4 Competitive Advantages Community Lenders Have Over Online-Only Lending Giants

There’s no arguing that online-only lenders have disrupted the mortgage industry. Take lending giant Rocket Mortgage: Profiting a massive $9.5 billion in 2020, it cemented itself as America’s largest mortgage lender. Indeed, it might seem natural that the mortgage process evolves towards the impersonal convenience of Amazon or Grubhub.

Still, even as fintech changes the way we transact loans, another less obvious trend is building momentum. Community lenders—meaning credit unions, community banks, and independent mortgage banks who serve their local markets—are a growing force in the mortgage industry. And that shift is nothing new: From 2010 to 2016, independent mortgage bankers increased their market share from 8% to 32%, and small lenders outside of the top 40 grew from 7% to 35%.

Why do borrowers gravitate towards community lenders even as consumers demand more technology and convenience? In short, borrowers today are looking for guidance, trust, and a human touch while taking out a loan. Yes, they want tech-powered platforms and the ability to upload documents using their phones, but they also want a person to answer their questions and a knowledgable presence to accompany them on the largest purchase of their lives. And that’s where community lenders come in.

With their local relevance, presence, and relationships, community lenders hold competitive advantages that big, online-only lenders lack. Maxwell hosts Alan and Bryan recently chatted with Kevin Peranio, industry veteran and Chief Lending Officer at PRMG, Inc., on the Clear to Close podcast to discuss how mortgage professionals at community lending institutions can lean into what they do best to form a powerful competitive edge even in today’s changing industry.

Here are four advantages community lenders hold over their online-only competition.

1. They can afford to pursue thoughtful growth.

Massive fintech lenders like Rocket Mortgage are generally in the lending game to grow their presence quickly and relentlessly. Because of heavy outside investments and aggressive revenue projections, they have little option to pursue thoughtful growth.

“There’s a lot of fintech dollars, and they think they can automate the hell out of anything,” said Kevin. “They want [the mortgage process to be] like ordering an Uber or a Lyft.”

Community lenders, on the other hand, are concerned with serving their customers at local levels. While they certainly care about traditional metrics like profit, they can also afford to weigh growth against other vital considerations. These aspects include customer relationships, company culture, and borrower satisfaction. The ability to prioritize service-related aspects of the business means that these lenders can build a customer-first experience and reputation in the market that’s hard for online-only lenders to replicate.

That’s not to say that community lenders don’t also pursue growth and convenience in their quest to serve more customers and offer a better borrower experience. The best of these lenders arm their teams with the high-tech tools and services they need to communicate seamlessly, streamline operations, and fulfill loans efficiently. In fact, it’s because of these tech-empowered features that community lending teams can afford to focus on the high-value, service-related tasks that differentiate them from the competition.

2. They benefit from local knowhow through decentralized teams.

Community lenders often station branch managers in the various locales where the lending institution does business. Within these locales, managers and the loan officers that work with them form relationships, become involved in the community, and learn location-specific knowledge that can help them guide borrowers. For instance, if the lending team is in a military-heavy community, they’ll become experts on VA loans and be able to give customers the best advice in those specific situations.

This decentralized structure helps lending professionals serve their customers in a much more personalized way than national, online-only lenders can. Not only do branch managers and loan officers understand the nuances of the location where their borrowers reside, but they learn from personal experience the pitfalls and opportunities customers in that particular area might encounter.

These lending teams are able to form lasting relationships with borrowers, truly understanding their financial goals and the big life plans that might require new loans or refinancing down the road. Because of these considerations, community lenders are well positioned to capture repeat and referral business.

Empowering local leaders

Kevin also points out how decentralized leadership benefits company structure and culture: With each branch manager heading up their own locale, they’re more likely to adopt an ownership mindset, where they’re responsible for training and developing the loan officers in their market. This setup helps to build trust and empowers local leaders.

“Ultimately, at the local level, when that loan officer has a question, they really need to rely on their immediate team leader,” commented Kevin. “We have a platform, and we offer a lot of support.”

This education also benefits the end user: By working closely with local branch managers, loan officers gain a wealth of community information that helps them better serve borrowers.

3. They pursue customer and employee-centric benchmarks.

With their focus on culture and building a highly cohesive team, community lenders are well positioned to hold themselves accountable to less traditional metrics that reflect employee and customer satisfaction. That includes pursuing benchmarks related to Net Promotor Score (NPS), Glassdoor reviews, and InHerSight ratings, which gauge how amenable companies are towards women.

By caring deeply about the numbers associated with their employee and customer bases, community lenders can form an important competitive advantage that translates into staff retention and raving fans.

“That stuff matters,” said Kevin. “Everyone wants to talk about what it means to create an open architecture. Do people walk that walk?”

4. They benefit from industry-wide dialogue.

One of Kevin’s biggest takeaways from his tenure working in the industry is that coming together, even with competitors, will only benefit the community lending industry. Keeping up a dialogue with other lending professionals has helped him solve problems, find new perspectives, and teach and learn from others.

“I think that abundance mindset and that collaborative mindset will make for a better industry overall, especially if you’re an independent mortgage banker,” Kevin commented. “We all gravitate towards each other and try to lift each other up. We’re playing the long game. It’s a marathon, not a sprint.”

Because many professionals in the community lending space have been working mortgages for years (or have learned from someone who has), it has the feeling of a small industry that thrives on relationships. In this way, community lenders benefit from a shared knowledge base representing an immeasurable amount of in-the-field experience. Online lenders, many of whom are headed by leaders with tech backgrounds, simply lack that wealth of industry knowhow.

Finding a competitive edge

Community lenders have always thrived at serving their customers in a personal, localized way. As the mortgage experience becomes more digital and online-based, it might seem like skillset is becoming obsolete. In fact, the opposite is true: Today’s borrowers crave expertise, trustworthiness, and a human-led experience alongside a convenient, digital process.

If community lending institutions want to compete against the giants in the industry, they should invest in the technology to modernize their processes, freeing them up to focus on what they do best: creating lasting relationships and experiences for their customers.

Click here to listen to the full Clear to Close podcast episode with Kevin Peranio.

Let your team focus on what it does best, and leave the technology up to us. Click here to request a demo to see how Maxwell can streamline your lending business.

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