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Consumers may be buying homes, but are financial institutions providing the mortgage?

Written by Steve Hoke Vice President & General Manager, North American Community Markets, Mortgage, Origination and Analytics Solutions
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After historic mortgage activity in 2020, the question for the remainder of this year is whether buyers are buying and how mortgage lenders will keep pace with borrower needs and encroaching market entrants. Both are questions we set out to answer in our recent webinar, titled “Expanding Your Mortgage Ecosystem through Integrations with Fintechs and Beyond.”

If you missed this virtual event, keep reading for a sampling of the highlights shared by some of the top minds in mortgage lending.

Homebuyers are buying, despite struggles with the mortgage process

To answer questions surrounding home buying activity this year, Leslie Parrish, Senior Analyst at Aite Group, came armed with proprietary research conducted over the previous six months. Her findings indicate that nearly 40% of U.S. consumers are either in the homebuying process or plan to be soon, even though most admit that it isn’t the best time to be buying, and not all will achieve this goal.

Prospective homebuyers are most frequently older Millennials, while many within Generation X are also looking to buy. Younger buyers round out the next largest segment of interested purchasers, with nearly a quarter of Gen Z and younger millennials ready to step into their own home. In contrast, relatively few baby boomers are looking to buy this year.

As potential homebuyers seek a mortgage to finance their home purchase, Leslie’s research indicates several pain points with the process, from finding their lender of choice and getting approved to understanding all the steps in the process.

When it comes to understanding the borrowing process, first-time buyers are especially in need of help.

What homebuyers want from a mortgage lender and where they’re going to get it

Aite Group’s research uncovered a number of knowledge gaps when it comes to homebuyer mortgage readiness, but despite misunderstandings about the process, consumers certainly know what they want from a lender. According to Leslie, it’s a number of digital tools and capabilities to streamline the process and guide them throughout their journey.

Leslie notes that understanding consumer pain points and preferences provides banks and credit unions with knowledge of their own when it comes to approaching the market, an edge traditional financial institutions need now more than ever as non-bank lenders push banks and credit unions out of the competitive running.

Leslie revealed that 6 of the top 10 lenders in 2019 were non-banks. Carrying the trend into 2020, 63% of mortgage originations took place through a non-traditional lender.

Financial institutions take back market share

Financial institutions have the knowledge and the community position to take back market share from non-bank players. What they lack is the digital capacity to meet consumer expectations for a faster, more efficient and yet personalized experience.

My colleague, Steve Megson, Managing Director at Finastra, and I revealed the potential way forward for banks and credit unions, utilizing APIs.

I explained that APIs make it possible for systems to talk to each other, and Steve detailed what that meant in the real world, providing examples from his own buying experience, as well as that of his clients. For example, Steve is seeing banks and credit unions forging connections with rate search sites, such as LendingTree, bringing interested applicants directly to the bank or credit union doorstep to apply for a mortgage.

We’re also seeing banks and credit unions expand digital capabilities to consumers by easily adopting products that address priorities, such as online origination, all without having to build proprietary products.

Most importantly, by utilizing APIs to connect internal banking systems with a world of third-party products and information, banks and credit unions are breaking down informational silos, gaining greater visibility across customers. The result is a deeper level of insight to drive more targeted consumer engagement. It’s the edge financial institutions are looking for as they take back market share from new entrants.

To gain deeper insights from our mortgage webinar “Expanding Your mortgage Ecosystem Through Integrations with Fintechs and Beyond” download our whitepaper.

Written by
Steve Hoke

Steve Hoke

Vice President & General Manager, North American Community Markets, Mortgage, Origination and Analytics Solutions

Steve leads the product strategy and innovation for Finastra’s Mortgage and Commercial Lending solution sets. With more than 20 years in the financial services industry, Steve brings to his role a wealth of experience in fintech, insurance, lending and investment banking. His broad background allows him to lead a strategic product team focused on improving the lending experience for home buyers and businesses in communities across the country. He is committed to purposeful innovation that...

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