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Reinventing lead generation with the Qualified Borrower program (HousingWire)

The mortgage industry needs to face the facts: today’s approach to lead generation is broken.

For decades, mortgage lenders have relied on purchased lead lists to ferry in loan revenue. Unfortunately, purchased leads are expensive, and their lofty price tag does not guarantee they will convert to closed loans. Lenders can shell out lots of cash just to get a list of “tire kickers” who are not actually primed to buy a home.

A less discussed downside of purchased leads is that they can create an unhealthy reliance on third parties to feed sales funnels. A dependency on purchased leads not only weakens a lender’s brand, but it also indicates that an organization is missing out on opportunities to capture the business of contacts already in its database.

What’s more, today’s lead generation strategies do not bring leads to lenders early enough in the sales funnel. Engaging with prospective borrowers at the very beginning of their home buying journey is far more important than many lenders recognize. In fact, the Consumer Financial Protection Bureau (CFPB) has found that more than 30% of borrowers do not comparison shop for a mortgage at all, and more than 75% of borrowers apply with only one lender.

A busted system for lenders and consumers

Technological innovations that have allowed consumers to browse property listings from anywhere on any device do little to help borrowers understand their true home buying power. Homebuyers know that allowing financial institutions to pull a hard credit report can negatively affect their credit score. This makes consumers less likely to engage with a lender until they are absolutely certain that they are ready to begin the mortgage process.

The alternative options are not much better, either. Websites that allow consumers to fill out a form to check their credit or estimate buying power will typically sell consumers’ personal data. Entering an email or phone number into a web form just once can result in endless sales calls, emails and text messages.

Introducing the HomeScout Qualified Borrower

In a mortgage landscape rife with competition for purchase business, lenders need quality leads that demonstrate both intent to purchase a home and the ability to obtain mortgage financing. But with the Mortgage Bankers Association (MBA) reporting average production costs of nearly $10,700 per loan in Q1 2022, lenders are also seeking opportunities to cut back sales and operational costs without sacrificing the number or quality of their purchase prospects.

FormFree and HomeScout have partnered to address the need for leads that deliver an undeniable return on investment with HomeScout Qualified Borrowers (HomeScout QBs), mortgage-ready consumers qualified at the front end of the home buying journey.

HomeScout identifies potential homebuyers “in the wild” and within a lender’s database during the earliest stages of home buying — when it matters most. These consumers want greater insight into their mortgage eligibility at the start of the home buying journey without being penalized for credit inquiries, bombarded with ads or hounded by loan originators to complete an application. So, HomeScout and FormFree offer homebuyers the opportunity to understand their home buying power by electronically verifying their direct-source financial data right from their computer or mobile device.

With home shoppers’ permission, FormFree leverages its connections with financial institutions and its patent-pending Residual Income Knowledge Index (RIKI) to supplement traditional credit evaluation with analysis of assets, cash flow and residual income, providing a more complete picture of the consumer’s Ability to Pay (ATP) and potentially allowing more homebuyers to qualify for a home loan. What’s more, HomeScout also considers the median home price in a given home search area when estimating a QB’s ability to pay for a mortgage, giving lenders and QBs a more realistic picture of how much home they can truly afford.

HomeScout Qualified Borrowers offer lenders top-notch value because, unlike “lookie-loos” who are just window shopping, QBs have high intent to buy. This is a much-needed advancement, as lost time spent with early-stage homebuyers who aren’t truly mortgage-ready has a far greater drag on mortgage originators’ productivity and the consumer experience than many lenders care to acknowledge. QBs offer the highest propensity to close the mortgage industry has ever seen because lenders can engage with these borrowers from the “tip of spear” — when they are first searching for home rather than when they decide to apply for a loan.

FormFree and HomeScout have created a seamless process for lenders to verify a QB’s ATP using direct-source bank data transmitted via a secure QB token. QBs enable lenders to analyze a consumer’s assets, disposable and discretionary income, employment and credit score in near real-time. When a homebuyer opts in to the QB program during the home search phase, they authorize a credit soft pull. This type of credit inquiry does not affect their credit score, but it provides an additional information point as part of the lead.

By putting the consumer in control of their own data and homeownership experience, the QB program also helps combat homebuyer trepidation about entering their personal information online and facing an onslaught of spam. A QB has the opportunity to understand their ATP before getting hooked into a relationship with a specific lender or real estate agent.

In the midst of a shifting, high-rate purchase environment, FormFree and HomeScout have created a timely solution that provides more wealth-building opportunities for consumers and lenders alike. The companies’ investment in innovation is paying off by giving lenders a better, more inclusive way to fill their pipelines with early-stage, mortgage-ready purchase leads.

I’d love to hear your thoughts on innovation in lead generation. Drop me a note at elapin@formfree.com.

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