There has been a bit of discussion over "declining" lead quality. Of course, it is easy to lay the blame of declining app and funding rates at the feet of lead providers. I must admit this was my initial reaction. However, I then got curious and decided to think a bit broader and dive into the data from our client network and tie it to market news during the period of decline.
Here is the chart:
The most notable observable points in this summary is that lead providers tend to stay very close to their general trend line; however, there was a general trend of decline on or about August 18, 2007. I would also suspect as we look at final September data we will see all of the lead providers returning to their typical trend lines.
So, I am not certain that the general assertion that lead quality has declined over the past several months is supported by market data.
However, if you do make the hypothesis that there has been a sudden precipitous decline in lead quality something must have changed–methodology, market, or consumer. We often assume and stop at lead generation methodology. Did lead providers radically alter their techniques and methodologies on August 18, 2007? No, but your application rates did decline in the short-term.
Something obviously changed. That leaves market conditions and consumer behavior. This is where I put my chips (I am currently in Vegas and down $100).
On that day, the mortgage market was being shook to the bone by Countrywide’s announcement they were tapping a credit line to fund loans. Notice the relative correlation between the Countrywide stock trend line and the lead provider application rate trend lines. At the same time, general news and panic media coverage is shaking the confidence of the consumer. Then, the for the triple threat–loan programs are disappearing for the majority of the borrowers needing financing and FHASecure has not arrived yet.
This is what happened to lead conversion rates. Not poor marketing, but poor market conditions and consumer confidence. They inquired, but got shocked, paralyzed, or left without a program.
The ironic part of this story? As rates stay flat, the mortgage market stabilizes, confidence returns, and programs come back, who is going to write about the dramatic, mysterious improvement in lead quality?
By the way, hopefully you have a good lead management system that is allowing you to manage these consumer inquiries over this longer sales cycle because they are ready to apply now!