During the recent mortgage-lending boom, lenders extensively focused on increasing their loan portfolios and market share rather than addressing technology investments and innovations. The Mortgage Bankers Association projects originations to decrease this year by nearly 19 percent to $2.26 trillion, down from $2.78 trillion in 2005. A significant portion of this fall is attributed to the shrinking refinance market, estimated to have declined 40 percent, along with a reduction in primary demand. Both fixed and adjusted-rate mortgages have increased by at least 100 bps over the last year. With the boom appearing to end, lenders now have the time to reevaluate their IT and operations strategies to remain competitive.
Sourcing and retaining credit-worthy customers in this low-volume market is a huge challenge for lenders. To attract these customers and get a large multi-year relationship on the books, banks invest heavily in setting up direct and indirect sourcing channels, including with brokers and call centers. Customers, too, are becoming increasingly demanding and sophisticated, expecting better service and a meaningful relationship throughout their life. The continual availability of information makes it even more convenient to compare products and choose the best provider. The dynamic regulatory environment is also tightening the mortgage landscape, making it mandatory for lenders to "know your customers" before closing a loan.
In such a scenario, several questions arise: Are the marketing campaigns addressing the target market? Are the lead-generation strategies ensuring high conversion ratios, justifying the marketing expense? Do lenders truly know their customers? Predictive mortgage sourcing can help lenders proactively identify and reach the target customer with a customized mortgage offering through the desired delivery channel. Mortgage lenders need to:
* Identify desirable customers at sourcing stage. Leads should be handed to call center agents and other sales representatives after screening prospective customers through credit-score checks and repayment history of existing loans.
* Be there at the right time. Predict when the customer most requires a mortgage loan and provide it before the competition.
* Provide a complete product offering. Approach the customer with a complete solution, including the loan sum needed; the interest rate that can be comfortably paid; and details of property sites that would be of interest.
* Contact customers through their desired delivery channel. Based on the customer's historical contact-point data, provide a similar experience when a mortgage loan is desired.
* Delivering a single view of the customer from the bank's perspective - or a single view of the bank from the customer's perspective - becomes critical. Thus, all delivery channels need to be well integrated for a smooth exchange of customer and product information across all lines of businesses.
If a bank were to conduct mortgage life-cycle sourcing, customers are approached in the early years of life and proactively offered different products at various stages, from the first home purchase loan when the customer is in his 20s to a reverse mortgage loan at his retirement. The key challenge lies in the ability of the lender to predict and model such trends.
The key imperatives for mortgage bankers is to catch prospects young, starting a relationship early so that they can monitor customer transactions and anticipate credit requirement and capture all communication to better predict future performance. Technology enables accurate predictive and analytical models to help understand the customer behavior.
A data warehousing and business-intelligence engine can integrate with every element of the mortgage-value chain, from loan sourcing to servicing, and benefit numerous business participants, including underwriters, credit-policy team members and relationship managers. Using the centralized DW/BI engine, valuable information can be extracted and used at each stage of the sales relationship.
With margins in the mortgage business narrowing, it is critical to innovate and develop solutions for effective lead generation. Accordingly, this technology-driven, number-crunching analytical approach to customer sourcing, rather than only a creative and intuitive one, will not only enhance cost effectiveness, reduce turnaround times and provide a better rate of return, but also set new benchmarks for customer satisfaction.
