Lenders, Borrowers Differ on Mobile Technology Priorities
By Adam Korengold | March 8, 2016
Mobile activity is less common in the mortgage space than other consumer finance market segments, according to research by Fannie Mae’s Economic & Strategic Research (ESR) Group. But it is a promising opportunity for lenders.
The ESR study found about one-fourth of surveyed lenders currently offer a mobile mortgage app. Approximately 40 percent of those who don’t plan to do so in the near future.
Lenders have their reasons for not developing an app. Among them, they cited the “high cost of IT investment, information security risks, compliance issues and slow consumer adoption,” says Steve Deggendorf, ESR’s director of business strategy and author of the study.
Tracking Consumer Demand
A March 2015 Federal Reserve report notes that 87 percent of the U.S. adult population has a mobile phone. And 39 percent of Americans used mobile banking in 2014. (The Fed defines this as using a mobile phone to access an account – via mobile app, mobile website or text message.) That percentage has risen steadily since 2011, when the Fed started its annual mobile financial services survey.
Borrowers – and potential borrowers – appear eager to use mobile devices for a range of business and financial transactions. But their interests are different from where lenders seem to be focusing development efforts, notes ESR.
According to ESR research among recent homebuyers:
- 12 percent say they have obtained a mortgage quote from their lender on a mobile device.
- 20 percent have compared mortgage quotes on their mobile device.
- 6 percent have filled out a mortgage application using a mobile device.
- 13 percent have used a mobile app to submit pay stubs or other documents to apply for a mortgage
The ESR poll found 30 percent of recent homebuyers saying they would prefer using mobile devices to get a mortgage quote. Thirty-five percent said they would like to compare mortgage quotes. (Obtaining a mortgage quote does not require the borrower to submit pay stubs or bank statements.)
ESR research also indicates that younger, more educated borrowers are more likely to use mobile devices to shop for a mortgage.
Consumers appear to prioritize using mobile devices to shop for a mortgage and obtain and compare quotes. That’s not the case for lenders that currently provide mobile mortgage apps. They place more value on apps helping borrowers get pre-qualified, connect with loan officers or complete an application. Lenders would like to automate the document intake process and generate better data about their customers.
Additionally, only 16 percent of lenders listed “facilitating mortgage quotes” as one of their top priorities. That’s about half the percentage of borrowers.
Deggendorf notes that lenders are placing a lower priority on mobile channels. And lenders and consumers do have divergent views on mobile tool functionality. This suggests lenders run the risk of not meeting consumer demand. Also, new market entrants who recognize the growing demand for mobile apps may beat out existing firms who don’t. “Getting the right mix of traditional (person-to-person), online and mobile channels and tools may be a key to future success,” he says.
For consumers, information security is the top concern over applying for and closing a mortgage online via mobile app or desktop device. It was the biggest concern for 52 percent of homeowners and 54 percent of recent homebuyers completing the survey.
Among recent homebuyers without a college degree, the figure was even higher – 63 percent.
Still, mobile mortgage apps are likely on their way to becoming a new, important tool for lenders in serving the needs of younger customers. But those apps need to address the functions and information security those consumers are truly seeking.
Adam Korengold is a research analyst with Fannie Mae’s marketing research and analytics team.
Estimates, forecasts and other views expressed in this article should not be construed as indicating Fannie Mae’s expected results, are based on a number of assumptions and may change without notice. How this information affects Fannie Mae will depend on many factors. Neither Fannie Mae nor its Economic & Strategic Research (ESR) Group guarantees that the information in this article is accurate, current or suitable for any particular purpose. Changes in the assumptions or underlying information could produce materially different results. The ESR Group’s views expressed in this article speak only as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.