The next generation of borrowers will demand a digital mortgage experience
There is a shift underway in the mortgage industry towards the adoption of technologies that give borrowers a digital experience and that create efficiencies and cost savings in loan production for lenders. This shift was a central theme at the Mortgage Bankers Association's annual conference last month as speakers and panelists noted the mortgage industry's focus changing from implementation of regulations, to implementation of technology.
These changes couldn't come at a better time for the mortgage industry, as a wave of young and tech-savvy borrowers, powered by the Millennial generation, explores their fit in the market.
Millennials coming of age for home purchase
According to research by Zillow, the average age of a first-time homebuyer is 33 years old. This statistic coincides with the front-end of the Millennial generation, whom the Pew Research Institute have categorized as people born between 1981 and 1997 (though other outlets have put the boundaries at 1982-2004). This means that the oldest Millennials are now about 35 years old, and would have now just started to enter homeownership.
Other generations such as the Baby Boomers and Gen X have passed their apex and are now considered to be declining in population. Already the largest generation in the US, Millennials are poised to put their fingerprints all over the housing and lending markets. Like it or not, this change is only going to accelerate and will force lenders to provide the type of features and digital mortgage experience that this demographic will not just expect, but require.
What tech-savvy borrowers want from their lender
When we speak about the segment of young borrowers approaching the first time homebuyer stage, we're talking about a group of people who have been exposed to technology for the majority of their lives, and are accustomed to transacting their business digitally. Research conducted in 2015 indicated that 83% of Americans aged 30-49 own a smartphone and 86% of the 18-29 demographic own a smartphone.
For these people, technology has never been easier to access, faster, and more powerful than it is right now. These systems have entered most aspects of their lives, and they do not expect getting a mortgage to be any different. We can see the evidence of this trend if we examine the rapid growth of online lenders and P2P lending.
So when a Millennial or Gen Y'er looks for a loan officer or lender to work with, what is the checklist of items that they want to see in order to decide to do business with someone? They want:
- To conduct business digitally through a single access point with your company
- To transact business on a mobile device
- To sign documents electronically
- Mobile-friendly communication: text messages, browser push notifications, and desktop alerts
- Secure, automated verifications – assets, income, employment, and credit
- A fast and transparent process
We're already seeing big changes to the mortgage industry in these areas. Fannie Mae and Freddie Mac are both integrating automated verifications into their AUS systems, and Fannie's Day 1 Certainty program will provide risk relief to lenders that utilize those verification systems. Systems are becoming more and more advanced in the back-end as a necessity to control loan production costs.
Now, it's time for loan officers to make the leap and embrace technologies and systems that will put them in the best position to serve a new generation of mortgage borrowers. A generation that will demand a digital mortgage experience.