Google announced a new mortgage shopping product in late November. Partly powered by Zillow, it’s an advertising tool for lenders and a product comparison tool for consumers.
Zillow already has the products, interest rates, and reviews of nationwide lenders across its mortgage shopping system. It makes perfect sense to integrate these into Google search results more seamlessly, reducing the number of clicks users must make to find the mortgage answer they’re looking for.
There’s a lot of money flowing into those companies, as they continue to focus on lead generation. Neither is actually involved during the mortgage transaction, though.
Lead generation is profitable, but it does little to improve the experience of getting a mortgage. The process is so much more than finding the right interest rate and loan product online. Finding a lender based on product advertising is like finding a real estate agent based on sales statistics. The consumer knows nothing about how their actual experience will be.
Anyone who’s spent time working as a mortgage lender (I put in five years) knows that there’s a serious need for innovation in lending that has nothing to do with the advertising of the products. Product choice is important, but an there’s far more room for improvement in the experience of the lending transaction.
There is no reason why it takes 30 days to close a loan.
We’re used to the idea that a financed purchase will take a month or so. Real estate agents accept it as a given. In a TRID lending world, we’ve been told to assume it may take 40 days for a buyer with financing to close a sale. That’s not because there are structural barriers that prevent faster closings. It’s because the mortgage process has always back-loaded its processing and underwriting functions and put them into traditional bank-style assembly line process. It’s archaic, it’s inefficient, and it’s time to reimagine how mortgage processing works.
That’s why it’s been encouraging to see companies like Sindeo using tech money and talent to improve the mortgage transaction experience. (Full disclosure, I joined Sindeo’s agent advisory board when I learned about their model—I’m biased but it’s not my day job.) Sindeo’s first improvement to the lending process is partnering with different banks across the country to offer all of their products under one roof. Borrowers don’t have to shop around at 10 locations to see all of their products.
Some mortgage products can be acquired by borrowers at lower rates/costs through Sindeo than if they had gone directly to the Sindeo banking partner. That’s not earth-shaking innovation, but it’s a significantly better product choice offering than most banks deliver. It’s a more efficient way to shop in a truly pre-qualified status (which is not how most mortgage shopping platforms operate).
The company’s opportunity for a more transformative change is in the experience of producing the loan. By front-loading the discovery/pre-approval steps and refining processing and underwriting, they’re trying to change the paradigm of a financed purchase from a month-long process to a two week (or even shorter) transaction.
Mortgage processing often looks like an old movie: loan officers handing documents off to the inboxes of processors and underwriters. There’s no need for each application to wait for its chance to get eyeballed by the right person when it finally hits the top of the stack and he/she happens to be in the office.
The pre-approval and education processes can be front-loaded so heavily that when a borrower submits a contract for a purchase, the lender simply puts the final underwriting process into motion online. With the right software in place, the physical/logistical constraints of most banking processes can be removed. Getting borrowers fully qualified prior to the purchase requires engaging the consumer with the message that this preparation is valuable. If a company like Sindeo can prove to consumers that it can break down the time frame necessary to close a loan, that message will be much easier to deliver.
There are a handful of time-sensitive elements to financing a home purchase that can’t be avoided, but they’re nowhere near 30 days. There is about a week of delay built in to TRID regulations that can’t be avoided. But with a fully pre-approved borrower and a tech-driven underwriting system that initiates immediately upon a purchase contract, there’s no reason that financed purchase can’t happen within 20, 15, or even 10 days.
With all of the money pouring into lead gen and advertising, there’s a conspicuous lack of attention on this opportunity. The lender that changes not just the timeline of a mortgage, but the timeline of a financed real estate transaction, will be the catalyst for real transformational change in mortgage lending. Real estate brokers and agents will be organically drawn to that service provider because it will increase their bottom line, and their clients’ satistifaction. That’s innovation in lending that’s worth getting behind.