In a Volatile Market, Mortgage Lenders Turn to ‘High Tech with High Touch’
The slump in mortgages isn’t deterring some lenders, who note homebuyers need help navigating the market. Investing in tech has helped make the process smoother for customers, but old-fashioned wisdom remains critical for bankers, lenders say.
By Polo Rocha, Reporter at The Financial Brand
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It’s a tricky time for mortgage lending, as homebuyers struggle with high interest rates and some banks call it quits on home lending.
Other banks are finding a way to stick with the often-volatile sector, even if mortgage volumes are far below their COVID booms. Technology has been key to that resilience, with lenders as large as the $555 billion PNC Financial Services or the $674 million Midwest Bank in Illinois investing in modernizing processes for both bankers and homebuyers.
But old-fashioned wisdom remains just as critical for bankers, mortgage leaders at several banks and credit unions say. Despite the dominance of nonbank digital players, financial institutions are finding that combining modern tech with in-person advice is a winning strategy.
The key is to be both "high tech and high touch," says John Fischer, chief retail officer at Golden 1 Credit Union in Sacramento, who previously was a top retail executive at Bank of America.
It’s not easy to buy a house today, with affordability challenges helping prompt a 5.9% drop in existing-home sales in March, according to the latest National Association of Realtors data. That makes it all the more critical for bankers to help homebuyers navigate an often-intimidating process, by offering advice and helping them avoid potential pitfalls.
PNC’s mortgage loan officers "aren’t trained just to originate loans, but rather to serve as trusted partners throughout the entire process," says Peter McCarthy, PNC’s head of home lending. Despite any volatility, homeownership is "central to our clients’ lives" and mortgages thus remain an integral part of PNC’s offerings, he said.
The focus at Huntington Bancshares isn’t "capturing market share" solely to boost lending volumes, says Carolyn Gorman, the Ohio-based bank’s national head of mortgage lending. Instead, it’s to give guidance to customers as they find a home and "meet them where they are," she said.
"We’re trying to think about how we can help that customer with what they need, and we trust that the rest will come," Gorman says, adding that bankers "have to be patient" as homebuyers navigate their journey.
How Tech Upgrades Help Both Bankers and Borrowers
There is no question, however, that technology is critical.
Processing a mortgage is "extremely expensive," weighing down banks’ profitability as lending volumes are down sharply, says AK Patel, founder and CEO of Attune, a fintech that offers a digital origination platform for banks and credit unions.
Banks can find savings by automating manual processes — but they can also roll out tools that "streamline and shorten the home-buying journey," including using tech to quickly connect borrowers to home insurers or appraisers, he says.
"Even if it’s a 10-15 year mortgage, it’s a long-term relationship," Patel says. "You help them with the hardest financial journey, you can bet that customer is going to be a customer for life at that institution."
Huntington has invested in making the document-heavy mortgage process smoother, both for its bankers and its customers. It also offers homebuyers tools to compare how different loan options — a bigger down payment or an adjustable rate option, for example — may impact their monthly payments. And it gives customers real-time status updates as they await the closing of their transaction.
In rolling out similar tools, PNC has found it’s "eliminated a lot of back-and-forth that traditionally may slow the process down," McCarthy says. The bank’s Home Insight Planner tool, where customers can explore loan options and browse home listings, is "especially useful early in the process when buyers are still figuring out what they can afford," he says.
Smaller banks such as Midwest Bank in Monmouth, Illinois have fewer resources at their disposal. But by partnering with Attune and other tech vendors, Midwest has eliminated "redundancy" in manual processes and enabled its small mortgage team to focus more on guiding customers through the mortgage journey, says Blake Rappenecker, assistant vice president at the bank.
The ultimate goal is cutting down on the usual 30 day closing period so that borrowers can get their keys quicker.
"We’re not trying to reinvent the wheel," he says. "We’re just trying to make sure that wheel rolls as smooth as possible."
Sticking With Mortgages Despite Tougher Times
Homebuyers have already voted that home lending should be done "seamlessly and digitally, like a Rocket experience," says Jeff Marsico, a bank consultant and president of The Kafafian Group. But homebuyers still appreciate the "human touch," he adds, giving the industry an opportunity to stand out during a tough market.
And the market is indeed tough. Average pre-tax profit rates on mortgages were minimal in 2022 and remain low at about 0.7%, according to data from community banks that Marsico works with. It’s a painful reversal from the 2% or more profit rate at the height of the COVID, when ultra-low interest rates fueled a mortgage boom.
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But the sector did "not bleed red ink" after rates rose sharply and can drive profits even during tough times, he says.
Though a couple of banks have stopped offering mortgages, many others have stuck with the sector and see it as an essential part of their offerings.
The industry "always has been cyclical," Huntington’s Gorman says, but even in rockier times consumers want to "achieve that dream of homeownership." And getting some in-person advice from bankers remains vital, she says.
Midwest Bank’s Rappenecker says the company tries to leave "no financial stone unturned," helping homebuyers navigate insurance, taxes, appraisals and other services as they buy a new home. Plus experienced bankers can help them troubleshoot when anything goes awry and help avoid minefields, including with small steps such as recommending termite inspections.
"Every bad thing that comes about creates a good loan officer," Rappenecker says.
Fischer of Golden 1 Credit Union in Sacramento says he’s seen his "share of interest rate cycles." Mortgage rates were in the teens for much of the 1980s and were higher throughout the 1990s than they are today.
No matter where rates are, success comes down to having "experienced, trained and trusted home loan advisors" who can educate and guide customers on their options, Fischer says. Recently, Golden 1 helped a family save a few thousand dollars a month after refinancing their mortgage and consolidating other debts.
"Success for us isn’t necessarily about how many loans you closed or how many dollars you funded," Fischer says. "It’s about improving the financial lives of our members, their families and our communities."
