TheMReport — News and strategies for the evolving mortgage marketplace.
Issue link: http://digital.themreport.com/i/1187758
20 | M R EP O RT FEATURE profit margins, leaving first-time homebuyers with little inventory in their price range. The study's authors conclude with an appeal to the public, private, and non- profit sectors to help the housing market meet the diverse needs of the growing U.S. population. Happily, all three of these segments—public, private, and nonprofit—are actively addressing ways and means to help home- buyers, in particular first-time homebuyers, achieve their dream of homeownership. While all con- tinue to support homebuyers with tried-and-true solutions, most are also introducing more innovative tactics. With more than a nod to millennials and Gen Z, new tech- nologies are being introduced that are already creating efficiencies by reducing delays and simplifying processes. In the private sector, private mortgage insurance (MI) makes it possible for borrowers to access the conventional mortgage market and get into a home of their own without waiting years to pay off debt while saving for a 20% down payment. Indeed, thanks to MI, the median down payment among first-time buyers has been just 6% since 2014. More broadly, MI has benefited the overall housing market by insuring taxpayers and the federal government against mortgage defaults. Helping to educate homebuy- ers about these many options are licensed real estate agents, themselves served by not for profit advocacy and policy groups such as the Asian Real Estate Association of America and the National Association of Hispanic Real Estate Professionals, whose missions are to foster sustainable homeownership in their commu- nities through educational tools and meaningful public advocacy support. The Fintech Factor I ncreasingly, supporting the activities and missions of all three segments so critical to the homebuying market is financial technology. Fintech is anticipated to change the way households buy and sell homes, obtain and manage mortgage debt, and mon- etize housing wealth. Many seg- ments of the homebuying market have quickly adopted fintech into their own services, and with its many appeals, continue to seek new innovations. Private sector activity in the mortgage lending phase has multiplied, with service provid- ers focused on accelerating the mortgage lending process with technology facilitating the process from loan application to approval to closing. A recent study con- ducted by the New York Federal Reserve Bank showed that fintech lenders are processing mortgage applications approximately 20% faster than traditional lenders, at no cost of greater defaults. The study concluded that in areas of more fintech lending, "technologi- cal innovation has improved the efficiency of financial intermedia- tion in the U.S. mortgage market." Technology has also created efficiencies through automation by enhancing the data verification process and creating analytics- driven metrics for loan officers to more rapidly understand their borrower's finances. In many cases, title and closing procedures have also been digitized, erasing hours of paperwork in the process. Although fintech in the hous- ing market is only in its nascent days, process simplification and automation are already improv- ing at lightning speed thanks to continuous innovation. While millennial habits are credited with the rapid adoption of fintech in the housing market, it will surely be Generation Z that drives its expansion and innovation in the digital mortgage space. The new generation of home- buyers is diverse, better educated, and savvier than ever before, they have experienced the confluence of technology, automation, and increased personalized contact and demand the same from the housing industry. As we survey the current state of the housing industry and look towards the future, all members of the housing ecosystem must continue to facilitate responsible and sustainable homeownership. While sentiments are positive and statistics are favorable for contin- ued growth, in order to meet the demands of an emerging first-time homebuyer population the hous- ing industry will need to embrace technology on both the front and back ends, thoughtfully monitor economic progress and remain cognizant of the nuances facing each generation. RICHARD THORNBERRY is CEO of Radian Group Inc. Thornberry has more than 30 years' experience in the financial services industry as a leader of some of the most innovative mortgage industry businesses. Before joining Radian, he co-founded NexSpring Group, LLC in 2006, a firm to partner with and advise leading private equity firms related to potential financial services M&A transactions. The firm was later expanded to provide mortgage industry advisory and technology services to mortgage lenders, financial institutions, mortgage investors, and other mortgage industry service providers. Technology has also created efficiencies through automation by enhancing the data verification process and creating analytics-driven metrics for loan officers to more rapidly understand their borrower's finances. In many cases, title and closing procedures have also been digitized, erasing hours of paperwork in the process.