’s very likely this will be a prime target for lenders in the next several years. 

Are we ready for the opportunity?

Just as is the case with Millennials, how we market to and service New Americans will have to evolve as well. And we’re betting the most successful lenders do just that—update and upgrade how they reach, sell to and serve New Americans. Do our credit risk models accurately gauge the actual risk of borrowers, or are they flawed? Is the 30-year fixed mortgage truly the “gold standard?” Is having a single multi-lingual loan officer serving 20 counties truly a marketing strategy for reaching or serving prospects with LEP (limited English proficiency—this, too is a term you’ll hear more and more soon)?  And once we’ve started the origination process, do we have enough—heck, do we have any—resources available to guide and work with those borrowers when English is not the primary language?

If you listen to our Lodestar’s Lending Leaders podcast regularly, you know there are some in the industry already preparing new tools to better serve borrowers with LEP. So the evolution we speak of is, indeed, starting to happen!

The New American borrower—asking the right questions now.

There’s a lot of potential revenue and a couple of very willing markets available right now for lenders as “traditional” markets recede. Thoughtful, successful lenders are already hard at work, building new tools and processes, and finding answers to the question “How do we make more mortgage loans to qualified borrowers, regardless of where they come from and how they communicate?” 

Got an idea for Deeper Thoughts? Let me know at jpaolino@lssoftwaresolutions.com.