TheMReport — News and strategies for the evolving mortgage marketplace.
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30 | TH E M R EP O RT FEATURE F itch Ratings believes the growing trend of digiti- zation in the U.S. mort- gage application process will continue over the medium term as changing demographics and increased competition force industry players to improve the ease and efficiency of obtain - ing a mortgage. While many financial-technology (fintech) firms and non-bank financial institutions (NBFIs) have had a first-mover advantage on this trend, larger banks are likely to catch up quickly given their bigger investment budgets, extensive risk management ca - pabilities, and broader customer relationships. Firms that do not invest in this area will risk los- ing market share and could have their profitability negatively impacted, which over the longer term could also put downward pressure on a company's ratings. Online Lenders Gaining Ground C hanges in demographics and technology (i.e., mobile banking applications) are help- ing to drive the evolution in the mortgage lending process. A Na- tional Housing Survey in October 2015 by Fannie Mae on consumer attitudes showed that increas- ing numbers of homebuyers are going online to get their mortgage and that the appetite for future shopping and application through a mobile device was more than twice the current rate due to improved ease and efficiency of the overall process. Driving this trend are millennials, who are increasingly using technology to complete transactions and interact with their banks and financial service providers, according to the Fair Isaac Corporation (FICO), a data analytics and consumer credit scoring company. While definitions vary, millennials repre - sent the generational group who were born from the early 1980s to the mid-1990s or early 2000s, according to Wikipedia. Buy - ers aged 36 and younger, which includes millennials, represented the largest share of homebuyers for the last four consecutive years, according to the National Associa - tion of Realtors, and accounted for over 86 percent of loans for new home purchases in February, according to Ellie Mae's Millennial Tracker. Some larger non-bank mort - gage companies were early adopters of online lending and have grown rather rapidly. For example, Guaranteed Rate Inc. launched the first digital mortgage in June 2015 and recently sought to expand its online business through a joint venture with real estate services company Realogy. Quicken Loans Inc. (Quicken) followed with its own online product in November 2015 through Rocket Mortgage. Within a year, Rocket Mortgage closed $7 billion in conventional, Veterans Affairs (VA), and Federal Housing Administration (FHA) loans, which was just over 7 percent of Quicken's total closed volume of $96 billion of mortgage originations in 2016. According to Quicken, Rocket Mortgage's origination volume alone would rank as a top-30 national mort - gage lender, among the 50,000 banks, credit unions, brokers, and DIGITAL DOMINATION Listen up, lenders. These days, online origination is increasingly a thing, as more and more would-be mortgagees take matters in their own hands. By Johann Juan