Patrick O’Brien of LenderLogix: Mortgage Lenders Gain Home Field Advantage in Higher Rate Environment

Patrick O’Brien is CEO of Buffalo, N.Y.-based LenderLogix, a provider of mortgage point-of-sale and automation software for banks, credit unions, independent mortgage banks and brokers. Reach him at

Patrick O’Brien

Just in time to prove the maxim that the Fed never raises rates during election years, 20 months of interest rate bloodletting appears to have exhausted itself. However, the 30-year FHA at 7.20% as I write this remains a far cry from what feels like a midsummer dream of 5% just 16 months ago. Affordability and supply remain hurdles to more normalized lending activity. It is safe to imagine our industry avidly rate watching like scouts scoping spring training talent – same as it ever was – throughout the 2024 political throwdown.

In all of this, there is good news about the current interest rate reality, and it plays to our industry’s longer-term benefit, if lenders play it with discipline and creativity. For reasons I’ll unpack here, mortgage lenders now enjoy a sort of home field advantage that strengthens mission-critical relationships both with home buyers and real estate pros. With their advantage, savvy lenders and their LOs will seize scoring positions to serve them well in a new cycle.

Here’s a fundamental where it will benefit lenders to lean in: with affordability Job No. 1 for home buyers planning to finance, mortgage loan officers are of necessity more often the starting point, followed by the work of a real estate professional. That order of business – lining those housing finance ducks in a row before embarking on the search for an actual house (or townhouse or condo) – has always been advisable, but in the era of cheap money, many aspiring buyers simply assumed they’d make the cut and started by stalking the real estate beauty shows to find “The One.”

In today’s reality of relatively fewer available properties and rates edging many out, it makes sense for buyers to start at qualification.

A Qualified Buyer is a More Valuable RE Lead

As tough as times have been, there’s opportunity lurking inside the challenge – arguably a longer-lived opportunity than any mere rate environment challenge. Mortgage lenders and LOs who carpe diem to attract and earn the loyalty of this re-oriented, needs-driven customer relationship will find themselves the preferred provider and the Trusted Advisor as that customer moves through their homeownership journey. Plus, a pre-qualified home search is of greater value for the real estate agent, and it helps to drive that point home with the real estate profession.

It may be counterintuitive, but agents’ primary problem isn’t inventory – it’s a dearth of leads. Here’s how that happened.

Zillow recently changed its Zillow FLEX program, which is where agents can get a lead and not actually pay until that lead converts to a sale. But Zillow continually pushes up that price until it’s up to 40 percent of the buyside commission. Thus, of the traditional 3% commission, Zillow takes almost half.

40% of RE Commission is the Lead

Zillow has established the value of closing a real estate deal – 40% is in finding the customer, 60% is in driving around, showing houses, negotiating the deal and signing contracts.  Reiterating, 40% of the deal is literally finding the customer, or in this case, enabling the customer to find the deal.

That’s got to chap agents’ backsides.

To stay on real estate pros’ good side, mortgage pros would be smart to use their own tools to help their agents generate leads jointly (where possible, leveraging technology for scale, detail and data management), allowing agents to reduce their dependence on commission competitive RE platforms.

Talk about counterintuitive. Here’s another baffling example: loan officers in general undervalue leads (WTH?). They know they do. However, it’s worth considering the value of a LO sharing a lead with a real estate agent. Let’s just assume a $300,000 deal for which an agent is willing to pay Zillow $3,600 (see above). There’s a lot of value in using the tools common to a mortgage lender to provide information borrowers might want to know. Using those tools and that info to generate leads is more than being helpful – it establishes existential value early in the customer journey.

Repeat after me: Whoever delivers homebuying value first wins hearts and minds.

That’s how Zillow and Rocket operate. Even in a lower volume environment, they are using this time to accumulate leads – accumulate these aspiring but as yet unsuccessful buyers – and keep them hooked. When the market turns because more residential properties come online and interest rates go down, they’ll activate those leads immediately.

The Big Payback: What Goes Around Comes Around

“To everything, there is a season” doesn’t mean waiting it out. Instead, it means now is the time to welcome more aspiring home buyers to your pipeline. True, they might not qualify now. But that’s no reason to be inhospitable. Make like a Zillow. Make like a Rocket. Get them inside your sphere, nurture them and when the market shifts activate them.

Nurture them. What does that even mean? It means to realize these customers are themselves not simply waiting for such a change and for all you know neither are your competitors. Nurture means reminding customers they might not qualify for the house they want now but with a plan and a partner, they can get there. Give them access to calculators and use email reminders to keep them engaged. Remember their birthday. Better yet, remember their spouse’s birthday and remind them! Once rates are falling, with the flick of a switch you can also remind them their home ownership dream is within reach.

Customers will come to smile at your reminders, if you are clever and kind, and always on time.

Again, repeat after me: Capture the lead. Nurture the lead. Nurture the lead some more. Send a holiday card. Convert the customer lead to a home buyer. Then treat that customer with care, continue to nurture appropriately even if servicing is sold, remind them to refer others and put out the welcome mat for second homes or buying up to the next.

The approach I’m suggesting takes work, but it’s the kind of work you’ll look back on as an investment, unlike watching another episode of “House Hunters.” Now is the time to seize and sustain home-field advantage. Repeat after me – the deal starts with financing and not a second before.

Wasn’t it the late Zig Ziglar who said, “You can have everything in life you want, if you will just help other people get what they want?”