- Attitudes and motivators on how digital-first consumers are acquiring mortgages
- Receptiveness to personalized marketing and usage of predictive analytics
- Growing usage of AI-powered chatbots and intelligent digital assistants
Heidi Patalano (00:06):
I had like to bring onto the stage one of my Arizent colleagues, analyst, Michael Moser, who will be discussing reeling in the digital first home buyer. Michael, join me.
Michael Moeser (00:28):
Thank you, Heidi. Thank you.
Heidi Patalano (00:29):
Thank you.
Michael Moeser (00:30):
Introducing me and all the great stuff that you said. This is a teaser presentation of research that's coming out next week.
Heidi Patalano (00:37):
Right? Right. And so just to give you a little bit of background, Michael Moser is an industry analyst with Arizents research team. Throughout the year, you generate loads of great analysis.
Michael Moeser (00:49):
Tons.
Heidi Patalano (00:49):
Tons, tons. Scads of research for the Arizent brands, which in addition to National Mortgage news, includes American Banker, the bond buyer, financial planning, digital insurance, employee benefits, news and accounting Today. Did I say bond buyer? Bond buyer? You said bond buyer. I did this. I did. Okay, so let's talk about this Research.
Michael Moeser (01:12):
Yeah, this is, as I mentioned, it's a teaser of an editorial report that's coming out next week. And this year we went out and we surveyed at 500 US adults. Last year we looked at both the refi and the home purchase market. This year we shifted and we're looking just at the home buyers.
Michael Moeser (01:30):
The key here was to understand their behaviors, their use of digital tools and channels as they search for new homes and acquire mortgages. And of those 500 people, about half made a purchase in the last year, half made a purchase within the last 13 to 24 months. And what we found is that two thirds of them were the lead person in making that mortgage with one third taking a backseat. And I mentioned that that's important because that's overall. And as we get into the digital first buyer, you'll see that there's a difference in terms of who's taking charge. So I thought this would be a good context slide here. Why is it important?
Michael Moeser (02:11):
Because, The digital first home buyer matters because home buying matters. And I think what you can see from the slide here is, and this is from the NBA, that we've been roughly at about a trillion and a half in purchases. Refi has ebbed and flowed, but the key here is that the purchase level has remained rather robust despite the ebb and flow of activity, particularly interest rates. And so I guess the question here I would have is if you're that digital, if you're the mortgage broker, if you're the bank, if you're the processor in terms of providing that customer experience, that consumer experience that you mentioned earlier that how retail has overshadowed the mortgage industry on financial transactions in general, if you're that person delivering that on the home purchase, when rates change and Refis come around, are you probably going to be that first person to benefit from that if you're delivering that experience?
Heidi Patalano (03:09):
Yes. I think absolutely. If you look to the examples of some of the biggest lenders out there, like a rocket for example, offering this very seamless experience, at least in the process of getting that information and getting the first stages going, they absolutely are the quickest with that kind of well, those that offer that technology are the quickest with that and will benefit once Refis come back around.
Michael Moeser (03:37):
It's the natural place to go, I got my loan from X, Y, Z, maybe I'll see it's time to refi. Is that the right person or is the experience that bad that I don't want to go back there again, I know who not to go to. So we talked a little bit about digital first home buyer and people are probably saying, well, what is the digital, or who is that digital first home buyer? And we asked a series of questions. And what you can see in this series of questions in the center highlighted is the handling large financial transactions. And so we asked consumers in terms of when you go out there and you're thinking about learning new topics, what's the typical approach that you take? Do I crack open my laptop? Do I grab my phone, open the app? Am I trying to do things digitally first, usually doing them digitally first, or do I go to the library and pull up the newspaper?
(04:29)
That's the kind of thing. Now learning new topics is pretty easy to go digital, but as you get more difficult in the process, say large financial transactions, buying a home, buying a car, buying a boat, we've got about half of the audience or half of the consumers saying, I want to try to do things digitally first. It's easier for me. It's more convenient, gives me more power. Those kinds of things versus people who say, I'd prefer doing things personally. I want to meet the agent. I want to fill out the paperwork. I like ink and paper, things of that nature. So it's roughly half and half. And I'm sort of curious here, I don't know, should we do an audience poll? Yeah. For those of you that would probably think about doing a large financial transaction, whether it's a boat, whether it's buying a house, buying a car, who of those here would say, I prefer to do digitally first? Raise your hands.
Heidi Patalano (05:26):
There you go. Yeah. Overwhelming majority.
