Millennials, millennials, millennials. Within the past five years, the term has invaded our vernacular and been used to sweepingly define a segment of the population that is apparently begging to be figured out by marketing experts in virtually every industry. But this demographic isn’t some unsolvable, complex equation. Marketers must simply work to communicate and meet the needs of each subset.
A 20-25 year old is going to have a much different set of expectations when it comes to speed and convenience; for the most part, a world without the internet access is not one with which they’re familiar and mobility is an expectation, not a preference. In contrast, the 33-37 year old segment was coming of age at a time when the evolution of consumer technologies started taking off. As they have progressed into adulthood and into their careers, digital and mobile tools have ignited an appreciation for an ever-increasing level of ease. And then in between these two groups, 26-32 year olds became familiar with the internet as adolescents and developed an expectation that information should be easily accessible. The common denominator is convenience and the path of least resistance. My question is: are lenders equipped to provide that path?
The industry has made significant progress in creating a frictionless, digital mortgage process. The move toward automation of income, employment and asset verification has already reduced lenders’ reliance on W-2’s, pay stubs and any other documentation that traditionally slowed underwriting. Even the manual verification process has become much more streamlined, provided that the lender is working with a comprehensive and trusted partner. In addition, the introduction of trended credit data allows lenders to to discern who, among two borrowers with identical credit scores, poses a higher risk. This facilitates more accurate and intelligent lending decisions, improving the quality of portfolios and contributing to the continuous decline in delinquencies. The pieces are available for lenders to deliver the level of convenience that will satisfy millennial homebuyers. So what’s next?
First, originators need to become adept at converting the data and analytics into actionable components of the digital mortgage workflow to truly support the end-to-end origination process. If the borrower can use the app to transfer documents and close the mortgage, but still needs to come to the branch in person to get approved for the loan, there’s a good chance that the process will end before it even begins. Alternatively, if the borrower can get approved for a loan digitally, but needs to complete the rest of the process manually, it’s going to create friction and result in losing the business. In other words, don’t try to fool anyone.
Once the operational pieces are in place, the next thing that a lender must do is create a marketing strategy that clearly communicates and educates consumers on the value of the digital mortgage process. Shout it from the rooftops! Diving deeper, lenders must know where the borrower is in his or her respective lifecycle. Someone just out of college will be focusing on starting a career and saving money (and potentially paying down student loans). It’s unlikely that a home purchase is in the immediate future, but it is certainly on the horizon, so it’s important to establish that relationship so you’ll be the lender of choice when the time comes. An individual that is several years removed from college may have saved diligently and based on other financial triggers (paying down various loans, expanding their lines of credit, etc.), they may be a great prospect for a lender to get the dialogue started. Finally, older millennials may already be homeowners, but could also be prime prospects for home equity lines of credit (HELOCs) for home improvements or additions. As rates continue increasing, HELOCs will become more popular products thanks to the low cost of equity extraction and the ability for the borrower to tap into the funds as needed, instead of all at once.
As you can see, there is plenty of information available to lenders that will reveal where a prospective borrower is in the journey to homeownership. Supplementing that, geographical data shows the areas where low- to moderate-priced housing is plentiful or where buying is a more economic decision than renting. And as rates continue increasing, time is of the essence; it’s important to maximize the largest opportunities in each market while they’re still there.
I’m not the only one who has witnessed the evolutionary trajectory of the mortgage industry and how it has coincided with the increasing demand for convenience. So let’s stop trying to figure out millennials. The frictionless mortgage process is a reality and the tools are already there to help lenders accurately identify and appropriately market to borrowers of all ages – it’s time for us to put all of the pieces together and grow the business.