Why Haven’t Loan Officers Been Told These Facts? Comprehending the Changing Market.
Check out a great article by Kevin Tilman from FNMA’s Economic and Strategic Research division that discusses the changing dynamics of home buying. Lenders can enhance their mortgage prospecting by staying informed about these trends. Collaborating with real estate agents to identify and assist home buyers remains essential. However, is it possible to connect with potential buyers before they realize the need to make a change? Before they reach out to real estate agents and builders?
Madison Avenue emphasizes that consumer needs are often rooted in a sense of deficiency. Consider the success of consumer-direct approaches utilized by pharmaceutical companies—these companies have substantial marketing budgets and employ some of the best talent in the industry. Twenty years ago, most pharmaceutical companies operated under a very different business model. The amount of money these companies invest in consumer-direct marketing is astounding. In 2004, drug companies spent an estimated $4 billion on consumer direct promotions. Twenty years later, that figure is estimated to be nearly $14 billion. So why do you think they spend this kind of money? Because it works.
Most lenders do not have the same resources as major pharmaceutical companies. So, how do lenders effectively engage consumers before they begin considering potential improvements in their lives, whether through renovating their current homes or relocating to areas with more space? It’s important to consider the insights from the FNMA article and the factors influencing changing consumer sentiments.
KEY FACTORS INFLUENCING BORROWERS
- Home Location
- Security
- A home that affords better leisure time at home
- Custom features (aging in place, disability, multi-generational)
- The home as an investment
- Retirement
- Home as a workplace
MARKET SEGMENTATION
Market segmentation is the process of dividing a market into smaller groups that share common characteristics. This strategy allows lenders to create more targeted offerings. By establishing a classification system to categorize buyers, companies can develop more effective and thoughtful offers. The main idea is to identify potential markets, facilitating better engagement with specific audiences.
Through market segmentation, businesses can achieve a higher return on investment (ROI) from their advertising and overall marketing efforts. By establishing a classification system to identify buyers by category, companies can develop more effective and thoughtful offers. The key idea is to recognize potential markets, which enables better engagement with those specific audiences.
Through market segmentation, businesses achieve a higher return on investment (ROI) from their advertising and general marketing efforts.
There are four primary methods for segmenting a market:
**Geographic Segmentation:** Dividing a market based on the physical locations where people live.
**Demographic Segmentation:** Dividing a market using characteristics such as gender, age, ethnicity, income, education, career, and marital status.
**Behavioral Segmentation:** Dividing a market according to individuals’ actions or behaviors, such as previous purchases, lifestyle choices, travel destinations, or daily routines.
**Psychographic Segmentation:** Dividing a market based on individuals’ beliefs, values, lifestyles, opinions, or interests.
GETTING STARTED
In light of the FNMA article, consider which segmentation methods most effectively identify prospects within the largest consumer groups. Next, it’s essential to develop a campaign. This could involve advertising, social media, and collaborating with referral partners—this is where effective brainstorming comes into play.
Most importantly, aim to create something modest. “Modest” means that the effort should be achievable and ready to launch within two to four weeks, keeping it appropriately scoped. After launch, evaluate the results and make necessary adjustments for future iterations.
Don’t worry about achieving perfection. A well-executed plan is sufficient and much better than a perfect plan that goes nowhere.
The enemy of a good plan is the dream of a perfect plan. – Prussian General Carl von Clausewitz, architect of Napoleon Bonaparte’s defeat.
A good plan violently executed now is better than a perfect plan executed next week. – U.S. General and Tactician Extraordinaire George S. Patton
From FNMA
Consumers are using their homes in new ways
More than half of consumers made some sort of functional change to their home in recent years. One-quarter updated their home to better allow for remote work, 19% now use their home for fitness or other hobbies, and 18% are growing food or gardening. Homeowners are slightly more likely than renters to have made one of these adjustments to their home in recent years. Additionally, these changes are more common among surveyed younger and higher-income individuals.
Among those who made functional changes to their home for lifestyle reasons, 44% say the changes resulted in additional monthly savings or income. For example, many consumers were able to work remotely instead of spending money on commuting costs, or exercise at home instead of paying for a gym membership.
Additionally, when asked which parts of their homes have grown the most in value in recent years, nearly half (48%) cited functional features that improved the usage of their home, including having a large backyard or converting bedrooms into workspaces.
Changing consumer needs could affect buying decisions
To best meet their needs now and in the future, most consumers say their home would be more appealing if it had outdoor living space (69%), an extra room for hobbies (61%), and a yard for gardening (60%). Renters find these sorts of upgrades particularly appealing, and they may be drivers for why some renters might seek to make the move into a single-family rental or homeownership.
Although current market dynamics have made renting more affordable than buying in nearly all U.S. metros areas, many consumers are still willing to pay a premium to gain access to the non-financial benefits of homeownership. We know from previous research by Fannie Mae that consumers still have high aspirations to own a home despite the difficult market conditions, driven partly by non-pecuniary reasons. To that end, our latest study finds that renters are significantly more willing than homeowners to say they would pay more to buy a house with proximity to shops, restaurants, public transportation, and work. Additionally, sizable shares of both renters (46%) and homeowners (42%) would pay more for the room needed to accommodate multigenerational living.
