This week, the subjects in our spotlight are CRM and data, and our guest is Jonathan Corr, president and chief operating officer of Ellie Mae, based in Pleasanton, Calif. Here’s what he had to say on these critical topics:
Q: What is your opinion of the current purchase market?
Jonathan Corr: It’s here to stay and as an industry we have to make the most of it. Last year, our August 2013 Origination Insight Report showed share of purchases running at 57%, but that number rose to 66% this past August. This roughly tracks with what the MBA is projecting for the year—$569 billion in purchases and $438 billion in refinances.
While this is somewhat of a shock to the system for an industry that’s been refinance driven for most of a decade, it is a return to a more normal mix of purchase to refinance, which historically has been more like a 70/30 mix.
The good news is that the economy and the market are both improving. Home prices are rising, but still affordable. Interest rates are still relatively low. Credit and underwriting standards appear to be gradually expanding. And all of our clients seem to be adjusting well to new regulations, like ATR and QM.
On the downside, volume has declined, which means LOs are going to need to get creative in order to succeed in this purchase renaissance. Everyone is going to use traditional marketing tools (i.e., direct mail/email) along with newer ones (i.e., social networks, such as Facebook and Twitter) to build brand and engage with potential customers. So how can you be original when everyone is doing the same thing you are?
Customer relationship management (CRM) and automated marketing systems will deliver new options and better, more relevant content to LOs and corporate marketers. They can also provide new control and insight into what’s working, what’s not and how compliant your offers are.
Q: How do you see the mortgage banking industry using CRM today? And are there places where CRM is not being used to its fullest?
Jonathan Corr: There is a great deal of interest in CRM at the moment. On average, our webinars on CRM technology are packed with hundreds of clients per event. As we move into a purchase environment, CRMs are no longer just nice to have, but necessities to drive conversion and help LOs be more productive and drive relationships with Realtors.
How will CRM systems be used? It depends on the banker, the channel and the commitment from the branches and the LOs. But I expect that they will drive outbound marketing campaigns to prospects, past customers and referral sources (like builders and realtors). Some systems, like our Encompass CRM, which integrates with our Encompass mortgage management solution, automatically communicate with borrowers and referral sources at key milestones in the origination process: keeping all the players in the loop, setting expectations, building confidence.
CRM systems can also give corporate marketers and executives better insight into what campaigns are working, where customers are going on your website, and which LOs are converting more leads and why.
Q: For the past couple of years, Ellie Mae has been offering its own monthly housing market data. How does your data differ from the data offered by other companies and trade groups?
Jonathan Corr: Probably the biggest difference is how close Ellie Mae is to the source (our lender customers) and how “fresh” our data is. Other players track similar data, but often it comes from surveys or takes months to be published.
Our data is pulled directly from the Encompass platform, annotated and reported. On the third Wednesday of each month, we release the data for the previous month. Our unique position in the origination process and our market share are reasons we can do this. Last year, approximately 3.5 million loan applications ran through our Encompass mortgage management solution.
Recently, we’ve expanded our coverage to provide insight into VA and FHA production, as well.
Q: What is Ellie Mae’s data forecast for the near-term health of the purchase market?
Jonathan Corr: As a public company, our forecast is based on a consensus of what the MBA, Fannie Mae and Freddie Mac are forecasting. In our Q2 2014 earnings press release, that number was approximately $1.1 trillion for 2014, which would mean an approximately 41% drop from 2013 mortgage origination volume.
Obviously, this decline will have an impact on the mortgage industry, including technology providers, as everyone’s revenue has some level of sensitivity to volume. But we remain optimistic and believe that, even though the “feast” days of the refinance boom are over, the “famine” days of the mortgage crisis probably won’t happen again either. We are moving back to a solid residential finance market driven by purchase and the future progression of millennials into those prime buying years as they marry and have children.
Ellie Mae is online at www.elliemae.com.
Phil Hall has been (among other things) a United Nations-based radio journalist, the president of a public relations and marketing agency, a financial magazine editor, the author of six books and a horror movie actor. Also, as you will discover, he is not shy about stating his views.