Residential Magazine

Don’t Feel Threatened by Informed Borrowers

Data-driven analytics can deliver a client-centric pricing strategy

By Erik McNally

Pricing is a key component for all parties in the mortgage process, from the borrower application through secondary marketing. Now more than ever, borrowers are looking for homes and are already armed with detailed information that was, at one time, only available to the mortgage lender.

Today, a quick internet search will yield a myriad of interest rate and pricing data points, as well as on-line databases that enable the borrower to compare properties, evaluate price points and more. With an increasing number of lenders expecting compressed profit margins in the coming months, the search for a better way to maximize profitability has begun.

Competitive insights

A borrower’s inclination for research, and an ability to educate themselves on the mortgage process and current rates long before they even approach a lender, should not be threatening. Rather, mortgage lenders and originators should be encouraged to develop client-centric pricing strategies with the informed borrower in mind, and thus be equipped to better serve a variety of clients with varying mortgage needs.

Just as they expect in other retail-based environments, today’s mortgage borrowers are looking to do business digitally and expect convenient journeys through their loan shopping and application processes. Presenting the right price and the right offer through the borrower’s preferred channel is the simplest way for originators to not only develop a client-centric strategy but also to attract previously untargeted clients.

The simplest way to win borrowers in today’s market is to offer the best price. Without competitive rate intelligence and pricing insights, mortgage lenders cannot be sure their pricing is appropriate. The trick, of course, is for a lender to continually optimize pricing in response to the daily dynamics of the market and to consistently maintain its competitive position. This is the essence of an effective pricing strategy.

Unfortunately for lenders, many borrowers continue to rethink their options, even once their loan application is underway. And why not? If loan prices are readily available and are known to be fluctuating, nothing is stopping a well-informed borrower from researching their options.

Rapid adjustments

As profit margins shrink, it will become increasingly important for lenders to make the most informed decisions possible. Competitive rate intel and pricing insights are tools that leading mortgage lenders can use to help support these decisions, and even gain a competitive advantage for their originators. Utilizing these tools to inform their pricing strategies, lenders and originators can price more accurately to sell loans more competitively.

Currently, many lenders set pricing once a day based on an estimation of where they think they need to be, and unless there is a major market event, they do not adjust their rates again until the following business day. Using this approach, lenders are often unaware of how their rates stack up against the competition. With competitive rate intel, lenders gain actionable insights into their competitors’ pricing, allowing them to set their own rates based not only on the current market but also on their strategic goals in a certain marketplace.

Using rate intel to inform pricing strategies, lenders can make pricing decisions based on factors such as products, metropolitan statistical areas, secondary market conditions and more. By basing pricing strategies on factors such as these, lenders also are able to predict the effects on factors relative to their pipeline, business goals and bottom line. This cyclical effect simply feeds more data into the pricing optimization machine, allowing lenders to make more informed pricing decisions in the future.

Harmonious culture

By connecting pricing from application through secondary marketing, lenders can create a collaborative process and improve internal relationships. It is no secret that there can be a disconnect between front-end operations and secondary market operations due to a lack of coordination regarding pricing strategies. By using competitive rate intel, mortgage lenders can more easily facilitate these internal conversations and create a more synergistic culture through pricing insights.

Rate intel allows secondary marketing functions to provide front-end operations with near real-time information on what the competition can and cannot offer a particular borrower. For example, if an originator is looking to create the best deal for their borrower, they may try and beat a competitor’s advertised rate. With rate intel, a lender’s secondary department can determine what the competitor is most likely to offer the actual borrower in the current situation, rather than the ideal borrower for which the rate is being advertised.

Pricing insights can be used to empower mortgage originators by providing more granular pricing and proactively comparing rates to those of competitors. When originators are looking to beat a specific rate, lenders can quickly determine if this is a profitable option, and if it is not, lenders can reference data-based evidence to support the decision. Using rate intel, lenders can give their originators more detailed specifics and best position them to serve their borrowers.

With rate intel and pricing insights, lenders can also accurately identify what is happening operationally and make the most informed strategic decisions, which ultimately helps increase profits over the long run. As margins compress, lenders need to make every point count, which is where data-driven pricing strategies become more helpful. Lenders that are attentive to pricing refinements also can remain nimble in these ever-changing environments, ensuring that they pivot as needed and achieve more refined profit margins.

● ● ●

As interest rates normalize, lenders that leverage competitive rate intel will have an even greater competitive advantage, improve relationships internally and ensure they remain successful in the marketplace. With mortgage applications trending down this past summer, lenders are looking for every possible advantage, and pricing insights can be their secret ingredient.

By keeping the client at the center of the transaction, lenders can use competitive rate intel and pricing insights to simply offer the best price. Using pricing insights allows lenders to provide originators with faster and better answers regarding pricing adjustments, as well as the ability to more thoroughly defend a rejection. ●


  • Erik McNally

    Erik McNally serves as the lead product manager for Nomis Solutions, which works with lenders on best-in-pricing technology and analytics. McNally joined Nomis Solutions about two years ago, quickly becoming a key contributor to product development due to his keen experience and background in the mortgage industry. He is responsible for designing the robust analytics methodology and captivating display within Nomis Mortgage. With a solid background in mortgage industry data and risk analytics, McNally works cross-functionally between teams to spearhead the company’s product vision.

You might also like...