Fintech, that has already disrupted the repayments, banking and financial advisory markets, is starting to go into the $14 trillion mortgage market. Because of the growing interest in digital financial solutions, there seems to be a need for electronic mortgage solutions among home sellers and buyers alike.
The U.S. mortgage market continues to be covered with several major players with Wells Fargo at the very top and JP Morgan Chase, Bank of America and US Bank not far behind, based on Daily Fintech. But because the 2008 mortgage meltdown, the market continues to be upended. Non-bank mortgage lending is expanding as commercial banking declines. Actually, mortgage lending by kind of institution shifted dramatically between 2007 and 2014. Recently, commercial banks provided 52% of mortgage lending, down from 74% in 2007. In 2014, mortgage lending by non-banks almost doubled to 43% from 23% in 2007. (For additional, see: 7 Stuff That Will Shape the way forward for Fintech.)
Where is the fact that growth originating from? Here’s how fintech is gradually entering the mortgage lending market.
Fintech Players within the Mortgage Market
Radius Financial Group cracked the fully paperless mortgage code in 2016. The firm, together with assistance from DocMagic, the MERS loan registry, Fannie Mae and Santander Bank closed six loans without paper documents. Radius used DocMagic as well as the MERS loan registry to deal with distinct areas of the procedure, showing the opportunity of automation in document preparation and loan tracking.
Electronic closings and e-notes aren’t new, as Fannie Mae and Freddie Mac have purchased e-mortgages because the turn of the century. Yet, the issue with these kinds of transactions is the fact that few warehouse lenders can buy electronic mortgages, based on a recently available National Mortgage News article. This drawback will probably change as increasing numbers of companies go into the electronic mortgage market. (For additional, see: Fintechs’ Expansion Will Shatter the Status Quo.)
Clara, a California startup, aims to resolve a few of the mortgage issues that plague consumers trying to purchase a home. Founded by engineer Lukasz Strozek and Jeff Foster, a former policy advisor in the U.S. Treasury Department, Clara strives to smooth the inefficiencies that accompany the mortgage lending industry. Clara differentiates itself by educating borrowers and offering a web-based portal for completing paperwork. The firm also maintains that its rates are less than competitors.
Lenda, a house-loan provider, also provides an electronic mortgage solution. Other digital mortgage lending services include Quicken Loans’ Rocket Mortgage. Then there’s SoFi, the fintech firm recognized for student and private loan services, that is also gaining ground within the digital mortgage lending sphere. (For additional, see: How Tech Startup SoFi Intends to Disrupt the Banking Industry.)
A recently available JD Power survey discovered that 62% of respondents under 35 who purchased a home this season stated that they’d make use of a mobile app to finish a home loan application, if offered by their lender. And 20% of buyers of every age group weren’t satisfied with their lender, providing further support there is need for a brand new kind of mortgage service.
The Conclusion
Chances are that you will see more automation inside the mortgage lending industry moving forward – either full service beginning to end solutions or companies expediting an element of the process through automation.
Mortgages are comprised of numerous moving parts, from your application for the loan and approval process, to appraisals, completing and verifying borrowers’ credit and application for the loan, in addition to completing and signing the last paperwork. Ultimately, like numerous other elements of finance that fintech is taking on, there’s room for automation. Reducing time, fees and face-to-face contact are an allure for your fintech mortgage market. Ultimately, this new frontier appears to be gaining traction with innovators and disrupters.
