Online Lending and the Changing Consumer
Williamson, David, Mortgage Banking
SINCE THE ADVENT OF THE NETSCAPE graphical browser in 1995, the Internet and online lending have made the mortgage loan origination process more transparent to the consumer. This newfound visibility gives consumers more transaction power by enabling them to surf for financing information and decision support on the Web sites of competing lenders, while they channel-hop the various business channels. That is, a loan prospect can easily use the consumer-direct Web sites of many lenders to conduct initial financing research, followed by a trip or call to the retail branch of a particular lender--only to accept the offer of a competing mortgage broker who may not be part of that lender's wholesale network.
With competition increasing as origination volumes have declined, this new consumer behavior makes it more important than ever to consider online lending as part of a comprehensive go-to market strategy, and not just another channel to add to the traditional retail and wholesale efforts.
In addition to the consumer's new power, the ability to coordinate the origination process and resulting capture rate across multiple channels is complicated by other trends influencing online mortgage lending. In response to the increased competition and the channel-hopping, it has become a best business practice for a lender to push the decision as close as possible to the point of sale. In fact, many lenders are teaming with Realtors and builders to push that decisioning point out even further to the consumer to what might be called the point of decision. This trend entails significant changes in the underlying business process and the roles and responsibilities of the loan officers, account executives, processors and underwriters. These changes in the business process and the business culture must be skillfully managed to maintain productivity and profits.
The adoption of eMortgage technology is another trend that will provide challenges to managing the sales and origination processes of online lending. With its potential to dramatically cut the loan cycle time from weeks to days or even hours, eMortgage technology will cause the origination process to evolve into an origination transaction, which will obviously represent great value to the consumer. No other management option available today offers the possibility of a productivity advance of this magnitude. By comparison, a proper offshoring strategy can deliver improved operational costs, but those savings are found across various functions, and a cycle time reduction as dramatic as that possible with eMortages is unlikely.
However, this electronic metamorphosis will place more pressure on lenders to be successful at the point of decision, because once the consumer says "yes," the ballgame will be over. That is, the only competitive playing field will be the pre-decision environment, since every aspect of the origination process after that point will become a commodity. Consultants and vendors, who can help a lender stratify consumer target groups, identify customer-buying signals and control channel-hopping will be in great demand. …