“There’s been a sea change in the mortgage lending market as interest rates have risen and refinance loans dropped from prominence,” says Eric Anders, VP Market Development at TransUnion.
Given that change, it’s time for lenders to dust off their playbooks for purchase loans. We sat down with Eric to understand the new reality — and what lenders can do today to attract new customers.
Q1: How is the mortgage industry changing?
We’ve seen a few big shifts in the marketplace over the past 12 to 24 months; higher interest rates and home values returning to pre-recession levels.
With interest rates edging closer to 4.5%, the market has moved from a refinance market to a purchase market. In fact, refinance activity dipped from 59% of overall activity in February 20151 to just 34% of overall activity by February 2019, with purchase activity comprising about 66% of lenders’ activity.2 Over much of the previous 10 years, mortgage lenders didn’t need to focus on marketing since borrowers flocked to refinance loans for better terms and lower payments.
Now that home values in aggregate have returned to pre-recession levels, this opens up an opportunity for homeowners to tap their equity to fund major expenses and/or consolidate debt to reduce their overall debt obligations.
Q2: What does this shift mean for lenders and consumers?
With less refinance business, lenders are focusing on — and competing for — the purchase market and those consumers who may need to leverage their home equity. Efficiently identifying the most actionable consumers is a major challenge that requires mortgage lenders to develop marketing campaigns that are efficient and effective.
According to the MBA’s Quarterly Mortgage Bankers Performance report3, overall margins are shrinking to historic lows and lenders are originating for a fraction of the income they used to generate on a mortgage in the past.
Q3: What can lenders do to adapt?
With refinance activity drying up — and buyers hard to come by — sitting back and waiting for customers isn’t an option. Lenders must proactively identify and target viable loan candidates who are actively in the marketplace.
That might mean finding people with high, non-mortgage loan balances who would consider a HELOC or cash-out refinance, consumers back on the market for a home after a foreclosure, or first-time homebuyers. Unfortunately, finding the right people to target can be like finding a needle in a haystack.
HELOC originations versus home equity
Q4: How can lenders find and target the right mortgage customers?
Lenders can use information such as trended credit data to help find prospects who are more likely to consider new loans. TransUnion standard prescreens, for example, allow lenders to extend a firm offer of credit by using credit information to identify a population of consumers who fit their certain criteria.
Layering a prescreen with a propensity model allows mortgage lenders to gain visibility of consumer performance, helping to rank individuals based on behavioral or credit attributes. Using any marketing channel, lenders can begin to reach individuals that meet the lender’s criteria and are likely in market for a mortgage to avoid wasting marketing efforts and dollars.
Q5: How can TransUnion help mortgage lenders?
Lenders can benefit from TransUnion’s trended credit data. In a single credit report, lenders can view up to 30 months of data to understand consumer behavior. Trended credit data provides insights into how quickly a consumer is paying off debt, how much they paid and whether their credit score is on the rise.
What really makes TransUnion stand out is our data analytics, modeling and alternative data usage and capabilities. In other words, it’s what we can do with all the data that makes TransUnion innovative and effective.
Contact your sales rep or call 844-245-4071 to learn how TransUnion can help you succeed in this changing market. To learn more visit www.transunion.com/mortgage.
1 "Origination Insight Report February 2015." Ellie Mae. February 2015. Accessed March 26, 2019.
https://static.elliemae.com/pdf/origination-insight-reports/Ellie_Mae_OIR_FEBRUARY2015.pdf.
2 "Origination Insight Report February 2019." Ellie Mae. February 2019. Accessed March 26, 2019.
https://static.elliemae.com/pdf/origination-insight-reports/Ellie_Mae_OIR_FEBRUARY2015.pdf.
3 "Mortgage Bankers Performance Reports — Quarterly and Annual.” Mortgage Bankers Association. March 2016. Accessed March 5, 2019.
https://www.mba.org/news-research-and-resources/research-and-economics/single-family-research/mortgage-bankers-performance-reports-quarterly-and-annual.
