by David Depman
Americans love to shop for the best deal. People will go 5 miles out of their way to save a dime on a dozen eggs (at least my mom will). So what is the big disconnect with the extraordinary effort to shop for savings on daily purchases like groceries, and the distinct lack of shopping on what is likely the biggest purchase a person will make in their entire lifetime?
In a just released report, The Consumer Financial Protection Bureau (CFPB) takes a deep look at the shopping habits of Americans when it comes to mortgages. Some surprising results turn up. In prepared remarks prior to his address to the Brookings Institute on Tuesday, Richard Cordray, the Director of the CFPB, said “Consumers put great thought into the choice of a home, but the mortgage process continues to be intimidating,” Intimidating enough, that the report reveals nearly half the people getting a mortgage (just over 47%) don’t consult multiple lenders, raising questions about whether or not they are interested in searching out the best deal, or if they’re just searching for the quickest end to the process. For first-time home buyers, the number was even lower.
Mr. Cordray was critical of the lack of comparative shopping in the mortgage process. “Almost nobody looks only at one house and decides to stop right there…. Consumers spend considerable time looking at different neighborhoods and at different homes for sale. The same should be true of choosing among possible mortgage loans.”
As an example, Cordray highlighted one of the commonly heard objections to shopping for mortgages, that shopping around for a mortgage can have an adverse affect on your credit score. Again, Cordray pointedly replied saying “You can shop around and even submit multiple applications to obtain multiple initial estimates…The effect on your credit will be the same no matter how many lenders you consult.”
(On a side note, President Obama announced on Monday that Bank of America, J.P. Morgan Chase and Ally Financial will start providing the FICO scores they have to their clients for free.)
In his address to the Brookings Institute, Cordray said “by not shopping around consumers are often throwing good money down the drain. An important and interesting finding from our survey — I want to emphasize this — was that consumers with more confidence in their knowledge about the mortgage process were more likely to shop. This was especially true for those who said they were familiar with the available interest rates. [They] were almost twice as likely to shop as those unfamiliar.”
So what does this mean to Loan Officers?
It means educated shoppers are out there searching for you. It also means your efforts to engage socially need to be top notch. Knowing that only half of potential home buyers are searching for the best mortgage option makes how well you are represented online even more crucial than anyone could have imagined. Key to being well represented online is keeping up a dynamic social presence. To get the attention of savvy consumers, you need to be seen as an expert and you need to drive traffic to your web pages. A solid social presence with continually updated content is a winning combination that will differentiate you from your competition.
When they do find you, you want to understand the issues that are of the most concern and deal with them upfront. From increasing your education efforts to ensuring that the information you provide has real transparency and clarity, you will be recognized as a best option for people taking the time to research their mortgage options.
What’s your reaction to Mr. Cordray’s address?
You can watch Mr. Cordray’s entire address to the Brookings Institute below.
Richard Cordray addresses the Brookings Institute. January 13, 2015
(Cool fact: Richard Cordray is a 5 time Jeopardy champion from the 1980’s. What is ‘cool’? Ha!)