MReport March 2019

TheMReport — News and strategies for the evolving mortgage marketplace.

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16 | TH E M R EP O RT COVER STORY T he mortgage industry is in the midst of disrup- tion that's being caused by changing consumer behavior and demand. Today, bor- rowers are getting more tech-savvy and have become more open to a complete digital experience. Take millennials for example. A recent survey by Clever Real Estate revealed that 63 percent of this generation use their smartphone as a primary research tool while searching for a home, preferring to go to popular real estate search portals to find the right property. And it is this group of bor- rowers that are really driving the innovation in the digital mortgage space. "Seventy-nine million poten- tial millennial customers are enter- ing the housing market for the first time and disrupting the industry with a new set of demands for the mortgage lending process," said Joe Tyrell, EVP, Ellie Mae. "This new generation of homebuyers is more diverse and better educated than ever before, so they expect both high-performance technology and automation, along with increased personalized contact with their lenders." It is perhaps these numbers that are encouraging lenders to enhance their customer service through apps with new features such as person-to-person pay- ments, personal financing manag- ing tools, and virtual assistants, according to a global consumer survey on digital banking by De- loitte. The survey revealed that 23 percent of consumers in the U.S. said they used online banking to apply for home equity or mort- gage top-up loans and another 23 percent used it for mortgage and mortgage refinance. Around 45 percent of those surveyed said that they would use online banking more if it allowed them to submit e-signatures and complete applications online entirely. The Growth of Digital-Only L enders have taken note of these changing consumer behaviors as they look to offer end-to-end mortgage lending processes. Here's some perspective from a study on fintech lenders—those who provide a completely automated mortgage experience—by the Federal Reserve Bank of New York: • The market share of fintech lenders has grown from 2 percent in 2010 to 8 percent by 2016 • Mortgages offered by fintech lenders close about 20 percent faster than others • Default rates for fintech loans are 38 percent lower for purchase loans and 29 percent lower for refinances • These lenders also appear to alleviate capacity constraints during periods of high mort- gage demand Today, with the entry of retail giants such as Amazon in the mortgage space, digital-only mort- gage banks are getting even more popular. "In 2019, we're seeing a growth of digital mortgage banks espe- cially through the entry of tech giants such as Amazon," said Pete LeFebvre, General Manager of Operations and Client Services, Wipro Gallagher Solutions. "To manage competition from these new entrants, lenders must formu- late an integrated digital strategy to improve the borrower experi- ence. If they're able to do that, then they can start actually meet- ing the expectation that consum- ers already have, that they're used to in their digital lives." According to Tedd Smith, CEO, FirstClose, the emergence of digital-only banks are also likely to pose a threat to brick and mortar entities in the near future, not only because of the lower costs associated with running digital-only operations but also because they are able to attract new customers with higher inter- est savings accounts due to lower overhead costs. "Some of the digital-only banks out there are able to offer savings accounts at 2.25 percent or more where the larger banks are offer- ing a fraction of that," Smith said. "Maybe some of the larger banks will start opening up additional digital-only divisions that can compete, but they still have their brick and mortar operations, with a lot more overhead and cost." But even brick and mortar banks are fast catching up on the digital revolution through a variety of channels."More than ever before, lenders are utilizing a variety of channels to grow their business and are competing to give homebuyers a faster and more personalized, transparent and engaging digital mortgage ex- perience," Tyrell explained making a case for why lenders must adopt end-to-end mortgage processing technology and do so quickly. Making Ends Meet A ccording to Shelley Leonard, Chief Product Officer at Black Knight Inc., digital lending has changed borrowers' expec- tations of how long processes should take, how easy corre- spondence should be, and how transparent the lending process The New Technology Mix As the mortgage industry looks to add the latest technology to its systems and processes, experts give insights into how lenders can strike a balance between different technologies and how it can help in building customer relationships. By Radhika Ojha

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