Real Estate

Human Lenders Are More Valuable Than Ever

The Mortgage Bankers Association (MBA) estimates that lenders helped home buyers with $1.6 trillion of loans in 2021. Consumer demand for mortgages in the United States has skyrocketed, due to increased savings, interest in nesting and home ownership during the pandemic, and low interest rates.

Those low interest rates also have made refinancing attractive over the past two years. And, although a rise in rates will diminish refinancing for a better rate and term, banks, non-bank lenders and mortgage industry investors are likely to continue seeing strong demand from the purchase market. According to a recent MBA report, the industry is expected to originate more than $2.5 trillion for each of the next three years – a whopping 40 percent higher than average annual originations between 2010 and 2019.

Streamlined & responsive

Fortunately for homeowners and home buyers, lenders have been improving marketing, processing, underwriting, funding and servicing technology to streamline the process of financing a home. The consumer experience is becoming smoother and faster. Investors can facilitate further improvements at the point of origination, processing, underwriting and loan servicing, as well as expand consumer access to home-financing and home-buying services.

Nonbank lenders, most with mortgage loan officers (MLOs), continue to grow market share. In fact, nonbanks’ share of total originations has been on the march for years. Five years ago, nonbank lenders accounted for roughly half of total originations. Two years ago, that figure was nearly 60 percent. In 2020, the share of originations by nonbank lenders leapt to nearly 70 percent and when 2021’s numbers are tallied it is expected to be even higher.

This growth has been driven by lenders who have a strong digital focus and a differentiated value proposition with loan officers helping borrowers: the personal touch.

Rather than replace individual MLOs, companies have invested heavily in digitized interfaces that make submitting an application, uploading documentation and communicating with the lender easier. MLOs can continue to offer their clients speed, convenience and transparency.

Lenders have not only increased their own technology departments but have enlisted third-party technology and data providers who are further streamlining the mortgage process to help consumers. That’s timely, because borrower expectations for digital engagement have risen dramatically over the past 18 months, as have expectations of rapid closings and any subsequent servicing transfers. Best: Lenders and loan officers will continue to streamline any origination and servicing processes that are still slow, manual, labor intensive and fragmented. MLOs are benefitting from these innovations and investments, and that translates to customer (borrower) benefits.

Real people, feedback & guardrails

In terms of product offerings, MLOs provide direct feedback to senior management about loan types and maturities that will best help their clients. For example, the advent of “non-qualified (non-QM) mortgages” that consumers need for various reasons (self-employed, too much debt), is a direct result of MLOs informing management of the need for the product.

At the start of the pandemic, lenders stopped accepting non-QM applications as credit guidelines tightened and capital availability diminished. But liquidity has poured back into the non-QM market, prompting lenders to again underwrite non-QM loans. MLOs are seeing how non-QM liquidity plays an important role in expanding consumer access to mortgages by providing options for borrowers whose income stream or other financial attributes lock them out of traditional lending programs.

Loan officers are often the “point person” when it comes to questions borrowers have, or any confusion that may occur, if and when servicing is transferred. Borrowers enjoy that personal touch, and “having a friend in the industry.” This will increase as new lenders and owners of mortgage-servicing rights that are entering the industry may lack internal servicing capabilities and will consider outsourcing to retain mortgage-servicing rights.

Although the MLO is not involved in servicing directly, they are the person that the borrower knows and will often contact. The ability of an MLO to be the subject-matter expert for their client, rather than the client going back to a generic, non-personal website for help is a huge reason that MLO-centric lenders continue to increase market share.

Borrowers can take comfort in the fact that MLOs are subject to rigorous guidelines and extensive training. In addition to knowing their core business, they also learn consumer protection law. MLOs must pass both a national exam and one for each state they practice in. (Those state licenses must be renewed every year.) Loan originators at banks register with the NMLS (National Mortgage Licensing System), are finger-printed and undergo a criminal background check.

From connecting to closing

As any and all interactions during the pandemic have become more complex, personal interactions have become more vital: Being able to talk to an available, willing, knowledgeable human about a mortgage, for instance. Whether refinancing an existing loan, or financing a new home, people like dealing with people. Having questions answered online is helpful, but borrowers continue to appreciate working with a lender that has loan officers helping them with their home ownership and home financing dreams.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.