A 40-Year Veteran of the Mortgage Industry Reflects on Change
For the first time in a long time, I opened the printed edition (yes, I still get a paper version!) of National Mortgage News (NMN) and saw real, notable changes that will transform the mortgage industry for good. The changes are coming fast. We need to be informed, nimble, and quick to understand the upstream and downstream impacts of these changes. We need to ask: “How can I embrace this future now?”
So, what caught my eye in the April 2022 NMN edition? Not that, once again, we are in a rising rate environment—refinances down, housing prices up—we’ve all seen that many times before. (I like to remind people that I was once a loan officer peddling 17% mortgages—yes, some of you remember those days!) It wasn’t that nonbanks continue to be the larger mortgage originators, nor that fraud is on the rise in a red hot housing market.
Nope, it was the headlines on page 10 that jumped out and made me realize just how much the industry is about to change for good: “ICE Mortgage creates eClose ties with Roostify and Floify” and “Fintech Haus promises home ownership for $1K a month.” These headlines made me stop and read. I’ve been waiting for FinTechs to make the impact they have been promising. Our industry is about to really go digital.
We’ve been creeping toward digital mortgages for a while. Perhaps the Mortgage Electronic Registration Systems (MERS), Desktop Underwriter (DU), and Loan Prospector (LP) were the first steps toward digitalization. E-signing followed. We have been communicating via email for a while now. Lenders have applications that provide communications solutions to customers. FinTechs like Blend evolved the application process. All of these have been good innovations to the lending process, but we all know that closing loans, especially in a high-volume environment, remains a struggle.
Now comes eClose. Ice Mortgage Technology created Encompass eClose to provide customers a fully digitalized experience end-to-end, which is now being integrated into the point-of-sale platforms run by Roostify and Floify. This an exciting change that should greatly benefit all aspects of lending. Lenders like Figure have been using eNotes (digital promissory notes) and blockchain technology (digital ledgers) for a while. But once a leading loan origination system embraces eClose and eNotes, the industry will forever be changed.
And then there’s Haus. This FinTech has created a product where buyers can purchase a home for just $1,000 per month. What?! The concept is that buyers put 10% of the home’s value down and enter into a partnership with Haus. The homeowners pay taxes, insurance, maintenance, and HOA fees and can buy more equity or sell equity throughout the 10-year partnership. Equity is traded through HausCoin, a cryptocurrency built on the Ethereum blockchain. Haus is treated by the regulators as an investor, not a lender, and registers assets as securities with the Securities and Exchange Commission.
It’s interesting that NMN put these articles opposite each other in its edition. Turn the page and there is further discussion about tech choices in lending, and Figure pops up as having originated and sold eNote mortgages through the Provenance Blockchain marketplace in the form of non-fungible tokens, or NFTs. This further expands the burgeoning technology into the secondary market.
We’re on the Verge of Real Change
The last time we experienced an upheaval in the mortgage industry was the tide of regulations that swept the industry as a result of the financial crisis of 2008. The changes enacted improved customer protections and, in general, improved the industry, putting originators on a more level playing field. The industry changed forever with the advent of increased regulatory scrutiny.
Once again, we are on the verge of real change. But unlike the financial crisis, this change is, for once, being instigated by our own industry. I have waited a long time to see true innovation in the industry. New entrants thinking they could merely improve the processes have largely failed. The typical mortgage lifecycle just did not allow for the kind of efficiencies and streamlining that everyone promised. The move toward digitalization, however, and embracing new technology, including blockchain and cryptocurrency, could truly effect change. How the rest of us catch up, including regulators, remains to be seen.
Sweeping change cannot be achieved by just a few players. It needs to involve the whole industry: lenders, vendors, regulators, states, borrowers. It needs to be collaborative and inclusive. Slow adopters may get left behind as the next generation of home buyers embraces those lenders in the forefront. So, remain optimistic, wait and see how things go, but don’t wait too long. It’s an exciting time to be a lender!
Now, can we see some innovators in the mortgage servicing space?
Note: The opinions expressed herein are the author’s and do not necessarily reflect those of Treliant, LLC or its affiliates.