Direct-to-Consumer Lending: It’s Time to Up Your Game—Here’s How

In the first half of 2021, a record number of consumers pounced upon fleeting, historically low interest rates to purchase new homes or refinance existing mortgages. And many of them—particularly Millennials and Gen Z—did it online.

Online homebuyers certainly existed pre-pandemic, but COVID-19 made shopping online for mortgages much more appealing. In fact, 36% of all Americans surveyed during the pandemic said they would be more likely to try to buy a home entirely online (43% even said they’d be more likely to try to sell a home entirely online!).1

But don’t expect online homebuying to decline once the pandemic ends—particularly for the younger generations. According to March 2021 research from Zillow, 39% of Millennials and 36% of Gen Z said they would be comfortable buying a home online.It’s this population segment, Millennials and Gen Z, that’s expected to add nearly 25 million new households in the U.S. by 2028.3

Raised on technology, these consumers hold heightened expectations for a better, richer direct-to-consumer—i.e. “consumer direct” —digital lending experience. But what exactly does that mean?

As a career direct-to-consumer mortgage technologist for market leaders like Zillow, in my experience, tech-savvier consumers tend to rate the quality of their experience based on three key elements: how quickly they received a response to their initial online mortgage inquiry; if they felt the lender listened to them and provided relevant, personalized data within each communication; and if they received expedient, valuable service throughout the entire process.

In theory, these younger consumers really aren’t asking for much. Yet three common obstacles often prevent lenders from meeting their expectations:

1. A Frankenstein-like approach to mortgage technology infrastructure.

Since no single consumer direct platform offers a whole product solution for sales and marketing needs, lenders employ a disjointed array of separate core and ancillary sales/marketing tools—an array that makes it difficult for lenders to track and optimize the full customer journey. Lenders, for instance, bolt together three different lead management, CRM, and marketing automation systems to provide a consumer direct sales and marketing experience.

Unfortunately, even when integrated, disparate systems prevent optimal responses to inquiries and unified outbound marketing and sales messages because they prohibit a holistic understanding of online consumers—they can’t tie together leads and contacts, and they don’t maintain each consumer’s full contact history and information.

2. Consumer direct lenders can’t effectively utilize the consumer information they already possess.

In an era when relevance reigns supreme, most consumer direct lenders can’t deliver messages that strongly resonate with consumers—even if they’ve already gathered important, consumer-specific information that could be used to inform their communication decisions. In addition, no turnkey consumer direct sales and marketing solutions offer basic demographic segmentation functionality.

3. An invisible, practically impenetrable curtain separates various lending channels.

Largely due to the mortgage technology architectural issues mentioned above, client data isn’t easily shared between the various lending divisions across a mortgage enterprise. Without tight collaboration between different lending departments, lenders can’t manage the consumer situation in a way that delivers the best customer experience.

Consumer direct lenders have certainly been at a disadvantage when it comes converting leads to customers. And it’s about to get worse.

For one thing, the Mortgage Bankers Association (MBA) predicts the mortgage market will shrink 40% from 2020 to 2022 due to 30-year fixed mortgage rates rising to an estimated 4.4%.4 For a second thing, this year’s shrinking pool of refinance candidates means the market is about to swing back to purchase-focused. That’s not necessarily good news for a vast majority of consumer direct lenders who have kept their purchase strategies on the backburner as rates continued to trend downward over the past decade.

Combined, these factors are going to make it a dramatically more competitive race to find, attract and secure borrowers searching for mortgages online. Those who win will be the lenders that deliver the most connected consumer experience.

Find out the three actions I deem most critical when it comes to readying your direct-to-consumer lending for this fast-approaching, uber-competitive market—read our new guide “Direct-to-Consumer: A New Competitive Model Is Coming—Are You Ready?

1 Zillow, “Home Shoppers are Trending Toward Buying Sight-Unseen, Selling Virtually.” July 17, 2020.

2 Zillow, “Americans Want Digital Tools to Complement Traditional Home Shopping.” Mar. 10, 2021.

3 Realtor Magazine, “Gen X, Millennials Likely to Keep Home Buying Strong for Years to Come.” Jan. 5, 2021.

4 Mortgage Bankers Association, “MBA Forecast: Purchase Originations on Pace to Increase 16 Percent to Record $1.67 Trillion in 2021.” April 22, 2021.