As the economy rebounds and rebuilds, neither government nor investors are likely to reward unwarranted credit risks. Consumers will be paying close attention to credit scores and appraisal accuracy. They won’t be taking as many risks as they have in the past. Instead, they’ll be focusing on affordable housing options.
This change is likely to cause significant downward margin pressure for financial institutions of all types, and home loan origination volume will surely decline. To maintain and grow margins, financial institutions need to target the consumers likely to yield the greatest return. At Microsoft, we recommend the following three strategies:
1. Broad brand-building programs across engagement platforms to regain trust
2. Contextual programs to target actively engaged consumers
3. Targeted acquisition programs focused on actively engaged and affluent consumers
Institutions targeting secondary loan markets would be wise to focus their messages on increasing consumer savings. Home loan payments are the primary expense for many households, and reduced payments represent a great savings opportunity. These institutions should follow the strategies above, focusing acquisitions efforts on consumers who meet the restrictive debt-to-equity ratios, credit scoring & income levels required for loan approval.
Finserv Industry Specialist