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Over the past few years, the source of home financing has steadily shifted from the big Banks over to non- bank lenders. Lenders like Independent Mortgage Lenders, Credit Unions and smaller Community Banks.
In 2007, the Commercial Banks held a 74% share of mortgage loans, 3 of every 4 homes were financed by a large Bank. Lately, things have changed. Their share is now down to a little more than 50% (The Shift). Why the change?
Mainly the big Banks have moved away from mortgage financing for two reasons:
- The increased risks
- The high cost and small profit margins
Why spend the time and money to take on all that risk for so little reward? This has opened the door once more for the Independent Mortgage Lenders, as well as for local Credit Unions and Community Banks.
These entities can operate more nimbly, and cost effectively, not being tied to the expenses of a large bureaucratic infrastructure. Independent Mortgage Lenders do one thing. They do mortgage loans, and they do them right.
The tide is again shifting but non-bank lenders need to be positioned to take advantage of these lending opportunities. Many new home buyers, especially those of the Millennial generation, and even some of prior generations, now want quick, online access to information, products and services. These now include home loans. To meet that desire lenders are rolling out a new on-line application and processing services. Most notable is Quicken Loan’s Rocket Mortgage.
In reality, the Rocket Mortgage is an online application tool to allow Quicken to obtain consumer data quicker for a fast, easy, initial loan approval. This approval is similar to others provided by traditional lenders using LO’s to gather preliminary data for a quick upfront review.
In essence, it lets the consumer know that, for the most part, they are approved for their loan as long as everything checks out. The big difference is that the consumer can do it all online at their pace and convenience. Apply when they wish, where they wish.
This is nice, but, in the long run, most consumers will have questions and will seek the advice, counsel and assistance of someone to help them through the process. That is the experienced Loan Originator, either inside or out.
So, lenders should offer both online and personal service to potential home buyers. They should provide support personnel trained to guide borrowers through the maze of rules and regulations while protecting the company from regulatory pitfalls and defective loans. Not an easy task. But, one that successful lenders must conquer.
All in all, things really haven’t changed that much. A loan is still a loan, an application, an application and quality and service is, and always will be, what they are; the keys to any lender’s success.
It’s all a matter of how you apply them. Offer consumer’s what they want and need, at a fair price, with quality service, and stand behind what you sell.
If lenders do so, we need not worry about another crash like 2008.
