Don't Buy the Backlash — Consumers Want a Digital Loan Experience

The commercials during Super Bowl 50 featured a surprisingly large number of firms talking about an old staple — mortgages — but in a new light. While some of the ads provoked outcry via social media that they were insensitive to the catastrophic impact of the subprime mortgage crisis of 2008, they also show the marked commitment of an industry that has been slow to adopt technology to move more aggressively into digital offerings.

Quicken Loans' spot advertising the self-service app for Rocket Mortgage asks, "What if we did for mortgages what the Internet did for buying music, plane tickets and shoes?" SoFi, whose tagline is, "Don't bank. SoFi," sent the message that it offers "Great rates to great people," promoting its underwriting approach that offers to get borrowers "more house" by requiring lower down payments with "less headache" through online prequalification and "exceptionally fast financing." In a regional spot, Guaranteed Rate touted its low rates, its size and a "digital mortgage — get approved for a mortgage online, anytime, anywhere in minutes." SunTrust also got in on the action with a duo of ads that weren't mortgage-specific, but did attempt to forge a similar link between customer experience and financial products.

So, what do these ads mean for an industry that is still grappling with the after-effects of the financial crisis and the resulting increased regulatory oversight?

The first challenge to the status quo is speed. At a time when most lenders are worried that regulation is going to extend the length of the process by days if not weeks, the idea of an eight-minute approval seems improbable. That said, consumers appear to have a strong interest in shortening a process that is often measured in weeks, if not months. In the 2015 J.D. Power Primary Mortgage Origination Satisfaction Study, nearly a quarter of all respondents (23%) and more than one-third (36%) of millennials said they would be willing to pay extra for premium, or faster, processing of their loan application. These borrowers said they were willing to pay an average premium of $1,448 for a faster process, indicating there is substantial market demand.

Another potential area for disruption in the mortgage industry is around simplifying the process for the borrower, especially in the collection of documents, which has always been one of the more arduous parts of the application process.

According to that same J.D. Power study, 68% of customers said they were asked for additional documents after they completed the detailed application process and 49% said they provided the same document more than once. Among those asked for additional documents, nearly a quarter (24%) said they had four or more additional requests which resulted in an average drop in satisfaction of 145 index points (out of 1,000) compared to those who had no additional requests.

The Holy Grail of the all-digital mortgage not only allows for electronic document submission but eliminates the need to send any documents at all. By giving lenders access to the sources of the data (i.e., bank accounts, etc.) customers don't have to send things in manually or repeatedly.

One of the biggest points still up for debate in what the future mortgage experience will look like is the role of humans in the process. While technology is clearly on the rise in the mortgage industry, the 2015 study found that 53% of first-time homebuyers completed the detailed application process in-person.

However, among current mortgage customers who completed an application via website, mobile app or text message, overall satisfaction scores were 46 points higher than those who completed forms via mail or fax in our annual study. For digital document submission, scores were 38 points higher and for digital status updates, scores were 41 points higher. Mortgage originators are well aware of this phenomenon and are clearly looking for ways to get a critical mass of consumers to start migrating to their new digital offerings.

Are consumers ready to make one of their largest financial decisions on their own? While that is still to be decided in the mortgage industry, looking at industries like wealth management and tax preparation — many of whom started their big consumer pushes on Super Bowl Sundays of yore – may give a hint at what consumers may be willing to do on their own if given the right tools and financial incentives.

In the end, like them or not, the ads are about consumers and the movement of an industry to influence perceptions on new products. If these commercials have their desired effect, then the mortgage industry will have some lofty consumer expectations to live up to.

Craig Martin is the financial services and mortgage practice leader at J.D. Power and Associates.