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How Data Allows Banking Institutions To Access Hundreds of New Mortgages

Providing mortgages to borrowers and depositors might seem like the path of least resistance for banks and credit unions to win more mortgages. After all, roughly 70% of borrowers said they applied for a mortgage with an institution with which they already had a relationship, according to research by Cornerstone Advisors. Unfortunately, with consumers utilizing upwards of 30 financial companies, winning new mortgages from depositors is anything but a done deal.

In a market where interest rates and origination volume compel lenders to strike all the weaknesses from their lead-generation and origination processes, banks and credit unions need to hone their ability to serve every possible customer or member who needs a mortgage, or equity financing, this year.

What Data Can Tell You

Lenders need to identify and engage borrowers seeking cash-out refinances, to purchase a new home, and even the rare, refinance. Before, finding these customers was a passive, waiting game where the borrower had to come to you. Now, lenders can proactively engage customers signaling – through their data – that they need your help. Here are three ways to ensure you’re their provider of choice:

1. Credit Pulls

What if you knew when another lender pulls credit for a mortgage on someone in your database? 

Many people don’t immediately think of a lender when they want to sell or buy a home. They think of contacting a realtor first. The realtor then, in turn, refers to lenders they trust. If you were the lender that provided the customer’s last loan, you’re usually out. You wouldn’t know the customer needs credit unless they literally told a loan officer or applied on your website.

Catching a mortgage credit pull solves this problem because, fortunately for lenders, homebuyers often look at mortgage payments to determine their price range. When they want to know how much house they can afford, they start shopping lenders. Especially during the recent sellers’ market, that means getting preapproved, which almost always requires a hard pull on their credit.

New technology offers alerts like this.Before, a lender would learn a customer was leaving when they receive payoff funds – too late to do anything about it – and that assumes they’re servicing the loan. Now they can get back in the running. 

2. Homes Listed for Sale

What if your loan officers knew when a past borrower listed their home for sale? 

When a borrower lists their home, it appears on the Multiple Listing Services. Lenders today are catching this signal for a possible purchase mortgage – the most valuable loan type for lenders’ franchise value. 

If a past borrower went with a new realtor, or if the realtor referred to a different lender, your loan officers now have a shot at winning the borrower’s next loan.

With this type of data-based engagement, technology allows loan officers to build stronger purchase businesses – with origination volumes more secure from disruptions due to changes in realtor referral relationships, from borrowers who change realtors, and even from homeowners who decide not to use an agent. 

3. Equity and Rate

What if you knew which borrowers have meaningful equity in their homes, or who may still benefit from a rate refinance? 

Borrowers have a record $11 trillion in “tappable” equity that they could use for a cash-out refinance or home equity line of credit (HELOCs).

Lenders should plan to engage customers who might use equity because consumers need education on their options now; they know their window is closing to use equity – for renovations, debt consolidation, or surprise expenses – as rates cause home equity to slow and eventually decline.   

For consumers who’ve just purchased a home, and even for those who refinanced last year, home equity is both a revenue and a relationship opportunity for banks and credit unions. For example, the National Association of Home Builders found that customers are over 2.5 times more likely to make large purchases within a year of buying a new home — for items like appliances, furniture, and home improvements —compared to consumers who did not.

Lenders must engage these homeowners or risk allowing another provider – potentially one better at cross-selling – to them with large purchases.  

Doing the Math

Hundreds of mortgage originations await in consumers’ banking data. Using that data to serve pressing financial needs will contribute to the performance of profit leaders in mortgage and banking in the years ahead.

For every 50,000 contacts monitored in a mortgage or banking database, lenders discover nearly 200 additional mortgages per year, according to lender data gathered by Total Expert. That level of increase in loan originations can translate to nearly $1 million in revenue growth — a return on investment of 12 times the cost of the technology.

Lenders should also consider how technology reduces overhead, such as marketing costs. Mortgage leads cost $800 to $1,200 per loan. For 200 new originations acquired by a lending technology saves those costs, which reach $160,000 on the low end. When that savings scales across a larger contact database – especially one that combines a bank’s mortgage and retail customers – revenue growth becomes highly efficient and translates to much more profitability at the bottom line.

With such significant opportunities in originations and profit growth, financial institutions have a clear incentive to solve their retention challenges using new data-driven technology. However, even bigger upsides await in relationships. When customers see their financial institution working to educate them and to provide options that serve their situation, it creates a deeper connection in which the customer turns to their bank for every financial need throughout their lifetime.