Technology Driving Change in Lender, Real Estate Business
Consumers’ mobile experiences with leaders such as Amazon are reshaping their expectations in all aspects of their lives. This includes financial and mortgage decisions as well.
According to survey results released in December by Fannie Mae, demand for and usage of mobile mortgage products has almost doubled over the past 12 months. The survey covered 1,200 low- to moderate-income homebuyers who bought homes in the last year and have a mortgage guaranteed by Fannie Mae.
“This is a startlingly large increase reflecting the pervasive and growing use of mobile technology among consumers at all income levels,” wrote Steve Deggendorf, director of market insights research for Fannie Mae. “Although this research focused on low- and moderate-income homebuyers, our prior research suggests the results would be even larger for mobile usage and interest among higher-income consumers.”
The survey suggested that interest in mobile mortgage products will only increase among consumers in the coming year, particularly among first-time buyers and younger consumers with a college education. Fannie Mae’s Mortgage Lender Sentiment Survey, covering the third quarter of 2016, noted the growing number of lenders that were making mobile apps part of the process. Additionally, Deggendorf said there is significant opportunity to meet consumer demand beyond using mobile devices to research homes for sale.
“Though some lenders have begun building out the mobile experience for consumers, all lenders should evolve their online and mobile capabilities to address the rapidly changing consumer demand as well as the potential for competitive shifts,” Deggendorf wrote. “The potential for the competitive repositioning in the broader mortgage market value chain is high, maybe much higher than in many years, as next-generation technologies and providers focus on offering exciting mobile opportunities to improve the consumer experience through digitization and by removing inefficient manual processes.”
Regulators have taken notice in how consumers and industry have embraced mobile technology. In December, the Office of the Comptroller of the Currency (OCC) announced it will start granting limited-purpose bank charters to financial technology (fintech) companies. In a speech, Comptroller of the Currency Thomas Curry said “consumers want better, faster, more accessible products and services, and they are willing to switch providers or use multiple providers to get what they want. These consumers expect to be able to transact basic banking and financial business anywhere, anytime, from the palm of their hands.”
Fintech companies that obtain a limited-purpose bank charter will still have to comply with several regulatory requirements, including the Bank Secrecy Act and other anti-money-laundering provisions, as well as relevant consumer protection laws.
Concerns about usurping state regulation were quickly expressed by the New York State Department of Financial Services. In a statement, the department’s superintendent said her state would not allow consumer protections to fall into the void and opposed “any effort to federalize what states have been doing for over a century.”
“Any reliance on a federal fintech regulatory framework, such as the proposal contemplated by the OCC, would be irresponsible if it were to ignore the states’ historical role and longstanding expertise in this arena,” Maria Vullo said. “History has demonstrated that states, not the federal government, have the requisite knowledge and experience to effectively regulate nondepository financial service providers and guard against predatory and abusive practices.
In the real estate space, executives at Redfin have asserted that technology will play a role in speeding up the homebuying and selling processes as well. According to a report from the online real estate brokerage, the next generation of real estate technology will see innovation shift from online listings to hardware and real-world services that increase the efficiency of real estate transactions.
“More and more there are buyers who are comfortable with an online offer process that makes it easier and faster to close a deal,” said Karen Krupsaw, senior vice president of real estate operations at Redfin. “There’s a new mindset that the home purchase isn’t the once or twice in a lifetime move it once was and the wide acceptance of technology makes online offer writing a reasonable and often preferred approach for buyers. People see it as more of a transaction. They want to get it done efficiently and move on.”
As an example, Caliber Home Loans recently launched a digital mortgage process that allegedly can close a loan in 10 days or less. Called the “Ultimate Homebuying Experience,” the company said the program takes nearly all of the mortgage process online, using various technological advancements to automate the process, from application all the way through closing.
Opendoor, another company with an online focus, plans to expand beyond the two markets where it’s currently available thanks to a round of funding that reportedly values the company above $1 billion.
The company, which launched in 2014, is an online marketplace that buys homes direct from homeowners and currently operates in Phoenix and Dallas-Fort Worth. With this model, a homeowner seeking to sell a home can go to Opendoor, enter details about the property and get a near-instant price quote. If the seller accepts, Opendoor then allows the seller to close on the sale when they’re ready, rather than on the timeline of the eventual buyer.
According to details provided by the company, it is currently handling $60 million in home volume each month and has served more 4,000 homeowners since it launched. The company said that it will use the $210 million in funding it has received to expand market share in flagship markets and to extend its service to 10 cities in 2017.
Despite more consumers flocking to websites to get help with the homebuying process, usage of real estate agents continues to grow, according to the 2016 homebuyer profile from the National Association of Realtors (NAR). The report showed that while 44 percent of recent buyers started the search process online, 88 percent purchased their home through a real estate agent. This percentage has grown steadily from 69 percent in 2001.
Jeremy Wacksman, chief marketing officer at Zillow, sees technology shifting the role of real estate agent from an information negotiator to a local market expert and service provider. Title companies also will need to adapt to the changing needs of their clients and consumers.
“Before, you spent a lot of time doing information gathering, and collecting, and response,” he said. “The Internet really opened the doors. Agents are freed up to help get the deals done. But now they have to be agent, negotiator, price setter and a community resource.”