What will origination look like in 2024? Yes. 2024. [paragraph] Ten years may seem a long time from now, especially when mortgage managers are facing a near-daily compliance crisis and trying to generate volume in a difficult selling environment. [paragraph] Indeed, 3,650 days can seem like an eternity. [paragraph] Of course, no one can accurately predict the future. But it is worth trying, because it says a lot about what new trends will dictate future success. Keeping an eye on the longer game helps companies with their present choices.
Back in 2004
Before looking forward, it makes sense to look back at what was happening in business and lending a decade ago.
Consider that some of the most highly capitalized firms today just got started in the past 10 years or less. Facebook[TM], YouTube[TM] and Twitter[R] are all young companies that have changed the way individuals interact with each other and how businesses sell and source their customers.
Yet, in 2004 we had no iPhone[R], iPad[R] or tweets.
These new communication tools have completely changed the marketing and selling environment. Individuals and their friends are more powerful than ever. It is hard to imagine that not that long ago, the telephone and fax machine were the dominant communication tools. According to current data from the Centers for Disease Control, Atlanta (which tracks these sorts of things), 51.7 percent of U.S. homes either don't have or don't use their land line telephones.
In 2004, some of the mortgage sales leaders were Countrywide Financial Corporation, IndyMac, Washington Mutual and National City Mortgage. That year, there was a slight retrenchment in volume from the previous year's record of $3.8 trillion in residential origination.
Back then, mortgage investors were eager for more mortgage products. Their appetite was ramped up for specially designed products, including non-conforming loans such as subprime and stated-income. In the years that followed, the mortgage industry experienced a financial meltdown and many industry heavy hitters went out of business.
Next came the onslaught of more rigorous government regulations, which in turn brought consolidation in the industry that left fewer companies and originators.
Present industry challenges include a generational softening on the demand side when it comes to buying homes. Today's younger generation of consumers is not that enamored with purchasing a home, and many prefer to rent.
Determining how to succeed today--let alone 10 years from now--may take the vision of Nostradamus, the brains of Einstein, and the determination and imagination of Steve Jobs.
Let's start with the customer
In the last decade, customers' buying habits--whether consumers, brokers or correspondents--have dramatically changed with the advances in Internet technology.
The traditional marketing sequence of identifying a customer's needs, ensuring customers are aware of their needs, compiling and evaluating information, and making and executing a plan to meet these needs has been turned upside-down by customers' access to information 24/7.
All of the intermediaries engaged in the travel, insurance, real estate or mortgage origination industries are being challenged by a new sales process. That process has the customer performing many of the traditional marketing steps without a salesperson.
In the old model of selling, the salesperson had the advantage of product knowledge and the inside information on what worked and did not work relative to products or services. This is no longer true.
The future seems clearly to include more imaginative ways for a buyer to research products or services by using digital tools before even speaking to a salesperson. Complicating matters further, the Internet has become a trusted information source as a way for the customer to filter out bias and self-serving marketing and sales pitches.
New York-based Nielsen's Global Trust in Advertising and Brand Messages report estimates that two out of three people claim they trust the information on the Internet when deciding on a vendor's solution. This changes everything for salespeople.
This seemingly small difference in the buyer's process of researching and evaluating before initiating contact with a salesperson may wreak havoc on the future mortgage sales organization. Customers self-educating will completely change how selling will be conducted by 2024 and well before then.
Because a customer will possess prior knowledge of a seller's products, features and benefits via Internet research, texting their friends or reading third-party rating services, the number of selling parties that they contact will be reduced. A seller who is No. 7 on the customer's list will rarely be contacted.
When the future customer finally contacts a seller, the customer will want to transact quickly because he or she has already researched the solution and made a product...