Michael Moeser (05:29):
Are you surprised?
Heidi Patalano (05:30):
No, no, not surprised. But I think what's really interesting about this, it really speaks to some of the reporting that we've also had at National Mortgage News where lenders are really trying to offer the best mix of both of these things. The personal touch with the self-serve answers and all of those things. And actually, I wanted to mention this quote from someone at Campus Door who they handle student loan lenders and they said that Gen Z really wants a bit of both. They have all of this information at their fingertips, but when they have a question, it's not a basic one. So they want to be asking by phone, by chat. They want that personal response. So I think this is.
Michael Moeser (06:18):
It's interesting that you mentioned that, and I know later in the presentation later today, we'll be talking about chat GPT, Generative Ai, things of that nature. And the question there is can these technologies supplant that need for that in-person? Because I know the first time I bought my first home, I think I've had seven now looking at number eight,
Heidi Patalano (06:38):
Seven?
Michael Moeser (06:40):
You have that question of my situation is unique, we all think our situations are unique. Or it's the first time I've purchased that home. What is it that makes me different? But if you think about that digital first home buyer and what is he or she thinking that could potentially, maybe I will use a chatbot one that is a little smarter than the old chatbots to answer some of those questions. But We'll get into that in a second because I think what's important to understand when we look at who is that person that tends to be digital first versus that person who tends to be in person first, what did we find? They're more affluent, the digital first people are more affluent, they skew younger. I think you mentioned that earlier. And I think there's the degree of that giving up a little bit of privacy, which we'll find out about a little later in the conversation. And then in terms of that involvement of obtaining the new mortgage, three quarters said they were more involved in that lending process versus 39% saying, I'm taking a back seat. So clearly that speaks to people who are more comfortable, more willing. And could that be the tools that are out there? I don't know.
Heidi Patalano (07:54):
Yeah. Well, I mean, you can't overstate how important it is to try to serve these digital first buyers. If you look at when Gen Z will really make up the majority of those searching for a home, and that's not far off realtor.com did a study that said that 26 million gen Zers could be in the home purchase market by 2026.
Michael Moeser (08:17):
That's amazing.
Heidi Patalano (08:18):
So you can't ignore that. These folks want to get their information a certain way, and you have to be prepared to offer it up to them in exactly That form.
Michael Moeser (08:27):
You mentioned TikTok earlier. We were chatting about that in the back before the drummers broke the Conversation.
Heidi Patalano (08:32):
I watched too much of it. I have to say, I will confess that I do spend a lot of time on TikTok.
Michael Moeser (08:39):
I think Heidi was mentioning, we were talking about the home buying process, how TikTok is becoming such an important platform, and not only within the home buying process as we've done research in other industries, wealth management, for example, this whole great wealth transfer, $73 trillion going from silent and boomers to Gen Z and millennials that you're seeing a lot of in that industry, wealth advisors having to adapt social media. And in this case, in the mortgage industry, you're thinking about how do I get to that individual and what platform does he or she prefer TikTok, maybe that avenue, YouTube, etcetera. And so that is interesting. But let's talk about the home buying journey. So the digital first home buying journey. So we've got this digital first home buyer. What is he or she going to do in terms of the types of tools? And I think what you can see, if you look just glance at where the bright blue bars are, those are the digital first people Versus the pinkish, reddish, I don't know, mauve colored salmon, salmon colored bars, which is the in-person first you see there's a degree of, okay, I'm going to search for current interest rates. And that's very common amongst most populations. But when you get into things like using a mortgage calculator, how much can I afford on my salary? Or when you're looking at getting pre-qualified, you're conducting a search for a mortgage broker, they tend to hop on the phone, they tend to hop on the laptop. And so there's an important element in terms of if you are out there within the mortgage business serving people at the front end, the back end, these people have a tendency to look at things in terms of, can I get it while I'm maybe going to visit the house? I'm right in front of the house. Can I afford this house? I know that was the first conversation my wife and I had when we bought our first house. She said to me, can we afford this house? I don't know. My phone isn't working. So ,That's a key question. And I guess, is there a presence issue that you feel.
Heidi Patalano (10:42):
Right? I mean, that's the opportunity, that's the opportunity for lenders to provide those tools to provide that information and say, I can tell you, you first start building that relationship right there. When this prospective buyer starts doing their research, if you're one of the sources, for example, we're saying in for TikTok, I know that a couple lenders influencers that have really gotten out there as mortgage influencers, the leads they generate from videos where they're saying, Hey, did you know that you could actually afford to put down this much money? Do you know with this kind of loan you could do this? And that they start to build trust with those borrowers right away. And so when someone gives me a bit of useful information, yeah, there's kind of an intrinsic trust that starts building with that person. And so that's why so much of this is so important because these are the opportunities, especially when origination volumes are lean. This is where you can go to find contact, make contact with those borrowers.
