As Lenders Move To More AI, Digitization, Borrowers Want A Real Human

Regardless of what’s to come of this spring’s homebuying season, there will be home sales and loans to go with them — the question is how many. If mortgage loan officers want to claim more of those loans, being more involved personally with borrowers just might be the ticket. 

National Mortgage Professional turned to global consumer research, data, analytics, and advisory services firm J.D. Power for some insight. 

“Borrowers are looking for more individual interaction from their lender throughout the process,” Bruce Gehrke, senior director of lending intelligence at J.D. Power, told NMP. “The preference for purely digital lending is declining. Borrowers are looking for a more advisory experience driven by lender expertise delivered through live representatives.”

The percentage of borrowers who think that in "a perfect lending environment" they should "always talk with a lender representative in person" has increased by 33%, and now amounts to 61% of all borrowers.

“For new borrowers,” Gehrke said, “we have also seen the preference for engaging with lenders earlier in the buying process — that is, when they first consider buying a home versus when they have found one and are looking for a mortgage loan — increase from 35% to 42% in the past three years.”

That point, engaging with lenders earlier in the homebuying process, is an important one for LOs to note. 

“This preference matters to lenders, because borrowers who engage later are twice as likely to submit a second application with a competing lender,” Gehrke pointed out. On the other hand, “borrowers who have been engaged earlier in the buying process are also 42% more likely to recommend that lender to others,” he added. 

J.D. Power’s consumer data supports this higher / earlier engagement trend, Gehrke explained: “The percentage of borrowers who expect the lender to walk them through every aspect of the borrowing process has risen to 90%, up from 84% two years ago.”

Meanwhile, “the percentage of borrowers who [say they] would prefer a totally digital experience has dropped 16% over the past two years to 43% — even considering lenders offering the perfect combination of digital tools,” he emphasized. 

Remarkably, the percentage of borrowers who think that in “a perfect lending environment” they should “always talk with a lender representative in person” has increased by 33%, and now amounts to 61% of all borrowers, Gehrke said.  

One thing is clear about homebuying and the housing market this year: it’ll be up to LOs to earn borrowers’ business, and the competition will be tight. Gehrke offered some additional data and insight on current homeowners and their propensity to sell from J.D. Power’s research. 

“Only 5% of homeowners say they are ‘very likely’ to sell” right now, he noted, “and an additional 11% say they are ‘somewhat likely’ to sell.” But, why are so few homeowners willing to sell at the moment? 

A large part of the answer to that boils down to rates: many sellers are hesitant to get into a mortgage with a higher rate for another house, even though they may be wishing to move.  

“This lack of willingness of existing owners to sell is creating the short supply of homes suitable for first-time buyers,” Gehrke said. “Forty-eight percent of these homeowners [who won’t sell at this point] say that the current interest rates are the main factor keeping them in place.”

And, there are other factors as well holding sellers back from listing their homes, including the many stresses of selling. Check out this recent article, “Stress Of Selling Holds Many Owners Back,” from NMP contributing writer Lew Sichelman for more on that topic.