Major Mortgage Co. is an established mortgage company that has been operating successfully since 1998 in New Jersey. It is owned and operated by Mr. Business, who is aided by an experienced, capable management team of mortgage, financial, legal, human resources, sales, technology, and marketing experts. Major Mortgage Co. has successfully developed its market niche of residential home mortgage customers, who typically have higher-than-average credit scores, and who are financially savvy.

The business serves first-time and repeat mortgage customers. The business was issuing $300 to $400 million in mortgages annually until 2020 when market conditions led to the most extraordinary year in the U.S. home loan and mortgage industry. Major Mortgage Co. experienced exponential growth, achieving $1.4 billion in mortgage origination in 2020. 

Now, Major Mortgage Co. is poised to expand its Consumer Direct Lending division, National Lender Mortgage, which was founded in 2015. Since that time, consumer direct lending has been growing in influence in the mortgage industry and experienced an opportunity boost during the COVID-19 pandemic.

However, the overwhelming majority of mortgages are originated in traditional retail processes that involve paperwork and office visits. Even “online lenders” use their mobile or online sites as sales funnels, not service portals. 

According to the Mortgage Bankers Association, the cost to originate a retail mortgage in 2020 was well over $10,000. National Lender, Major Mortgage Co.’s consumer direct division, has total costs of $3,784 per loan due to its efficient and innovative marketing and business model.

National Lender’s target market customers are typically financially-savvy and well-qualified for mortgages. These customers have high expectations for excellent mortgage rates and efficient and error-free service.

As more consumers become educated about the mortgage process and gain financial literacy, this target market can only grow. Major Mortgage Co. plans to achieve approximately $370 million in revenue after five years of expanded consumer direct lending.  

The Challenge:

Major Mortgage Co. will grow its National Lender consumer direct division through improved branding, strong customer-facing marketing, and streamlined technology and digital processes to support every step of their customers’ journey.

National Lender will expand its market share through five strategies which include:

1) Cost-effective and efficient operations – National Lender’s origination costs are one-third of the industry average.

2) Meeting customer needs: National Lender serves financially-literate, highly-qualified borrowers who have high expectations for service, efficiency, and low rates.

3) Continuous Process Improvement: The existing National Lender system is optimized to provide a high volume flow with reduced errors and improved cycle time. Through continuous analysis and improvement strategies, these performance metrics will be optimized on an ongoing basis.

4) Marketing to Customer Expectations: National Lender has established a smart marketing plan using current, robust technology to reach target market customers.

5) Reputation and Brand: National Lender has built loyalty from prior customers, who serve as recommenders and brand champions, and will continue to provide superior customer satisfaction. 

The Opportunity:

All mortgage lenders and the home buying industry experienced their highest volume year ever in 2020 for a variety of reasons, ranging from the COVID-19 pandemic, which led to increased work-from-home opportunities among higher-income workers, and a record number of home purchases and home refinance in response to historically-low interest rates.

The National Association of Realtors (NAR) reported in 2020 that the home-buying market was dominated by younger and older Millennial buyers for the first time. These buyers desire all-digital consumer direct mortgage experiences and are dissatisfied with traditionally-slow, unresponsive, and confusing mortgage processes. The client-centered, all-digital mortgage revolution was exemplified by Better.com, which achieved exponential growth in 2020. Rocket/Quicken, the other market leader, originated over $100 billion in mortgages in 2020 and reported profits of $9.5 billion. 

Major Mortgage Co.’s consumer direct division, National Lender, offers the lending experience that today’s emerging home buyers and refinance mortgage customers desire. It is well-prepared to strengthen its branding, adopt successful marketing strategies, and grow its customer base, achieving its potential in total mortgage volume, expanding its mortgage servicing business, and profitable operations while maintaining a lean and efficient structure and operations.

Solution: 

National Lender’s consumer-direct model provides the quality of service, pricing, and quick response that well-qualified younger home buyers and refinancing customers desire. It has a strong foundation upon which to build its plans to improve its business branding, strengthen and expand its marketing initiatives, and build strong technology and infrastructure to support ongoing growth and profitability.