Michael Moeser (11:47):
It definitely seems like in terms of the numbers of bars here, there's lots of opportunities from the credit bureaus, the broker websites, the mortgage calculators. So there are many avenues that people can focus on.
(12:01)
In Terms of serving this buyer. Now, We looked at further down in the process in terms of completing the mortgage purchase. And so overall, and in this chart, what we see is you've got a small bar of people who do 100% completely online or through mobile app, remote online notarization. And if you look at the digital first column in the center, about 92% of the people will spend at least half of the process doing it digitally. So that would be filling out the loan application, uploading the documents, or as in my most recent purchase I did in my most recent purchase.
Heidi Patalano (12:45):
Eight Houses
Michael Moeser (12:48):
Providing remote online access. And so to me, it's that comfort level of saying, am I willing to give the mortgage broker the opportunity to use the third party, reach out to the IRS, get my taxes and all this? And it's a permission to online access and what you're seeing with the digital first people, there's a lot of interest in leveraging those tools. Now, When I Refi, one of my other homes didn't have that remote permission to access. And for me, when I went to buy my next house, there was a concern. I want to have that digital first experience. So I didn't go with the refi company. But Still, Even when you look at the people who say, I prefer to be in person first, there's a lot of interest in or a lot of capability, a lot of production Digitally.
Michael Moeser (13:36):
And we talked a little bit about some recent research.
Heidi Patalano (13:38):
Yes, that's right. Thank you. So we snap Docs recently conducted some research with Arizent, and we found that 74% of lenders surveyed had invested in the digital closing tech, but only 28% of those offering e-closing achieved an adoption rate above 60%. That's interesting. And hybrid is the most popular closing type. 62% of the loan volume was hybrid. And a lot of that comes down to regional rules, local rules on whether or not you can even actually do the run. So that's just something that's not .
Michael Moeser (14:18):
Definitely cities and states, counties have different laws, different requirements, whether you have to have a wet signature or could be completely remote. I know there's a lot of people who would rather go fill out the paperwork and then the bunny slipper crowd that would rather fill it out online.
Heidi Patalano (14:37):
I like that. The bunny slipper crowd.
Michael Moeser (14:39):
I'm part of that bunny Sticker crowd.
Heidi Patalano (14:40):
Home bodies. Yeah.
Michael Moeser (14:44):
But let's talk about choosing lenders, unsolicited offers and AI enabled intelligence, virtual assistants, IVA's for short. And so in the process of thinking about choosing the lender, it's no surprise, everybody says the competitive mortgage rate is up top. Lender transparency is very important. And the application fees, closing costs, those are all important. So I think it's difficult to differentiate yourself if you are a, I'm offering 25 basis points or a loan that's 25 basis points higher.
(15:17)
It's Going to be shopped around. But generally people understand, people within the industry understand you need to have that competitiveness. There's a strong interest in having that level of transparency. But where the differentiators really come are on these secondary factors where banks, brokers, et cetera, have more control. It's that speed and convenience of pre-approval, prequalification. It's that the closing last year we did a study, and I mentioned this in terms of both buyers and people who did refi. And we asked the question, how long should the average, on average, when you find that you sign the loan application to close, how long should it take? And it was interesting, the average consumer said 28 days for the first time buyer, it rains between 14 and 21 days. And I'm thinking Freddie Mac released data, I believe it was last year. It's roughly around 42 days. So the difference in terms of consumer aspiration, consumer interest, Expectation is different. And I don't know, it feels like it's almost that Amazon effect.
Heidi Patalano (16:31):
Right, exactly. I know that's what, it's so fascinating when something's so easy like that, you just expect everything to be as easy as ordering something on Amazon where you get updates along the way and boom, there it is next day. So that's really, like I was saying earlier, that really has reset our customer expectations of how fast that we can get things done. And this is like a what in terms of how long? 30 days? Are you kidding? Nothing else takes that long.
