With technologically adept younger consumers now approaching prime earning years, and mobile use surging among mortgage customers in the COVID era, lenders are looking for ways to serve them with speed and simplicity
“You just expect things to be easy because you’ve lived with technology your whole life,” said Brad Lawson, co-founder of PrimeLine Capital, a broker that connects with 11 different mortgage lenders.
For the mortgage industry, the development of financial apps presents an opportunity to work with growing
Recent data shows rapid growth in the popularity of mobile use among mortgage customers during the pandemic. According to LexisNexis Risk Solutions, the share of mortgage-lending business, including applications and transactions, conducted by
The industry is going down a path already blazed by banks to some degree. A 2021 study conducted by Morning Consult and the American Bankers Association found that, pre-pandemic, 33% of consumers were already using mobile apps more than other methods for their banking needs, and among Gen Z and millennials, the percentages were even higher at 48% and 45% respectively. Since the pandemic’s onset, those numbers increased to 44% overall, and 56% and 55% for Gen Z and millennials.
Although finance apps don’t rank nearly as high in popularity as social or game offerings, research by software company Simform revealed that usage time on them in 2020 was relatively high, at 57 minutes a week, due to the attention people paid when making decisions on them.
For lenders like Fairway or Revolution Mortgage, mobile apps serve primarily as a way of streamlining and automating the application process, through document uploads or scanning. Their apps also permit other parties in the purchase to stay up to date on the status of applications.
“Realtors will also have a connection to be able to see where their borrowers are, or their customers are, throughout their home buying process,” said Masana Noma, vice president of marketing at Revolution Mortgage, who said that 79% of her company’s loans have come via its app.
Even when the loan closes, the app can still remain a means of further engagement, leaving the door open for return business down the road.
Shane Westra, chief product officer whose team builds apps for over 400 lenders representing approximately 45,000 loan officers at housing technology and software solutions provider
While reducing paperwork for the client, the time saved can be a boon to a loan officer as well. “I always have a client do an application online or the mobile app, just because that’s 20 to 30 minutes that I can spend on generating more business. It just makes me a more efficient originator by having that technology,” said Jeremy Schachter, a producing branch manager for Fairway Independent Mortgage in Phoenix, who in 2021 generated about $80 million through the sale of approximately 240 units.
In addition to being time savers,
“If you’re going to go buy a house, more than likely it’s intimidating to go walk down to your local bank,” said Lower CEO Dan Snyder. “You don’t know where to go, and maybe you don’t have any sort of perspective on what you can actually afford. And we solve for that online and through our app.”
Although Lower’s end goal is to finance a home loan, the app also incorporates personal finance tools that encourage saving and goal setting by “gamifying” the process. Along with loan calculators, the app also includes a savings account that clients can use to deposit funds, which can potentially turn into a down payment, with a match from Lower.
“What you’re seeing is like the early entrance into stock trading that once upon a time was only for your dad or mom. Now it’s really accessible,” Snyder said. “You can download Robinhood, you get a free stock and you can trade a few stocks for free. And it’s easy on the app. I think that’s the same kind of folks that are coming in through us.”
Even as mobile apps become more prevalent, limitations still exist that keep the mobile experience from being entirely seamless. Unlike many bank transactions, mortgage lending is a more complicated procedure with many steps between application and closing, not all of which can be conducted exclusively on an app. Many borrowers express frustration in online reviews about being unable to make payments through a mortgage app, unaware that their lender and servicer are not always the same.
Current regulations also limit the extent that mobile services can be provided in languages other than English, leaving out a fast-growing Spanish-language market. And as mobile use grows, so does the threat of fraud, which the mortgage industry is struggling to combat. Criminals targeting mobile transactions accounted for 29% of mortgage companies’ total fraud costs in 2021 up from 24% in 2020, according to LexisNexis.
For mortgage lenders that emerged in the digital era, their apps also serve as one branch of a larger strategy to appeal to younger consumers, who are increasingly influenced by online presence and social media when it comes to choosing products or brands to support. According to 2020 research from McKinsey & Co., 39% of the Gen Z demographic above age 18 and 25% of millennials cited social media as the main factor behind buying decisions. Whether it be through stadium naming rights, like Lower.com Field in the fintech’s hometown of Columbus, Ohio, or a prolific presence on specific social media channels, branding matters to younger audiences, Noma said, even if it’s not always connected to mortgage.
Unlike most businesses, Revolution Mortgage eschews Twitter, and instead devotes more attention to Instagram, a site that appeals more to younger users. “Our brand is solidified through Instagram,” Noma said.
“I think that, more so than ever, as we move towards ‘22 and beyond, it’s really important. Consumers now are connecting with brands that they want to do business with,” she said.
But the best marketing campaigns are effective only if companies back it up with the service that keep clients happy, and lenders that come out on top will be those who prioritize speed and the digital tools new homebuyers value, according to Schachter.
“I always encourage originators to embrace technology just because as I get older, my clients get younger,” he said. “People love technology, and you just have to embrace it.”
