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Capturing Share In a Shrinking Market

Market Share

As refinance business slows and the overall volume of mortgage loans declines, mortgage lenders are facing an increasingly competitive market. In order to grow revenue and profit margins, lenders are having to find ways to out compete their competition. To capture more borrowers and grow market share. The question for managers of mortgage lenders is how to go about capturing more customers to achieve a greater share of the market.

J.D. Power’s 2016 U.S. Primary Mortgage Origination Satisfaction Study does uncover one way in which mortgage lenders could capture borrowers. According to the Study, 27% of first time buyers/ borrowers regret their choice of a lender. Over one in four regret the lender they used, a surprisingly large percentage. The top reasons for their dissatisfaction include lack of communication from the lender and feeling pressured into a particular loan product.  So, by ensuring that your operation communicates with your potential borrowers and that your loan officers do not pressure prospects, regardless of their needs, into the highest commission products, you’ll get a leg up on capturing over a quarter of the market.

While capturing a quarter of the market with better communication skills is tongue in cheek, it does talk to the importance of customer service. Borrowers today understand that for lenders offering comparable interest rates there is not a significant difference in loan origination costs. As such, they are more actively comparing the service the lender provides and not basing their decision on pricing alone. How you communicate with your customers is one service attribute that can differentiate you from your competition. Though of greater significance is the growing interest among borrowers to find a lender that makes the loan process both fast and easy. As we’ve discussed in past posts, technology has streamlined many aspects of our daily lives, from buying groceries to purchasing a car. Borrowers are looking for this same “instant gratification” when purchasing a home and a mortgage. Lenders that invest in or utilize technology that streamlines and simplifies the mortgage loan process will be more successful in capturing borrowers.

As the Millennials enter the home buying market, the number of loan products offered by a lender will play critical role in winning business form this segment. Saddled with student loan debt and surviving years of a challenging job market, conventional mortgages will not always work for these new, first-time home buyers. Lenders that offer a wider range of loan products, including FHA and GSE products, are more likely to capture this growing segment of the market. In addition, lenders that have expanded their underwriting criteria to take into consideration other data besides the borrower’s FICO score stand to capture a greater share of the market. This is not to say that these lenders are acting irrationally, as we saw a decade ago, but are looking at a broader picture of their potential borrowers to make a more informed underwriting decision. This expanded look also benefits the customer as it more clearly defines what is needed to get a specific loan, further simplifying the loan buying process.

As our industry continues to shift toward purchase mortgages and a new generation of first time home buyers enters the market, those mortgage lenders that are the most effective in simplifying and streamlining the mortgage process will achieve the greatest success in capturing borrowers and gaining market share.