Michael Moeser (17:01):
Nothing does. I mean, I don't know if you're a Domino's fan, I'm a Domino's rewards member, I'm sorry. But they have TV ads where you can drop a pin on a map and they'll come and deliver it. No one's coming here to the states to deliver pizza please. But, What I'm saying is that there's that level of convenience in terms of I can order a pizza, it can be delivered to me at this location. I'm at the soccer game with the kids, and then the Amazon effect, I can sit there, I can compare prices while I'm at Walmart, what's cheaper. And then that capability, and a lot of that is sneaking into other areas of financial services, mortgages, banking, wealth management, and we're seeing this Amazon effect of, this is my expectation. I can order food. It gets delivered with a certain amount of time. I can resolve problems through my app, and now all of a sudden I'm buying a house. Why should it be different? That's what a lot of buyers are asking, especially digital first home buyers. And what we found is that about 40% of the digital first home buyers are first timers.
Michael Moeser (18:07):
So, The guys and gals, the people out there that are buying these homes, there's that expectation, I think, as you mentioned. Why shouldn't this be different than when I order a pair of shoes Or Something from Amazon?
Heidi Patalano (18:20):
Yeah, exactly. I mean, it's another example is Uber and Lyft, for example. Those are things where now when I got here to Las Vegas, I walked over to the Uber Lyft pickup stand, and it was loaded with people. It was clocked because that is so easy and convenient. People don't want to go through the trouble of going to a cab, telling them the address, coming up with the money, giving them a if guy driving you around. Yeah, yeah, yeah, exactly. So when you come up with an easier solution, the whole market goes to the easier solution.
Michael Moeser (18:57):
Well, I want to draw your attention to one of the yellow bars here.
(19:01)
It's availability of digital tools, mobile apps, digital payments. Heidi, you talked about the cab experience. To me, I'm always amazed when I come here to Vegas, there are cabs. Probably the only other place I ever see cabs are in New York. In most of the cities, they've pretty much gone the way of the dinosaur because they've taken that friction out. And for the digital first home buyer, 71% said, if I'm choosing a lender, what's important to me? It's that availability of digital tools, mobile apps, digital payment options. And I guess I would ask you if I'm a broker, if I'm a bank and I don't have all of those latest tools, am I at a disadvantage?
Heidi Patalano (19:44):
Right? Absolutely.
Michael Moeser (19:44):
Compared to my peers.
Heidi Patalano (19:46):
And yeah, I think it goes without saying, there's just going to be an abandonment of that process.
Michael Moeser (19:52):
It's that silent
Heidi Patalano (19:53):
Difficulty,
Michael Moeser (19:55):
People may go onto your site, they may say, I'm not seeing the mortgage calculator, or It's not giving me the options. Maybe I'll try the next one. And that's very fleeting,
Michael Moeser (20:06):
It's an important element because it's in that early phases of the buying stages.
Michael Moeser (20:11):
So, You're just getting to know somebody and they've left. So let's talk about out unsolicited offers. And you mentioned this a little earlier in your intro.
Heidi Patalano (20:23):
Yeah.
Michael Moeser (20:23):
So what you've got here are two questions, and I'll try to paraphrase them quickly. So on the left hand side, what you have is we ask people, how receptive would they be to a mortgage lender who reached out to you unsolicited with a mortgage loan offer for a place you just visited?
Heidi Patalano (20:40):
Right.
Michael Moeser (20:41):
Okay. That would be a little spooky, maybe five years ago, 10 years ago. But now we can geolocate you when you go to a home opening, you can sign in, provide your details, so that's being transferred to somebody else. And what we found is that at least half of the digital first home buyers were interested in an unsolicited offer to place you just visited. And then we asked the follow-up question. So not only that, but by using publicly available data about you and what we found digital first, people were much more interested. But when we came to the ages, the generations, gen Z millennials, almost two thirds said, yes, I would like that offer. Compared to the boomers, you've got one third.
Heidi Patalano (21:29):
So these questions are meant to really highlight just the openness that they have to this kind of approach. Like whether or not it's a should or could, this is just, would I like that? Yes, I would actually. And what I wanted to mention here was something super interesting called the Netflix Effect that one of our reporters heard from Binna Kim, who's ACEO of Vested marketing communications firm. I just wanted to read a quote from him. He said, there's almost an innate understanding with younger generations that they're giving up access to their data in exchange for a highly personalized shopping experience. The same way you log into Netflix and get a highly, you get highly tailored show recommendations based on what you seem to, you're also going to expect that same level of customized content and service from, in this case, your home lender. And I think that's totally true. I mean, also, I'll just say Instagram has got my number. They're always advertising to me things that I want or that I'm interested in, and I respond to it, it pays off for them. I do buy those products.