Interestingly, consumers today are slightly more likely to tout the financial benefits of homeownership than they were nine years ago (46% in 2024 vs. 39% in 2015) as the best reason to buy a home. This is likely an acknowledgment of the significant run-up in home prices of the last few years, particularly compared to the period of only modest home price growth immediately preceding 2015. Security and lifestyle benefits are still slightly more important, but that gap is narrowing.
In many ways, this research underscores the pandemic’s profound impact on consumer housing-related behaviors and attitudes. Many people across America began to view their homes in new and meaningful ways, including, simultaneously, as places to work and safely socially distance. Practically overnight, the implicit value of home changed for millions, which may have even played a role — alongside the ongoing lack of sufficient housing supply and historically low mortgage rates — in the acceleration in home prices during that period.
See the full report from the link below.
What’s Driving the Increasing Importance Consumers Place on Their Homes
BEHIND THE SCENES – Appraiser Identity Theft
Under the “you’ve got to be kidding” category, FNMA has reported that fraudsters have used appraisal reports completed by appraiser imposters. This fraud was detected on loans originated between 2021 and 2023. One might assume that since there have been no further detections since then, the issue is resolved. Mortgage fraud is similar to a termite infestation: by the time it is discovered, the damage has already been done.
From FNMA
Fannie Mae’s Mortgage Fraud Investigations (MFI) team alerts the industry to potential and active mortgage fraud scenarios.
Fannie Mae has identified a significant number of loans involving appraisals that were completed by an unlicensed appraiser unlawfully using the identities of other actively licensed appraisers. The identified loans were originated between 2021-2023. There is no evidence that the appraisers whose identities were used were aware of or involved in the activity.
Red Flags:
- The unlicensed appraiser’s name and signature are not found in any capacity within the appraisals (or loan files).
- The company name, phone number, and address listed under “contact information” on page six of Form 1004 will be different from that of the licensed appraiser.
- Email contact information reflects a name other than the name of the appraiser who is listed as having performed the appraisal.
- The signatures of the “victim” appraisers appear forged and/or cut and pasted to the identified appraisals.
- Appraisal fees for the appraisals were paid with proceeds going directly to the mailing address of the unlicensed appraiser, not to the address of the purported appraisers.
What can lenders do?
- Perform thorough due diligence when retaining services of appraisers and other outside vendors.
- Utilize all available public records and licensing agencies in determining the validity of third-party documentation (including addresses) within loan files.
If suspicion of fraud exists
- Follow established policies and procedures within your organization and the Fannie Mae Selling Guide.
- Complete and submit the Suspected Mortgage Fraud Report on the Mortgage Fraud Prevention web page.
More general steps lenders can take to detect and prevent fraud
- Know your third-party originators/brokers
- Be “fraud smart” by educating your staff
- Establish a zero-tolerance fraud policy
- Share information within your organization
- If the loan doesn’t make sense, don’t do it!
- Report any suspicious activity through established channels
Tip of the Week – Connect with People Don’t Link
Linking
Linking can be a frustrating behavior that negatively impacts sales efforts. Although the intention behind linking often comes from a genuine desire to connect with the prospect, it can backfire. While demonstrating empathy is admirable, there are times when listening is more effective than speaking. Sometimes, a person’s expressions of empathy may stem from their own need to seem understanding rather than from a true desire to connect and care. For salespeople, poor listening skills and awkward attempts at superficial bonding can lead to negative consequences.
Example
**Prospect:** The last time I got a mortgage, it was a rough experience.
**Salesperson:** I completely understand how you feel. I recently bought a new car, and the process was awful.
**Prospect:** That sounds frustrating. Anyway, we moved across the country when we bought our last home. It was a nightmare.
**Salesperson:** I totally agree. Moving is such a hassle. I made a cross-town move last year, and it wasn’t easy. I can only imagine how challenging it must have been for you!
Indeed, the salesperson can only imagine how the prospect feels because he can’t stop talking long enough to hear the prospect out.
In a conversation, when a salesperson constantly tries to connect their experiences to the prospect’s, it can feel like an intrusion. This behavior can hinder the salesperson’s ability to genuinely learn about the person they are trying to assist. Although making these connections might seem harmless or indicate a good rapport, it actually undermines trust and connection.
Technical Challenge
Linking sabotages the collection of the essential data necessary for creating customized buying opportunities.
Instead of linking, focus on active listening techniques. These techniques can be relatively easy to master.
Active Listening Example
**Prospect:** Last time I got a mortgage, I had a rough experience.
**Salesperson:** I understand you had a difficult mortgage experience. Can you tell me more about what happened?
**Prospect:** It was a cross-country move, and I worked with a relocation company and real estate agents on both ends. I could never reach the loan officer when I needed information; it was always a game of phone tag. It was very stressful.
**Salesperson:** It sounds like the lender’s communication was disorganized and ineffective. Let’s take a moment to outline what an effective communication plan should look like.
(MLOs must always have a communication plan conversation with prospects and provide a written outline to share with the applicant. This plan should manage expectations and tailor the communication regarding mode, media, frequency, and content.)
Two Listening Maxims to Remember
1) God gave us two ears and one mouth; perhaps we should listen twice as much as we speak.
2) Samson killed 1,000 men with the jawbone of an ass. Too many sales are lost in the same way.