Market Size:

Fannie Mae predicts that $2.72 trillion in mortgages will be originated in 2021, including $1.6 trillion in home purchases ($1.1 trillion in refinances). The Mortgage Bankers Association (MBA) predicts $2.56 trillion in mortgage originations in 2021. Both organizations predict that the volume of mortgages will decline by 15 to 20% between 2021 and 2022, in large part because of the exponential increase in mortgage lending seen in 2020. Fannie Mae predicts 6.1 million home sales in 2021, a slight increase from 2018 and 2019 levels.

Fannie Mae recorded 6.2 million home sales in 2020. According to the Consumer Financial Protection Bureau’s June 2020 analysis of 2019 HMDA data, “nondepository institutions’ (non-DIs’) share of mortgage originations continued an upward trend that began back in 2010.”

Approximately 11,200 lending institutions originated 9.2 million mortgage loans in 2019 according to HDMA data. These loans include commercial, multi-family, farm and HELOC loans in addition to first and second mortgages. HDMA data for mortgages on 1-4 unit residential homes shows that the market has begun to rebuild itself from the 2008 mortgage crisis, achieving approximately two-thirds of the pre-2008 level of first mortgages. 

Marketing and Distribution: 

Major Mortgage Co. is basing its business expansion and growth plan upon strengthening:

• Infrastructure that serves customers
• Technology that supports its streamlined, efficient, and responsive loan process
• Marketing that will bring increased numbers of target market customers to the company
• Sales that will support the business expansion goals and objectives

Major Mortgage Co.’s National Lender Division’s marketing plan incorporates multiple smart strategies to continue to build the business customer base, continue with strong lead conversion metrics, and build a strong team of customer brand advocates.

The marketing plan will incorporate personalized service and support, smart customer and prospect data use, and marketing analytics. Some competitors use bespoke marketing tools. Major Mortgage Co. is using a cost-effective and efficient combination of existing tools in the marketing tech stack to reach and convert customers at a competitive customer acquisition cost (CAC). In 2021 to date, the business is converting approximately 60% of leads into customers at a cost of approximately $350.00 per lead.

The business will develop a customer-centered, public-facing marketing campaign that utilizes business partners effectively, communicates well to the target market customer (above-middle income, non-traditional, yet financially savvy home buyers), and creates a brand image that reflects the business quality of service and commitment to a streamlined, efficient, and “quick” mortgage lending experience.

Target Market: 

Major Mortgage Co. serves customers with above-average credit scores who desire efficient, cost-effective, and responsive mortgage lending services.

In order to increase its market share among younger home buyers and first-time home buyers who are financially knowledgeable, Major Mortgage Co. plans to strengthen its business branding, improve its customer-facing marketing materials and assets, and ensure that customers continue to experience the customer service, cost-effective, and efficient loan processing, and approval that the business has developed to date.

Most financially-savvy younger buyers appreciate the convenience offered by all-digital mortgage loan companies like Rocket Mortgage and Better.com, but they are also aware that these companies may not offer the most efficient and cost-effective mortgage packages on the market. Major Mortgage Co. can brand itself as a tech-savvy mortgage provider that will offer the best financial deal along with the smoothest, most efficient mortgage approval process. 

Competition and Competitive Advantages:

Major Mortgage Co. is seeking to strengthen its branding and grow its business in competition with other mortgage lenders that are pursuing digital-first strategies and which are acquiring younger customers (younger and older Millennials) through sophisticated marketing and digital lending platforms.

Major Mortgage Co. benefits from a strong, experienced management team, a solid business model and customer base, and a long-term commitment to providing affordable and efficient mortgage lending services to its target market customers. Major Mortgage Co.’s customers are ones that most mortgage lenders would want to serve. The business goal is to acquire more customers which fit its desired lending profile through marketing, communications, technology, and infrastructure that can provide them with the lending experience they desire for home purchase and refinance. 

Major Mortgage Co.’s competitors are among the nation’s largest, including Rocket Mortgage/Quicken, LoanDepot, and Better.com. These companies have recently been focused on IPO offerings. Their financial reports indicate on-sale margins that vary widely, from 1.89% to 5.19%, depending on the category of loan or the original customer source.

Rocket Mortgage touts its size and has an expansion goal of serving $40 billion in loan volume a month. However, competitors are not specifically targeting Major Mortgage Co.’s current or potential expanded customer base. Market research, including by McKinsey, indicates that mortgage customers with higher incomes, higher credit scores, and financial acumen are not the best customer for high-volume, internet-based lenders. It is this target market customer whom Major Mortgage Co. intends to serve.