Michael Moeser (22:40):
Well, there's that convenience factor I think people need to understand. And as you mentioned, the Netflix effect of when you're giving the two thumbs up to that movie you just watched versus thumbs down or just one thumbs up, They will Definitely redirect you because there's that level of engagement that they're looking to get.
Michael Moeser (22:59):
Because if you're Netflix, you compete with Apple tv, paramount Plus, et cetera, and so you're competing. And so it's really developing that level of engagement. And I think here what we're seeing is there's an interest because younger consumers like that level of engagement, I'm willing to give up some information. Or if you're harnessing information that's already out there on me, maybe my credit score, the fact that I've recently purchased a car where I live, et cetera, where I'm going to, that you're willing to tailor something to me, and it's curated. And in this case, it's really providing that message that says, okay, Heidi, we think you can afford this. Here's a tailored offer to you and How receptive would you be? And what we're seeing with the younger generations, definitely.
Heidi Patalano (23:52):
Most definitely, right? That's going to be the future of how people do business and do this outreach.
Michael Moeser (23:58):
And I think, as you mentioned earlier, 26 million people in that 61% bucket that all of a sudden it changes the, I guess the equation in terms of you sort of have to be at that forefront. Now, we're looking at technology of, can I see how many times Heidi has gone to that house? She's visited three times. There's a lot of interest.
Michael Moeser (24:19):
So all that information that's out there, it's important. And can you leverage that into a loan that could potentially drive that relationship? So let's talk about IVA's intelligent virtual assistants early days using AI enabled chatbots. We saw that the usage was relatively low, but when we asked folks in terms of what was your level of satisfaction in using these AI enabled IVA's, eight out of 10 said, I really liked it. I was very satisfied or somewhat satisfied with that experience. So there's a good degree of people who have that experience with IVA's AI enabled IVA's to say, I'm interested. And if you look at the questions, the benefits that they saw, it answered specific questions I was having about the process.
(25:14)
Made the process faster. What is escrow? If you're not familiar with what is escrow? We probably all know what escrow is here, but do I need to have escrow? Will this loan require me to have escrow made it easier for me to get information, detailed information about my loan? How does a five one mortgage work? I don't know. And so having that basic understanding makes it easier to keep track of my status process makes it less painful. That's an important thing. One of the questions we asked last year in terms of the mortgage process, we actually asked people, would you rather have a root canal or go through the mortgage? It was a real question. Actually, two out of 10 people said, I'd rather have a root canal than get a mortgage. And so it was very interesting. We didn't repeat that question, but it speaks to the pain that people feel. And there's a degree of it's a big purchase. I've never done this before, especially if it's that 40% of home buyers, and I want someone to hold my hand, not virtually, maybe. But I think as you mentioned, Heidi, that there's that interest in terms of having that both tailored, that personalized.
Heidi Patalano (26:26):
Specifically speaking to your unique questions and the way you're wording them and feeling answered rather than going to an FAQ, which can also be very helpful, of course, but Right. There's a different need being met there with a tailored answer. And we've covered the fact that Zillow, Redfin, they've both created some chat GPT plugins, and actually you'll meet from Insta Morgan Shekhar, who his company has instituted. They've released an AI bot named Rachel. So more companies are responding to this and trying to get these products out there. Sorry, these tools out there. And one thing I wanted to note, recent research from Strat more found that 22% of lenders surveyed were using AI either to court new customers, target current ones, or make better product offers. And AI was mainly applied in marketing rather than in operations and fulfillment, according to this survey. And yeah, per the report, 35% of mortgage shops were using AI to identify opportunities with current customers. 30% were using AI to target potential customers, and 25% we're using it to make better product offers to borrowers. So I think that goes to show that this is happening right now, and you got to get on board with that as soon as Possible.
Michael Moeser (28:00):
Definitely. And I definitely see that this is, while it's still early days, there's a lot of interest, there's a lot of benefit. And for those organizations that are, whether it's the Redfins, the Zillow's, or other Insta Mortgage, as you mentioned, those are the people that are going to be able to leverage this new technology, bring it in really creative and new ways to potentially assist in that process. So maybe if you can have an AI enabled chatbot that can answer some of those more difficult questions that a human being could to create that generative AI experience, definitely will provide that edge, that competitive edge, if you will, to that home buying experience and create that relationship.
Heidi Patalano (28:44):
Yeah, absolutely. Well, Michael, thank you so much for joining us today and sharing this information with us.