MReport July 2018

TheMReport — News and strategies for the evolving mortgage marketplace.

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28 | TH E M R EP O RT FEATURE T he mortgage process is broken. Ask anyone in the industry, and they'll nod in agree - ment. Mention the phrase "stare and compare," and people cringe with recognition. Start trying to explain the problem and consum- ers and lenders alike will finish your sentence with all the reasons why things aren't working. Lenders want to make respon- sible lending decisions based on various documents and pieces of paper. They've set up rigor- ous workflows to catch errors in imperfect information. Consumers are just trying to navigate the diz- zying array of requirements that stand between them and their dream of a home. Today's lending technology lacks robust data infrastructure to serve the needs of tomorrow. To build a more accessible system that uses verified source data and complete financial profiles, we need to rebuild and rethink. Without reimagining the process as a whole, we won't get to where we need to go. Tackling the Homeownership Divide W hile technology has led to great strides in democra- tizing access to information and transportation, the financial servic- es industry, including the mortgage sector, has been somewhat slow to evolve and reach historically underserved populations, includ- ing low-income, under-banked, and disabled individuals. Ac- cording to data from the Federal Deposit Insurance Corporation, 27 percent of U.S. households were unbanked or underbanked in 2015, a fact that can be attributed at least partially to lack of access to financial services. To address the homeowner- ship divide, we're seeing an increasing number of lenders take steps to boost accessibility. For instance, Bank of America and CitiMortgage are fund- ing the Wealth Building Home Loan, which will help low- and moderate-income homebuyers secure a new 15-year mortgage with no down payment. Similarly, Luther Burbank Savings is offer- ing three new community-lending programs to make homeowner- ship more accessible in California titled "Grow," "G2," and "Bloom." Grow will offer fixed-rate 30-year loans with down payments as little as 3 percent, while G2 will offer a fixed interest rate of 2 percent over a 15-year term and will allow homebuyers to put 2 percent of the purchase price toward their down payment and 1 percent toward hard closing costs. Bloom is a home improvement loan that doesn't require bor- rowers to verify proposed home improvement plans and offerings loans from $10,000 to $30,000 at a fixed rate of 4 percent for 15 years. Along with these lender- led changes, the continued rise of financial technology companies, or fintechs, is helping to further close the gap in financial accessibility, to the benefit of businesses and consumers alike. Tech to the Rescue T echnology is working to democratize financial ser- vices and drive greater inclusion throughout the industry. Here are three key ways borrowers are benefitting from technological advances. Meeting borrowers where they are: Before the rise of the web, finan- cial services had high barriers to entry that not everyone fully appreciates: requiring customers visit the bank and make appoint - ments with brokers, loan officers, or financial advisors during busi- ness hours. For households whose members may be working multi- ple jobs and juggling schedules to support a family, taking time off work to visit a branch or paying someone for financial advice may be unrealistic. This rift makes it challenging for around one-third of the population (according to the latest census data) to utilize traditional financial resources and, in some cases, make informed decisions around major purchases like home buying. Now, as financial services be - come increasingly digitized, users can manage their entire spectrum of financial needs from a desk- top or mobile device—mediums that offer a more intuitive user experience. Brands like TurboTax, Robinhood, and Affirm* have made filing taxes, managing a stock portfolio, and raising real- time capital experiences whose automated platforms give users the ultimate advantage. This easy accessibility enables consumers to better track and manage their fi- nances on their own time, as well as connect to valuable financial tools and services. Improved access to financial services has been proven to "make a substantial positive differ- ence in improving poor people's lives." Research shows that the most effective way to improve ac- cess for low-income households is through digital connectivity. Increased transparency through simple, guided workflows: Mortgage lending has long been considered an opaque industry. For years, lagging transaction times; labori- ous, document-driven processes; unexplained fees; and limited Smart Lending Today's origination process is utilizing tech to better reach unbanked or underbanked demographics. By Erin Collard

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