Automation less urgent with collapse of refinance market.
Experts have long pitched customer-focused automation to help boost efficiency and save money. That scenario doesn’t necessarily work today, however, after the collapse of mortgage refinancing, rising interest rates and an industry downturn, according to New American Funding CEO Rick Arvielo.
He argued the market turn drove many veteran homebuyers out of the market – the customers clamoring for automation. Millennials buyers remain, and they need much more in-person home buying attention than expected.
“The millennials, which make up the bulk of first-time homebuyers – they need more help in making the homebuyer decision,” Arvielo said. “Statistically, they’re just as likely to engage a professional real estate agent and a professional loan agent to consummate their purchase target than they ever were.”
With that in mind, he said, automation makes more sense for customers who don’t need a lot of assistance.
Arvielo and his wife, company president Patty Arvielo, launched New American Funding about 20 years ago. The independent residential mortgage lender employs around 4,100 people. New American Funding maintains 154 branches and 10 call centers, and is licensed to do business in 49 states. The company recently scored top in customer satisfaction for mortgage servicing for the first time in J.D. Power’s 2022 US Mortgage Servicer Satisfaction Study.
The mortgage downturn is forcing drastic cutbacks and outright closures in some cases, but Arvielo said that New American Funding has been resilient compared to many other rivals. While some have had staff reductions north of 50%, New American Funding has reduced its numbers by about 14%, Arvielo said, and the California-based company continues to selectively hire.
“We’re pretty proud of that,” Arvielo said. “As you look at the larger players out there, we’ll probably be [faring] better than most in terms of how we’ve had to right-size in this current cycle.”
The goal, he said, has been to minimize the pain for affected employees.
“When you’re right-sizing to downsize, it can be a little painful,” he said. “You have to part ways with people you love …. You just have to be responsible stewards of the business.”
Tech early on
New American Funding has built its own technology and marketing early on, with a goal of serving the customer.
“Our goal is to keep customers for life,” Arvielo said. “In order to do that you need to continually improve your deliverables and your efficiency, and that’s all to tech and marketing.”
Put another way, New American Funding focuses on staying relevant and Arvielo said that keeping (preferably proprietary) technology current is one way to make that happen.
“We want to stay relevant and that requires that you invest in your technologies,” Arvielo said. “We’ve been developing our own tech for the 20 years that we’ve been in business.”
New American Funding’s technology focus involves three areas. The company maintains a proprietary CRM system that handles origination, accounting and deal flow from various vendors the company acquires leads from.
It also relies on what Arvielo describes as “real estate partner technology,” as well as mobile apps for loan officers so they can be effective on the go. In addition, New America developed a consumer app that lets a customer come in and fill out an “intelligent application” that grows as he or she answer questions, similar to processes at Rocket Mortgage and elsewhere.
New American Funding is now working on improving and updating each leg of technology, so they work more synergistically together.
“We feel like real estate isn’t disrupting, it’s evolving, and you and the consumer just demand a different experience,” Arvielo said. “That will only grow in the future. We all have to bring to bear our various tech, to be a little more cohesive with them so we can create an ecosystem from solicitation to origination and procurement of the loan and then servicing the loan at the end.”
Plans call for updating or replacing older technology, with a focus on making systems more modular and dependent on APIs. Ongoing enhancements also will bring newer technology to the table.
“We’re like everybody else starting to dabble in AI and those types of tools to really provide clarity to us at the corporate level,” Arvielo explained. “If you want to know who loan officers are doing business with [and] where should we focus our time … we’re trying to implement some technologies in the call center that will covertly monitor interactions and look for buzzwords that might indicate that the borrower is frustrated or not otherwise happy so we can bring in resources to hopefully accommodate whatever those concerns are.”
Arvielo said automation of referral activity and the marketing of servicing to customers can be a very useful thing. The goal, he added, would be to address questions that customers may not even have asked yet to better suit their future needs.
Satisfied customers in that context will talk about their experience, he said, and “that’s going to lead to more business.”
Automation isn’t the priority that it once was, however. When refinancing's were at their peak, automation helped banks and mortgage lenders handle more loans. In that context, he said, it was useful because the bulk of customers had already been through the loan process and didn’t need much attention.
“Efficiency allows you to get more loans done quicker and if you’re efficient, you can offer a lower rate because you’re costly,” Arvielo said.
Today, with the collapse of the refinance market, customers that remain – mostly first-time buyers and millennials – need much more attention from live people. In that dynamic, New American Funding is piecing together marketing information that is timely and makes sense to them, he said.
Arvielo said automation grabs headlines but hasn’t always been affective. Better.com is one example he cited, noting the company had to lay off substantial amounts of people when the market turned, even with the automation and efficiencies the company has baked in.
Now, he said, the mortgage industry is a buyer’s market, and buyers right now want human interaction.
“We’re finding in a lot of cases, we’ll start a consumer in the call center and they’ll go ‘I’d really like to talk to somebody in my local market because I want to sit across the table from them,’” Arvielo said. “Luckily, we’ve got both.”
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