Depositories have a definitive advantage in a market where finding new customers is the key to driving more business.
Business is about finding your advantage and using it to secure a customer base that you can serve. It’s what we do every day in the production of the mission critical loan origination technology we develop. It’s also what every lender we serve is trying to do for homebuyers.
In an industry where just about every mortgage loan is purchased by the same very large secondary market investors, finding that advantage can be very challenging.
When the market shifted from refinance business to purchase money business, it became increasingly difficult for many, but one class of mortgage lender suddenly found themselves in possession of a significant advantage.
When refi business stopped pouring into the lender’s shop, it became important to reach out and find new customers.
Depositories, institutions that offer consumers a range of financial products, many of which their customers use on a regular basis, have a definitive advantage in a market where finding new customers is the key to driving more business.
Now, they just have to capitalize on it.
In general, banks see a lower cost to originate mortgages than an independent mortgage bank. That could allow them to earn more profit on each loan, but most don’t do this. That’s because they don’t think of the mortgage as a separate business.
Most banks don’t price their loans to maximize profit. They have a range of financial products and services to sell, so a more important success metric for them is customer share of wallet.
Mortgage loans are great for this because if they can get a bank customer into their servicing portfolio, they can eventually sell them many other products and services. The mortgage is a sticky product that keeps the consumer tied to the bank.
When the bank wants to sell mortgages, the marketing department doesn’t have to buy leads or send loan officers out into the streets. They can just search through their database for bank customers who don’t yet have a mortgage and market directly to them.
In a sense, the independents are hunters, living on every loan they close. Depositories, on the other hand, are farmers, cultivating their list of bank customers and growing those relationships over time. To succeed, banks must be successful in convincing their customers that they know them and know how to best meet their needs.
When it comes to the mortgage, that means they have to be able to offer any product their customer may need, serving both first time home buyers with their first home loans and senior bank customers with reverse mortgages that may be the last mortgage product they ever need. And everything in between.
This is why Mortgage Cadence has been visiting with more banking executives who realize they have an advantage that may not last forever and want to make the most of it. They understand the importance of a very good core banking system and so as they move deeper into the mortgage offering, they want a solid platform that offers them the flexibility to define their own workflows.
Mortgage Cadence MCP offers all of that and more. If you’re a bank ready to capitalize on your current mortgage advantage, reach out to us today to see a demo of the last mortgage platform you’ll ever need.
By Joe Camerieri, EVP, Sales & Strategy at Mortgage Cadence
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