Mortgage Lenders Shift Focus to Enhancing the Consumer Experience

In our most recent Mortgage Lender Sentiment Survey^® (MLSS) released in June, senior mortgage executives reported subdued mortgage demand growth, a pessimistic profit margin outlook, and strong concerns about increased competition. Against this challenging backdrop, we simultaneously surveyed senior mortgage executives to understand their 2017 business priorities as well as their risk concerns.

Overall, the majority of lenders said they expect to see more industry consolidation this year, possibly from mergers and acquisitions or by other lenders exiting the business. To remain competitive, lenders indicated that their top business priorities in 2017 are streamlining business processes, improving the consumer experience, and investing in human capital. In contrast, very few lenders cited cutting costs and investing in data analytics/business intelligence as top priorities. In addition, compared with nearly three years ago, lenders are significantly less likely to say compliance and loan repurchase concerns have grown.

Lenders’ current priorities and concerns reflect the shifting need to address challenges of the post-crisis era, as reported in the June MLSS results. In particular, the need to improve the consumer experience looms large for mortgage lenders. Given increased competition from traditional players and disruptions from emerging players, it is becoming critical for lenders to deliver a seamless end-to-end consumer experience across all channels. Today’s consumers have learned to expect a simple, transparent, and pleasant experience from customer service leaders such as Amazon, Netflix, and Apple.

Three MLSS special topic surveys on technology and innovation over the past year offer additional insights into the high priority lenders give to building a better consumer experience. In one study about overall mortgage technology innovation¹, half of lenders surveyed said improving the consumer experience is the primary goal for their innovation investments. Additionally, in studies on next generation technology service providers and Application Programming Interfaces (APIs)², lenders indicated that the mortgage origination lifecycle, including the activities that touch consumers most (such as loan origination and closing), was the top focus of their innovative technology efforts.

However, the way forward for lenders to realize an improved consumer experience could be challenging. In the studies mentioned above, lenders cited significant barriers to implementing new technologies, such as system integration difficulties and high costs. Additionally, data analytics and business intelligence capabilities are critical for identifying the gaps and opportunities in delivering a seamless consumer experience. However, very few lenders were focusing on this area. These challenges might be insurmountable for some mortgage originators and could explain why lenders say they expect more industry consolidation in 2017.

To learn more, read our Fannie Mae Mortgage Lender Sentiment Survey Special Topic Report, “Lenders Move Focus to Enhancing the Customer Experience.”

Doug Duncan
Senior Vice President and Chief Economist
August 23, 2017

Opinions, analyses, estimates, forecasts and other views reflected in this commentary should not be construed as indicating Fannie Mae's business prospects or expected results, are based on a number of assumptions, and are subject to change without notice. How this information affects Fannie Mae will depend on many factors. Changes in the assumptions or the information underlying these views could produce materially different results. 

¹ Fannie Mae Mortgage Lender Sentiment Survey. (July 2016). Mortgage Technology Innovation, https://www.fanniemae.com/portal/research-insights/perspectives/072616-jones.html

² Fannie Mae Mortgage Lender Sentiment Survey. (March 2017).  End-to-End Integration Needed for Next-Gen Technology Solution Providers (TSPs), https://www.fanniemae.com/portal/research-insights/perspectives/mortgage-technology-success-seidenstein-031317.html

Fannie Mae Mortgage Lender Sentiment Survey. (May 2017).  Lenders’ Experiences with APIs and Chatbots, https://www.fanniemae.com/portal/research-insights/perspectives/apis-business-strategy-051817-stephan.html