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March 9, 2015

If It Looks Like a Duck...

There’s been much ado about the Millennial generation as the borrower segment that lenders should zero in on.

By: Sarah Volling for Today's Lending Insights

If it looks like a borrower and talks like a borrower, it must be a borrower. That may be true, but everyone who comes through your doors has a unique situation with unique needs. It’s up to you, the lender, to identify those needs and address them to the best of your ability.

With a purchase market here for the foreseeable future, there are three important borrower segments you should be thinking about. What ties them together? Not much – which means having flexible staff and technology to meet every borrower’s needs will define your success.

There’s been much ado about the Millennial generation as the borrower segment that lenders should zero in on. With 86 million people in their twenties and early thirties in the U.S. alone, there’s no denying that Millennials represent a massive opportunity. However, this generation is unlike any before it, for two reasons.

First, in seeing the 2007/2008 crash firsthand, Millennials heard countless stories of people losing their homes. As a result, these borrowers became nervous about the mortgage process and require a high degree of transparency. Communication throughout the process puts their mind at ease and gets them to the closing table believing they are in good hands.

Second, Millennials grew up with the internet and mobile technology. They expect lenders to have easy-to-use websites with a way to apply quickly, without ever talking to a live person. They want brief, digestible online information – whether in the form of videos, articles, or infographics – where they can conduct research.

So, while Millennials are a great segment that all lenders should target, it’s important to proceed thoughtfully. Make sure you have the proper online tools and technology capable of handling their needs.

With the Millennial generation entering adulthood, the U.S. finds itself with 65 million empty nesters not yet ready to settle down. Many are looking to move, either because they are downsizing, relocating, or looking for a fresh start. The potential for serving empty nesters is vast, but their needs vary greatly. While they did not grow up with the internet or cell phones, some empty nesters helped create these technologies and many have used both for the past two decades. They are likely to begin their search online, using mortgage calculators and reviewing helpful information on the process, yet most will ultimately prefer speaking to an actual person when they do apply.

Lenders serving empty nesters need to provide flexibility. Some may apply online and others in person, while the remainder will pick up the phone. In the end, the experience should be the same. This generation often feels that great customer service is extinct; it’s up to you to prove them wrong. Well-trained staff using the latest technologies can – and will – please this segment.

Perhaps the most-bang-for-your-buck segment is the investment borrower. Unlike millennials and empty nesters, these customers aren’t defined by age. Instead, their desire to buy a new property every few years, often renting or flipping as they go, is the defining factor.

What does the investment borrower segment desire? They know what they’re doing; little education is needed. Instead, their first priority is an efficient experience from application through closing. Often, investment borrowers are on the go. They want to apply online and see their loan status whenever convenient for them. Make sure you have an online portal in place to support this. Communication is nearly as important as efficiency. As mentioned, this group is well aware of the process, but rules change, and each loan is different. Educate the borrower upfront on recent changes (think: Know Before You Owe) and keep the lines of communication open so that there are no surprises. Make an investment borrower happy once, and get a customer for life; that’s the ultimate goal for any lender.

So what is the factor unifying these three segments? As the saying goes, proper people, processes, and technology define success. And it’s true. When a borrower reaches out, you only see a very narrow picture; you need to find out more. Addressing the borrower’s unique needs is all it takes to gain a life-long customer. Make the process easy with the right information available at the right times. Educate your people on how to provide a level of customer service that even the savviest Millennial can appreciate. And, finally, make sure you have the proper technology to support a vast array of borrowers efficiently. Do all this, and you will be able to serve “ducks” from any segment.