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Opinion: Millennials’ side hustle will fuel mortgage innovation

Mortgage rates are rising and demand is starting to stabilize. The residential real estate market is changing, creating uncharted territory for lenders who have relied on a housing boom and refinancing to keep them in business.

As existing homeowners potentially put the brakes on buying new homes or refinancing their existing homes, lenders will rely more on first-time buyers to reduce attrition during the downturn. These new buyers; however, will largely consist of mature millennials who expect instant access to all of life’s rewards, including capital, at all times. Lenders of all sizes are now facing an unprecedented confluence of workforce and customer satisfaction challenges that threaten the way they have always done business.

Millennials continue to drive change

Millennials are the fastest growing segment of homebuyers today, accounting for 37% of the housing market. With a baby boom in the 80s, this generation is also the largest, fueling a massive influx of new buyers motivated to buy homes by rising rents and still low interest rates. Now, these young buyers are pushing financial institutions to adapt to their expectations for more streamlined user experiences, accelerating digital transformations through new technologies that will usher the mortgage industry into a truly digital age.

Remember, millennials are the generation that saw their parents struggle with high-interest mortgages during the last recession. They find that they are better off financially in today’s market and see home ownership as essential to their success. Although mortgage rates are slightly higher than six months ago, these buyers are facing rates that are still much lower than they were when their parents first entered the home market. dwelling.

Additionally, rising rent inflation in the United States makes home ownership particularly attractive to these buyers right now. Buying a home is much more affordable today than ever before, and with a wider variety of loan programs available, the appetite for home ownership of this generation of buyers is easier to satisfy. Major lenders will continue to capitalize on this by offering new products and technologies aimed at young buyers.

Expectations on demand

It’s also the generation that popularized on-demand services and the gig economy after all, helping to popularize everything from Uber and direct delivery to telemedicine for the past 15 years. They want quick answers and resolutions, digital access to forms and tracking, and streamlined processes, or more generally: instant gratification with less human intervention.

A tech-savvy homebuyer in his 30s today wants a faster, contactless approach to financing with a variety of options at his fingertips rather than mail-in forms, in-person office visits and constant waiting . Days of 45-60 day processing times in mortgages simply will not satisfy, nor will they survive.

Millennials and Gen Z adults also take on more alternative jobs, often to supplement their main job, than older Americans. According to Edison Research, 38% of 18-34 year olds fill these roles, the highest of any age group. Whether these contract positions serve as a primary source of income or function as a side job, lenders should use New solutions to account for income verification and credit scoring, as the traditional model of relying on a single job pay stub and credit report becomes obsolete.

The mortgage industry is lagging behind

Even with new borrower portals and paperless processing, the mortgage industry is lagging behind. While human decision-making is key when it comes to managing the complexity of high-dollar collateral, secondary market maneuvering, and data analysis, it will be mortgage lenders who invest in automation and robotic processes that automatically populate, analyze data, and eliminate keystrokes to deliver lightning-quick responses that have proven best suited to survive the next evolutionary stage of industry.

A look forward

With demand shifting to a new generation of first-time home buyers, low inventory and a possible interest rate rollercoaster ahead, expect to see a more non-traditional mortgage landscape as well. The condominium and new construction markets will swell. Non-QM loan products and government first-time homebuyer assistance will be more prevalent in the months and years to come. And consumer adoption of more technology in mortgage lending will prove key to meeting demand as lenders recognize that the turning point in innovation is upon us.

In the future, mortgage lenders will need to do more and faster to deliver the borrower experience needed to compete with the next generation of homebuyers. Once the technology gains traction for adoption, it scales rapidly, and we are already seeing many tech-focused banks and fintechs using solutions like automation to better serve these customers. As the market becomes more competitive for lenders, being prepared to meet the technology demands of the fastest growing buyer segment will mean having the ability to grow alongside them.

Suzanne Ross is Director of Mortgage Products at Ocrolus.

This column does not necessarily reflect the opinion of the editorial staff of HousingWire and its owners.

To contact the author of this story:
Suzanne Ross at [email protected]

To contact the editor responsible for this story:
Sarah Wheeler at [email protected]

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