How do banks need to position their mortgage products differently as we anticipate a shift back to a purchase environment from a refinance environment?

I think banks are taking the right approach with the relationship banking strategy.  Offering preferred pricing, discounts, rewards, and benefits on other products – things like free checking, no monthly minimum balances, etc – are benefits that appeal to consumers. Banks should also stress the benefits and positive nature of the existing relationship, and how that will extend to the servicing of the loan.

You shared a number of different mails. Do you ask your panelists which type of mailer they are most likely to respond to? One with a chart with options vs. bullet point benefits?

We haven’t asked our panelists which format they would most likely to respond to. Most likely, a better way to track this is to test both formats because it would result in the true response, which can be different from an “intended” response.

­When mortgage rates go up, how will it impact HELOC demand? I presume homeowners will rely on less cash-out refi and turn to HELOC – any insights or stats?­

Most likely HELOC demand will go up. Two things would prompt this:  1) By then almost everyone who was able to refinance would have done so; and 2) the rates on HELOCs will be lower than on mortgages.

­Are you seeing a trend that people are getting a HE line of credit instead of using their credit cards because the HE line of credit rate is a lot lower and has the tax benefits­?

In general, if a consumer qualifies for a home equity product, they’ll use that over a credit card to fund large purchases that will be paid off over time. The big benefits are lower rates and tax benefits. The exceptions to that might be people who have the resources to use their credit card, but pay the balance off quickly, mainly because they want to earn rewards or points.

How frequently are you seeing home equity offers for educational loans?  Have you seen this decline with the new disclosure regulations with Title X for student loans?­

We often see home equity products promoted as a way to pay for “anything” including “home improvements, college tuition, buying a car, emergency use, and more.” I think this is because the loan is taken out by the parents, not the student, and it’s up to the parents how they wish to use the money.

I’ve been reading quite a bit about Harp 2.0 , are you seeing much activity in this space?

Yes, we are seeing quite a bit of activity around HARP. We see many offers that outline the specifics of the program.  Some offers state, “You are eligible for HARP if you meet all of the following criteria” which is followed by a list of bullet points. Other offers state, “Concerned you can’t qualify?” and then specifically mention HARP, but don’t go into the qualification details.

A lot of the examples you’ve shown are from mid- to bigger banks, do you see community banks employing the same tactics?

Yes, we’re seeing a cross-sell and relationship banking strategy across the board. To some degree, smaller banks may be focusing more on acquisition, mainly because they don’t have the huge customer base that larger banks have. This forces them to focus on acquisition. But having said that, the smaller banks are still trying to cross-sell existing customers on a variety of products, including loans.

There was a direct mail loan example that had an incentive as part of the offer.  Incentives are common in deposit products, but how are they being used with loans?  Are they common?

Incentives are the norm for deposit products, but they’re not nearly as common on loan offers – roughly 10% of the loan offers have an incentive. Most commonly, the incentive is in the form of a rate discount or cash back at the loan signing or for bundled packages. BBVA Compass marketed mortgages with checking and credit card accounts, and offered a $500 credit.  PNC offered a $50 cash incentive to customers who could turn in all paperwork within 3 days of submitting the loan application.  Some lenders offered gift cards or even iPads.

What are banks doing to encourage automatic payments of loans?

Banks are offering rate reductions if the customer does automatic payments for the loan from a checking account at the bank. They’re also mailing offers that are only good if the customer selects automatic payment.