The Business and Technology of Online Lending Struggles & Best Practices from Industry Experts

The Business and Technology of Online Lending

Struggles & Best Practices from Industry Experts

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• BOB HARRIS President LendingTree Exchange

• OWEN RAUN President RMC Vanguard

• DON KRACL President Mortech, Inc

• GLENN HOUCK Co-FounderLeadQual, LLC

• FRANK POIESZExecutive Vice President, Chief Operating Officer Level1Loans, Inc.

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What is online lending? Online lending is the ability to completely process a loan, from lead sales, to application to closing, using consumer-facing browser-based capabilities and a high degree of automation throughout the process.

What are the main differentiators between online and traditional lending?

Why choose online lending? This evolving form of lending can:

• Improve customer service

• Facilitate rapid entry into new markets

• Help in the defense of existing market niches

• Increase lender efficiency, especially by driving down the cost of sales

INTRODUCTION TO ONLNE LENDING

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Question to All Panelists:

What current trends and struggles are you noticing, specifically in the secondary market?

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Question to Bob Harris:

As the leading mortgage lending lead aggregator, you have unique access to data that can help us understand consumer behavior. In these challenging times, what does your data say about recent changes in consumer behavior? Do you see any trends that may persist even after recovery starts?

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Question to Owen Raun:

As an online lending veteran you have experienced the fluctuation in this space since its infancy. How has your approach

to online lending changed over the last year in response to the rather incredible market changes we have experienced?

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PRIME PURCHASE – ONLINE FOCUS

Pre-Turmoil

• High Competition

• High Product Availability

• Ease of Approval

• High Volume Tight Margins

• Good Close Rates

• Demanding Consumers

Today• Less Competition

• Limited Product Options

• Qualification Issues

• Low Volume Higher Margins

• Close Rates Holding Steady

• More First Time Buyers and “nice” Consumers


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Over the course of the year we have seen a huge drop in consumer trust in lenders. Has this lack of trust been evident in consumer behavior, and if so, what can lenders do to help

rebuild trust? A related question – how can lenders best differentiate themselves in this market?


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Question to Don Kracl:

What advice can you give mortgage professionals to adapt to these changes in the markets and in consumer behavior? What is the best way to balance technology with human interaction?


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17

10,384

1,680

664365 275 215 168 78 25

1 hr 2 hr 3 hr 4 hr 5hr 6 hr 7 hr 8 hr 9 hr 10 hr

Hours After Application Creation Until Intial Contact with Lead

Num

ber

of L

eads

Qua

lifie

d U

pon

Initi

al C

onta

ct

MIT Study

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Question to Glenn Houck:

According to a recent study by Deloitte, 93% of homebuyers who applied online researched their mortgage on the Internet before

applying; even 71% of those applying by phone, and 60% of those applying in person used the Internet for at least some of their information gathering. What can lenders do to stand out in

a crowded Internet market while still gaining the trust of the consumers?

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Base: Respondents who used each application method and information source. Note: Percentages do not equal 100 because some respondents did not use some information sources.

9%

11%

32%

34%

13%

23%

63%

33%

10%

27%

39%

16%

23%

65%

6%

6%

28%

23%

12%

7%

71%

Meetings w/Brokers

Meetings w/Banks

Friends/Relatives

Realtor

Telephone-Broker

Telephone-Banks

Internet

Internet Application

Telephone Application

In-Person Application

Deloitte Study

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Question to Owen Raun and Don Kracl:

Given the current market, many lenders are looking for new ways to be competitive. If I were not already using online lead sources, or if they are not a big part of my business, what are the three most important things I should do to get into the game?

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KEY COMPONENTS OF ENTERING ONLINE LENDING

Internal• Corporate Culture Issues

• Be Committed to Success

• Define your Sweet Spot

External• Vendors Available to Help with Every Step

• Large Supply of Leads

• High Demand for Lenders


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The hand-off from a lead source to sales is crucial in maximizing conversion, as is the filtering of leads so that they go to the right lenders. In your experience, how long does it take for a lender to become effective in working with a lead source? Of those that fail to get traction, can you point out some of the rookie mistakes they could have avoided?

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Question to Don Kracl:

What technology will a lender need to be good at with regards to lead conversion? How much integration with their existing

systems is needed to be successful, and when compromises are needed, how would you counsel a lender to set priorities?

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Question to Owen Raun and Glenn Houck:

With the current volume of requests coming in, how can you make your loan officers more efficient to handle internet leads

as well as the heightened volume of other incoming leads?

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Besides using lead sources, what other tactics do you use to generate online leads? Are there specific tactics you use to maximize lead conversion?

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ONLINE LENDING OPTIONS

• Free or Low-Cost Sites: LendingTree, Bank Rate, Zillow

• 2nd Generation Leads: Referrals from Online Leads, Past Clients, Realtors

• Refinance: Purchase Leads we did not close come back as Refi

• Google, Yahoo: Pay Per Click, Banner Ads

• Our Own Website: SEO (Search Engine Optimization), Organic

• Web 2.0: Facebook, Twitter, Active Rain, Zillow, Blogs


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Question to All Panelists:

What new technologies are the market leaders employing that will define the future of the online lending space? Are there any

innovations or best practices we haven’t already mentioned that mortgage professionals should be integrating in their

businesses?

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As a correspondent customer of many of the companies represented at this conference, you have seen dramatic changes

in products, prices and underwriting over the past year. For the benefit of those secondary marketing executives who look to online originators for volume, are there any significant

differences in online lending compared with bricks-and-mortar operations? Do you see differences in profit margin, fallout and other business drivers? How can your correspondents better support your business model?

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QUESTIONS?

Documents

The Business and Technology of Online Lending Struggles & Best Practices from Industry Experts