MReport October 2019

TheMReport — News and strategies for the evolving mortgage marketplace.

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Page 23 of 67

22 | TH E M R EP O RT COVER STORY A mazon, the online retail giant, has had its eyes set on real estate for some time now. In July of this year, it finally took its first tentative steps into the market by partnering with Realogy, the na- tion's largest real estate brokerage. Together, Realogy and Amazon launched an initiative called TurnKey. According to a report in Curbed, Amazon hopes to launch its smart home and smart services business through this initiative. This, of course, would not be the first time Amazon has impacted the housing market. The announce- ment and subsequent shortlisting of cities where the Seattle-based behemoth planned to open its second headquarters (HQ2) saw the housing markets in all those cities registering a jump in demand and prices. The ultimate winner of this year-long exercise—Crystal City, Virginia—has not only seen a spike in demand in the area but also a housing boom in the neighboring Arlington and Alexandria regions. According to a Redfin report, the Amazon "HQ2 effect" has "become a permanent factor in the Arlington and Alexandria housing markets." Why are these nuggets of news so important now? Simply put: they are emblematic of a trend toward an influx of new players in the mortgage and housing sectors, many of whom weren't tradition- ally operating in this space. The primary factors driving these forays are fintech and the interest of private equity firms. In 2019, the competition for using digital lending platforms not only reached a new high but also resulted in many non-traditional financial institutions joining the fray after being backed by private equity. According to a Forbes report, "The drive to modernize the mortgage industry is expected to result in roll-ups of the more promising digital players by private equity firms and strategics." The Fintech Factor H omebuyers today have more choices than ever before when it comes to financing a loan. For example, recently partnered with Ally Bank to offer end-to-end digital loan processing. The idea for their business was actually born out of the founder's difficulties while securing financ- ing to buy his own home. Vishal Garg, CEO and Founder of, told MReport that he had lost a bid to an all-cash deal thanks to an inefficient mortgage process that required an extensive back-and-forth between him and his lender. "Using the down payment I would have used on the house, I created to allow customers to take complete control of the process," Garg said. He explained that the company's platform helps customers to upload and eSign documents, get loan estimates in seconds and a pre-approval letter within minutes. "They can reach us for guidance and support whenever they need— through email, text, phone, or chat. On a macro scale, the digitization of the mortgage industry has made the process easier, cheaper, and faster for the consumer," he said., a real estate co-in- vestment and technology company, offers another innovative method of financing with an eye on mil- lennials—one of the largest home- buying cohorts and also one that is saddled with enormous quantities of student debt. Jonathan McNulty, CEO of Haus told MReport that, compared to traditional housing mortgages, their financing model helped bor- rowers by lowering their monthly payments by approximately 30% and bringing in liquidity through co-ownership. "It allows owners to look at their home fractionally," McNulty said. "Imagine your house is broken up into tiny pieces that you can buy or sell. You build equity, buying shares of your home each month, but you can also sell some of those pieces you've bought, tapping your equity in real-time. It's an entirely different way to think about home- ownership." As these new players enter the market, traditional mortgage com- panies are working to adapt and innovate as well. "Forward-thinking lenders and fintechs are embracing technology to simplify the mortgage process in order to attract and keep custom- ers, as well as maintain profit- ability," said Tammy Richards, COO, loanDepot. In fact, Richards said loanDepot has invested more than $100 million in its proprietary technology called mello and its end-to-end digital mortgage called mello smartloan. Banks like TD Bank and Chase are also partnering with fintechs to build their digital capabilities. "We've made strategic invest- ments in a new loan origination system (Encompass), a comprehen- sive pricing engine (Optimal Blue), and a self-service digital mortgage application (Roostify)—all of which have been game-changers for our business," said Rick Bechtel, Head of U.S. Residential Lending for TD Bank. "The launch of our online When Worlds Collide As lenders focus on streamlining the mortgage process, how will the increasing presence of outside tech companies within the mortgage sector change the way business gets done? By Radhika Ojha

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