How cell apps can play an even bigger function in mortgage origination

With tech-savvy younger consumers now approaching their peak earning years and mobile usage among mortgage customers soaring in the COVID-era, lenders are looking for ways to serve them quickly and easily in the digital space.

"You just expect things to be easy because you've lived with technology your whole life," said Brad Lawson, co-founder of PrimeLine Capital, a broker who works with 11 different mortgage lenders.

For the mortgage industry, financial app development offers an opportunity to work with growing mobile domestic consumers. A study last year found that by 2026, nearly 29 million Gen Z could be looking for homeowners.

Recent data shows rapid growth in the popularity of mobile use among mortgage customers during the pandemic. According to LexisNexis Risk Solutions, the percentage of mortgage lending business, including applications and transactions, that is mobile has more than doubled in two years, growing from 12% in 2019 to 16% in 2020 and 29% in 2021.

The industry is going down a path that some of the banks have already taken. A 2021 study conducted by Morning Consult and the American Bankers Association found that even before the pandemic, 33% of consumers were using mobile apps more than other methods of banking, and the percentages were even higher among Gen Z and Millennials 48 % and 45% respectively. Since the pandemic began, those numbers have increased to 44% overall and 56% and 55% for Gen Z and Millennials.

Although financial apps aren't nearly as popular as social services or games, research by software company Simform found that usage time was relatively high at 57 minutes per week in 2020, which can be attributed to the attention people pay to meeting people decisions spend on them.

For lenders like Fairway or Revolution Mortgage, mobile apps are primarily used to streamline and automate the application process by uploading documents or scanning. Their apps also allow other buying parties to stay up to date on the status of applications.

"Realtors will also have a connection to see where their borrowers or their customers are throughout the home buying process," said Masana Noma, vice president of marketing at Revolution Mortgage, who said 79% of the loans are from her company came through his app.

Even when the loan ends, the app can still remain a vehicle for further engagements, leaving the door open for later re-dealings.

Shane Westra, chief product officer, whose team develops apps for over 400 lenders representing about 45,000 loan officers at home technology and software solution provider SimpleNexus, said the app design is highly customizable, even though they may have the same code base under the hood. Some companies request a product that they can provide to a potential borrower who may not even be ready for a loan but can use it to search for homes or real estate agents, while others only send it to clients for the application process, who themselves can be customized. The number of shots is in the thousands, which can be presented in different ways. "A lot of them don't look alike at all," he said.

While paperwork is reduced for the customer, the time saved can also be a boon for a loan officer. “I always let a client apply online or through the mobile app just because it gives me 20-30 minutes to generate more business. It just makes me a more efficient originator to have this technology," said Jeremy Schachter, a manufacturing branch manager for Fairway Independent Mortgage in Phoenix, which made about $80 million in 2021 by selling about 240 units.

Dan Snyder, CEO of Lower

Mortgage fintech Lower, which develops its mobile app in-house, not only saves time but also sees its digital tools reducing a new homebuyer's fears.

"If you're looking to buy a home, going to your local bank is most likely intimidating," said Dan Snyder, CEO of Lower. “You don't know where to go and maybe you have no idea what you can actually afford. And we solve that online and via our app.”

Although Lower's end goal is to fund a home loan, the app also includes personal finance tools that encourage saving and goal setting by "gamifying" the process. In addition to loan calculators, the app also includes a savings account that allows customers to deposit funds with a match from Lower, which can potentially turn into a down payment.

"What you're seeing is like the early entry into stock trading that was once only for your father or mother. It's really accessible now," Snyder said. “You can download Robinhood, you get one free share, and you can trade some shares for free. And it's easy with the app. I think these are the same people coming through us.”

Even as mobile apps become more common, there are still limitations that prevent the mobile experience from being completely seamless. Unlike many banking transactions, mortgage lending is a more complicated process with many steps between application and completion, not all of which can be done exclusively through an app. Many borrowers express their frustration in online reviews at not being able to make payments through a mortgage app, unaware that their lender and service provider are not always the same.

Current regulations also limit the extent to which mobile services can be provided in languages ​​other than English and miss a fast-growing Spanish-speaking market. And as mobile adoption grows, so does the risk of fraud plaguing the mortgage industry. According to LexisNexis, criminals targeting mobile transactions accounted for 29% of total mortgage company fraud costs in 2021, up from 24% in 2020.

For mortgage lenders that have emerged in the digital age, their apps also serve as a branch of a larger strategy to target younger consumers, who are increasingly influenced by online presence and social media when it comes to choosing products or brands they sell want to support. According to a 2020 McKinsey & Co. study, 39% of the Gen Z demographic over 18 and 25% of Millennials cited social media as a top factor in purchasing decisions. Whether it's through stadium naming rights like Field in Columbus, Ohio, the fintech's hometown, or a prolific presence on certain social media channels, branding is important to younger audiences, Noma said, even if it's not always associated with mortgages .

Unlike most companies, Revolution Mortgage eschews Twitter and instead pays more attention to Instagram, a website that caters to younger users. "Our brand is solidified by Instagram," she said.

"I think this is more important than ever as we move towards '22 and beyond. Consumers are now connecting with brands they want to do business with,” she said.

But the best marketing campaigns are only effective when companies back them with the service that makes customers happy, and the lenders that come out on top will be those with the speed and digital tools that new homebuyers value, Schachter said , prioritize.

"I always encourage originators to embrace technology just because my clients are getting younger as they age," he said. "People love technology and you just have to embrace it."

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