A few years ago it was expected that a stack of papers would be signed at the mortgage stacking table – there was no other way. But now a whole new world of opportunity has opened up as mortgage technology continues to advance and a younger generation of home buyers first steps into the property market.
“Alexa, get me a mortgage” was nothing more than a dream a few years ago. Now, when mortgage lenders keep their eyes on mortgage technology, that dream can become a reality – and the sky is the limit.
The mortgage industry is full of fresh ideas and old systems that need to be updated to suit today’s times, from front-end technology to origination technology to finding ways to innovate the service. Every sector is on the brink of change, and 2021 could be the year that finally makes the change.
Reconciling data and AI
For years, mortgage technology companies have worked to put together robust platforms for mortgage data. Title Company The first American spun off CoreLogic in the summer of 2010. In 2015, the company announced a new property research website, DataTree. A few years ago, the company announced that its real estate database covers 100 percent of the United States
Now that companies have expanded their database, it is time to learn how to use this data.
“It’s really interesting to see how many people are trying to solve the same problem in different ways,” said Joe Tyrell, president of ICE Mortgage Technology, in an interview with Inman. “So right now you have a lot of people involved in the process but not adding the value they intended.”
He explained that many highly trained professionals waste time checking paystubs and W2s – time that could have been spent solving more in-depth or more complicated problems.
“This is really a big point of friction where technologies, especially machine learning and artificial intelligence, can not only discover the documents but also make decisions that humans would normally make,” said Tyrell. “But they give you the guard rails when you, the lender, need them to be comfortable with exceptions.”
However, as lenders seek to increase their tech stack, mortgage technology companies need to realize that this change should be more of an evolution than a revolution.
“Anyone who believes that artificial intelligence can make a revolution has never been a lender,” said Tyrell. “The risk of a loan buyback or the lack of a regulatory requirement or undertaking before you are allowed to do so is so high. I mean, the risks are so great and this is much more of an evolution than a revolution. “
Mortgage technology boom on the horizon
The data and technology is in place for lenders to upgrade their tech stacks, and 2021 could be the year of change in mortgage loan technology.
The past year has been unprecedented in many ways, including the surge in mortgage demand due to extremely low interest rates, which further fueled the growth of top mortgage lenders.
Some of the top lenders of 2020 will be well known, but their volume is well above the volume recorded at the end of 2019. One mortgage lender saw more than 340 percent year-over-year growth. In fact, several mortgage lenders first rose to the Forbes billionaires list this year when the size of mortgage loans spiked and lenders went public.
But lenders have been so busy with the surge in mortgage demand that they haven’t had time to invest in their tech stack. As we head into 2021, lenders are now considering using their profits to upgrade their technology.
ICE Mortgage Technologies announced that earnings per share were up 16 percent year over year from $ 4.51 and posted record sales of over $ 6 billion for full year 2020.
“We anticipate recurring revenue for the first quarter to be between $ 122 million and $ 127 million, a pro forma growth of approximately 30 percent year over year,” said Scott Hill, Intercontinental’s chief financial officer Exchange, on the company’s fourth quarter earnings statement.
This increase in sales was also associated with increased interest in new bookings as more and more lenders branched out and looked at the company’s technical offerings.
“I think 2020 was a year where a lot of lenders said, ‘We’re taking a break from using technology because we’re too busy,” said Tyrell they finally got their arms around the volume, so they were a little apprehensive about making changes in the first quarter of this year.
“Well, and we’re certainly seeing it, I think there is a huge appetite to really look into using the next level of technology,” he continued. “If you look at the third, fourth quarters of last year and the first quarter of this year, those were the three highest quarters in our company’s history for new bookings. So the appetite is there. You will now have the opportunity to start deploying this technology so you can be ready for the next wave of volume and get the highest return on the volume that you are capturing today. ”
eClosings are here to stay
A saying that was common during that time is, “You can’t put the toothpaste back in the tube.” In 2020, stay-at-home orders from COVID-19 forced lenders to come up with new solutions and solve a revolution that is likely to be irreversible. Consumers have now seen what is possible and they will not settle for anything less.
One technology introduced last year was remote online notary’s offices (RON), which allowed consumers to close their mortgage from anywhere and use software tools to verify their identity instead of sitting in front of a notary public.
Companies that enable eClosings saw a surge in growth last year. Notarize raised $ 130 million after a year of tremendous growth and saw the RON platform grow 600 percent over the past 12 months.
In its November earnings report, Zillow announced that a significant number of its users of Zillow offerings, more than 60 percent, are turning to remote online authentication.
“The second win, perhaps even more powerful than the first, is the technological tailwind,” said Rich Barton, CEO of Zillow, in the earnings report. “There has been a COVID-catalyzed and dramatic increase in confidence in and adoption of technology across all industries. Concrete relies on new digital habitsIt is highly unlikely that we will revert to the old analog methods.
“Virtual tour requests tripled when home-stay orders began,” said Barton. “Now almost 2/3 of our home purchases from Zillow Offers are digitally completed with a remote notary. We invest our dollars and intelligence in building these solutions on behalf of our customers. These new tools are immediately relevant today and there is simply no going back. They will change the expectations for new generations of buyers and sellers in the future. “
In 2020, many states began passing temporary RON laws to enable the real estate industry to continue working from home on assignments. Before COVID-19, 23 states had passed some kind of RON legislation. During the pandemic, all but two states, California and South Carolina, passed either temporary or permanent laws to allow RON for real estate transactions.
As we head into 2021, states will have to decide whether to make their temporary orders permanent, adopt some other form of permanent RON legislation, or revert to the previous way of closing mortgages. But now that consumers have seen remote closings, it will be difficult to reverse those expectations.
And as eClosings become possible in many US states, mortgage lenders are expected to jump or lag behind the trend.
Blockchain on the rise
E-closings are one of the first things that spring to mind when considering the advances in mortgage technology over the past year, but blockchain is also taking steps and preparing to make waves in the year to come.
As blockchain continues to grow in popularity, it is even threatening established institutions in the mortgage industry. Title companies saw their premium volume for title insurance grow 20 percent in 2020, but Redfin chief economist Daryl Fairweather predicts they could soon become obsolete if blockchain penetrates the mortgage industry.
But not only the title industry could be disrupted by blockchain.
“There are many different use cases – from sharing information in the origin ecosystem to maintenance to stocks and capital markets,” said Debbie Hoffman, CEO and founder of Symmetry Blockchain Advisors. “Mortgages have a very long supply chain, from the initial marketing and home purchase to taking out a loan, servicing a loan, selling a loan and the secondary market. In each of these sectors there are areas that you can operate in have a blockchain. “
As the mortgage market deviates from last year’s record highs, market participants will increasingly think about new technology options that will emerge in 2021.
Email Kelsey Ramírez