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   ARTICLE   |   From Scotsman Guide Residential Edition   |   December 2018

Lead Nurturing Is the New Industry Mantra

A mortgage market driven by home purchases requires a different business-development strategy

Over the last seven years, LoanDepot and Quicken Loans have gained substantial market share due, in part, to their ability to respond to customer inquiries within seconds. In fact, those nonbank lenders have grown to a point where they now fund a significant slice of the mortgage market.

Speed-to-contact efficiency is proven to directly affect conversion rates and profitability. The higher the conversion rates, the more profitable a lender is, allowing more money to be invested in re-targeting efforts to improve conversions. This, in turn, allows the lender to grow further, and so on — creating a flywheel effect, which is one reason the behemoths like LoanDepot and Quicken Loans grow and gain such an astounding amount of market share, particularly in a refinance-driven market.

The industry is entering a new market cycle, however, in which the refinance volume that has driven growth up to this point is now shrinking fast, and mortgage originators are more focused on home-purchase loans. This cycle is not as sensitive to speed-to-contact attempts, given the substantially longer homebuying process.

Thoughtful, relevant lead nurturing throughout the borrowers’ shopping journey is the most important element to sustaining high conversions for home-purchase leads. The resulting opportunity is a game-changer. Originators are learning more about their clients and are poised to gain market share in the changing mortgage landscape. 

Need for speed

Over a decade ago, a study published by James Oldroyd of the Kellogg School of Management at Northwestern University found companies that reached the consumer within the first hour of submit-ting their inquiry observed dramatically higher qualification rates. As lenders leveraged technology to improve their ability to respond quickly to borrowers, competition escalated quickly.

Studies then began to update Oldroyd’s findings to reflect conversion rates based on speed-to-contact attempts made within minutes rather than hours. Today, lenders across the country measure this metric in terms of seconds.

By accessing behavioral data, the view becomes much clearer and holistic — allowing originators to market to borrowers in a much more appropriate manner. ” 

The data is clear: The first originator to have a conversation with the borrower gains the advantage in the deal competition and learns more about the homebuyer’s goals for financing while establishing a relationship as the trusted adviser. The second originator to contact a client must convince that borrower that it would be worthwhile to repeat their goals to another originator to receive a competing offer.

The goal of the borrower should be to obtain competing quotes and save money by negotiating the best rate and fees with the lenders responding to their inquiry. Speaking to multiple lenders and receiving three or four competitive quotes should yield the best offer and maximize the savings for the borrower.

If each conversation lasts 30 to 40 minutes, however, the borrower typically becomes fatigued and doesn’t want to talk with more than two originators. This results in a substantial decrease in conversion rates for those originators that are not the first or second conversations.

Originators invest a tremendous amount of time and money into shaving off every possible second of the reaction time to a borrower’s request. It’s similar to the simple, yet poignant, Ricky Bobby quote from the movie “Talladega Nights”: “If you ain’t first, you’re last.” Fortunately, as the market has shifted away from refinancing, there is a second scenario that is playing out, which has allowed some originators, as early adopters, to begin reaping the rewards.

Given the borrower journey is quite a bit longer for a home purchase, and with more borrowers seeking financing prior to speaking with real estate agents, unique behavioral data sets have been leveraged to gauge the client’s intent across the span of their shopping journey. This allows mortgage originators to time each engagement with sophisticated precision.

Understanding the borrower

Understanding the homebuyers’ level of intent at a given moment, and engaging with them accordingly, will impact greatly the success of your strategy. Each borrower is different and should be treated as such. If the borrowers are early in the home-purchase journey, the information they seek is different than a home-buyer who is prepared to submit an offer on a home. The first one should be provided with rent-versus-buy calculators and information to understand private mortgage insurance and whether a Federal Housing Administration loan is right for them. The latter borrower is ready to complete a mortgage application and should be high on an originator’s call-prioritization list and presented with e-mails, targeted display ads and direct mail with strong call-to-action prompts.

Behavioral data — such as time spent on mortgage websites, frequency of visit, and which web pages were visited — leads to valuable insights. Originators are able to collect this information from their own website tools, as well as access this information from data-as-a-service companies, to unlock these insights for lenders via methods that are sensitive to consumer-privacy concerns.

Being able to tap into actionable behavioral data will enable lenders to more appropriately provide consumers with the information they are seeking when they prefer to receive it. That allows originators to deliver an improved consumer experience and encourage a higher level of engagement.

Marketing with precision

The National Association of Realtors recently published a study featuring statistics about homebuyers broken down by generation. It’s no surprise that the millennial generation now makes up the majority of homebuyers and will only continue to grow over the next several years.

Millennials have higher expectations when shopping, whether for a car, insurance or a mortgage. They want the seller to understand and deliver what they’re looking for in as few clicks as possible.

As they begin their homebuying quest, most aren’t looking to complete a mortgage application. They’re primarily interested in information about the process as a whole, tips to become savvy buyers, and a better understanding of the financial commitment that will be required for a downpayment and ongoing monthly payments. Simply put, they’re educating themselves and see originators as a source of the information.

The challenge originators face today is that most only have access to a moment-in-time view of borrower interest. When a borrower inquires via a web form or engages with an e-mail, for example, only a quick glimpse of the potential client is revealed, and it’s difficult to understand where they are in their journey.

Marketing based on these moment-in-time indicators, called lead-based marketing, has become antiquated. By accessing behavioral data, the view becomes much clearer and holistic — allowing originators to market to borrowers in a much more appropriate manner. This approach, called people-based marketing, is marketing with precision and guides borrowers through a smooth journey to their destination of homeownership.

A better strategy

Understandably, for most originators, people-based marketing seems like an overwhelmingly difficult strategy to implement, absent a team of marketers at their disposal. Third-party data-as-a-service companies, however, can make accessing behavioral data simple. With thousands of data points available, they will comb through the ocean of data and deliver basic actionable outputs.

Because each originator is different in how they ingest data and the marketing tools at their disposal, it is recommended that organizations find a data company that has expertise in financial services. The data company also should be able to assist through the onboarding process using a consultative approach and put a go-to-market strategy in place to help deliver positive results. 

As a point of comparison, acquiring refinance leads is similar to a sprinter in the Olympics running the 100-meter dash. Sprinters have more fast-twitch muscles, and the quickest out of the starting blocks is typically the winner. Acquiring home-purchase leads, by contrast, is more like running a marathon, and there are no starting blocks. The marathon athlete has a completely different strategy than the sprinter.

Likewise, home-purchase leads require a completely different strategy. It’s well worth taking the time to explore what information is available and how it can assist in your goal of closing more home-purchase loans.


 


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