The mortgage industry is changing. It’s evolving. And it is happening right now, in the plain sight of anyone who wants to buy a home using an online service provider. Yet, according to insiders like Dan Schatt, mortgage professionals miss it big time!
Nobody knows exactly what the new lending ecosystem will look like when all of this creative destruction finally settles out. But there is no question that the future of home financing is being created today.
Here are ten ways mortgage professionals (and even consumers) can prepare themselves for what’s coming.
1) The New Lending Landscape is Bigger Than You Think
In the post-2008 world, only a handful of financial services companies have survived – and even fewer have thrived. The landscape has been completely reworked by new regulations, increased consumer distrust, and an explosion in fintech innovation. This has created a lot more competition for a relatively small number of dominant players.
This means that it’s not just the Big Banks that you have to compete with. Lenders big and small are going online – some in a big way by acquiring a technology platform and others by partnering with those who have. As a result, any problem a homeowner might experience – from down payments to credit issues, from income documentation to high debt ratios, from speed to affordability – is being addressed in was as simple as plugging into a ready-made solution.
2) Competing is Harder Than You Think
Even if you can compete on price, speed, service, or some other dimension of value – are you ready for the complexities of working with non-traditionally credit-worthy borrowers? If not, now may be a good time to at least explore your options.
3) Non-Traditional is the New Traditional
Virtually all new mortgages today involve some combination of higher debt ratios (i.e., more money borrowed), lower down payments (i.e., less money in the bank), non-traditional credit histories (i.e., rent plus utility bill payment history trumps traditional revolving accounts like credit cards) and financial support from sources outside of conventional employment income (like freelancing gigs). Are you ready for these changes?
4) Your LOS is Not Enough
If you are an originator, your Loan Origination System (LOS) – the software platform that powers how you input information about loans into a lender’s system – is not enough. At best, it only solves for speed and accuracy of data entry. Unfortunately, most companies leave it at that. A good technology partner will provide more than just data entry, however. They’ll help you create custom reports based on this new type of customer who might have little-to-no credit history or high debt ratios, who may work in occupations providing limited income documentation, or whose financial support comes from non-traditional sources like freelance gigs, public assistance programs or even crowdfunding campaigns. And since they’re constantly working with fintechs to stay ahead of the curve, your technology partner won’t just help you speed up and clean up data entry. Instead, they’ll help you access tools to create a 360-degree view of a borrower so that you can focus on making the right choices – about which loan products to offer, who’s a good vs. bad risk, etc.