February 2017 - Making Millennials Move

TheMReport — News and strategies for the evolving mortgage marketplace.

Issue link:

Contents of this Issue


Page 29 of 67

28 | TH E M R EP O RT FEATURE F intech investment has skyrocketed in recent years, from $1.8 billion in 2010 to $19 billion in 2015, according to a Citigroup report, but the mortgage industry, by most accounts, has been slow to board that high-speed train. Regarding the adoption of digital mortgages, lenders and other industry players are more apt to be like your old-fashioned parents who outwardly embrace innovation but wind up only us - ing a relatively small percentage of their tech tools and gadgets. Many lenders have engaged in hybrid deals—both electronic and paper—and the end-to-end eMortgage definitely constitutes the logical progression in the marketplace, but obstacles remain in the two major areas essential for originators and mortgage bankers to operate: the source of liquidity to fund loans and the secondary market to purchase them. The absence of warehouse banks, which serve as that source of liquidity for mortgage bankers willing to adapt their paradigm to accept eNotes as collateral, certainly plays a major role, according to Donnie Martin, EVP at Texas Capital Bank. "One reason is the revenue model of warehouse banking, which is based on interest income, the interest earned in the time elapsed between the funding of the loan and the sale of the loan in the secondary market," he says. "eNotes and eDelivery drasti- cally reduce the time it takes to purchase a loan in the secondary market, which has a negative impact on the interest income of a warehouse bank." Secondly, the lack of a secondary market constitutes the back- end bottleneck for mortgage bankers and warehouse banks with regard to e- or digital mortgages. "Presently, there are two primary investors in the market for eNotes: the GSEs. To put it simply: if you can't fund or sell it, you can't originate it," states Matt Fair, SVP at Texas Capital Bank. Not all hurdles hindering the widespread acceptance of digital mortgages are structural. The housing crisis and economic downturn affected more than people's stocks and credit ratings. The challenges that faced the industry during that period all but stopped the development and implementation of digital mortgages, E's of Use E- or digital mortgages offer increased speed, efficiency, and savings, but lenders and other industry players still face challenges in implementation. By Brian A. Lee

Articles in this issue

Archives of this issue

view archives of TheMReport - February 2017 - Making Millennials Move