A Mort­gage in 30 Min­utes? Fin­tech Says It’s Com­ing

National Mortgage News - - Technology - By Penny Cros­man

Quicken Loans’ Rocket Mort­gage has made waves be­cause it prom­ises to process a mort­gage ap­pli­ca­tion in min­utes and close the loan in un­der a month, but a new up­start is aim­ing to knock the firm, now the largest non­bank home lender in the coun­try, off its perch.

Lenda claims to make the fastest mort­gages out there — cur­rently two weeks start to fin­ish, with an even­tual goal of 30 min­utes in a nearly all- dig­i­tal process.

Launched in 2014, Lenda has made $200 mil­lion worth of mort­gages, is li­censed in 12 states and plans to ex­pand to 12 more later this year. Ja­son van den Brand, its co-founder and CEO, said that de­spite other big play­ers, the mort­gage arena is ripe for fur­ther dis­rup­tion. “Mort­gages are stuck in the dark ages when it comes to tech­nol­ogy,” he said. “The big banks are work­ing on tech­nol­ogy that was built in the ‘ 70s. We cater to the cus­tomer who lives on their phone, lap­top and tablet and shops on­line and com­pares on­line.”

Lenda is fol­low­ing other fin­techs that also aim to im­prove the cus­tomer ex­pe­ri­ence in the mort­gage process, in­clud­ing Lend, So­cial Fi­nance (or SoFi) and Roos­t­ify. But it aims to be the quick­est on the block.

Lenda has built an on­line mort­gage process in which, ac­cord­ing to van den Brand, the un­der­writ­ing starts while the con­sumer fills out an ap­pli­ca­tion.

“We’re able to look at their credit data to ap­prove them and make sure they’re qual­i­fied for the loan,” he said. Com­pli­ance dis­clo­sures are au­to­mated and de­liv­ered in 30 sec­onds. Doc­u­men­ta­tion is pulled au­to­mat­i­cally — Lenda lets the con­sumer log in to their bank ac­count from its por­tal to re­trieve the nec­es­sary three months of bank state­ments. (They could also down­load the state­ments from their Drop­box, Box or Google Drive ac­count and then up­load them to Lenda.)

In­come ver­i­fi­ca­tion and em­ploy­ment ver­i­fi­ca­tion are au­to­mated where pos­si­ble. To be sure, some em­ploy­ers don’t share em­ploy­ment data with data­bases used by lenders. In such cases em­ploy­ment ver­i­fi­ca­tion needs to be man­ual.

The ba­sic mort­gage un­der­writ­ing rules used by Fan­nie Mae and Fred­die Mac are built into the soft­ware, en­sur­ing the loans are easy to sell to the govern­ment- spon­sored en­ter­prises once they are made.

“You could have a hu­man try to de­ter­mine whether some­thing qual­i­fies or you can build that into tech and start do­ing it at light­ning speed,” van den Brand said. The soft­ware makes sure the po­ten­tial bor­rower is qual­i­fied and will pro­vide a no­tice of de­nial within 45 sec­onds if a red flag crops up that could lead to de­nial.

“We don’t want to waste the cus­tomer’s time if they’re not go­ing to be ap­proved,” he said.

The ap­praisal process, which typ­i­cally is not au­to­mated, re­mains a prob­lem. A hu­man ap­praiser usu­ally goes to a home, takes pic­tures, makes sure there’s noth­ing ter­ri­bly wrong with the struc­ture. It takes seven to 10 days to turn around, van den Brand said. But this, too, could be au­to­mated, he claimed.

“Ap­praisals are just data,” he said. Satel­lites could take pic­tures of a home. Com­pa­ra­ble data for the neigh­bor­hood can be looked up. Even­tu­ally, an ap­praiser won’t have to come to the house, cut­ting seven to 10 days from the process.

Lenda has also pi­loted a dig­i­tal al­ter­na­tive to in- per­son doc­u­ment sign­ing or hav­ing a no­tary come to the bor­rower’s house. It tested dig­i­tal sign­ing of mort­gage doc­u­ments through video chat with a no­tary in Jan­uary in a pi­lot project in Wash­ing­ton state.

Lenda’s back- of­fice tech­nol­ogy lets its hu­man un­der­writ­ers fo­cus on what re­ally mat­ters, van den Brand said.

The en­tire lend­ing process start to fin­ish is about 13 days, he said. Com­peti­tors take two weeks to two months, he said. Lenda also charges no fees and its rates are an eighth to a quar­ter of a per­cent lower than tra­di­tional lenders.

In the fu­ture, Lenda’s por­tal will be a place where con­sumers can ac­cess their loan doc­u­men­ta­tion and ob­tain sta­tus up­dates.

Clos­ing mort­gages within half an hour of ap­pli­ca­tion might sound like a sys­temic col­lapse wait­ing to hap­pen. But the com­pany is not try­ing to re­peat the lead-up to the mort­gage cri­sis, where banks and mort­gage bro­kers pumped out thou­sands of no-doc, low-doc and robo-signed mort­gages a day to meet the de­mands of Wall Street. In­stead, this au­to­mated so­lu­tion can en­sure cer­tain ver­i­fi­ca­tions are locked in, just com­pleted much faster.

Con­sumers, mean­while, seem to be in­creas­ingly ready for dig­i­tal mort­gages. Ac­cord­ing to a Har­ris poll com­mis­sioned by Fis­erv, 69% of con­sumers al­ready re­search loan op­tions on­line and 68% said they re­view loan doc­u­ments on­line. Among mil­len­ni­als, 48% said they would be com­fort­able re­search­ing loan op­tions on their smart­phone.

“A lot of con­sumers want an all-dig­i­tal mort­gage or a more-dig­i­tal mort­gage,” said Craig Fo­cardi, se­nior an­a­lyst at Ce­lent. “We’re not that far away where we can en­ter info on our smart­phones and check sta­tus and com­mu­ni­cate. if lenders can com­bine and au­to­mate their com­pli­ance checks, then we can get to a dig­i­tal mort­gage very quickly.”

Van den Brand says that time is com­ing faster than most imag­ine.

“We’re un­der­writ­ing cus­tomers in 30 min­utes, ap­praisals are get­ting to the point where they’re go­ing to be au­to­matic and we have com­pleted clos­ings that are border­line au­to­matic,” he said. “By 2025, as a con­sumer, you’ll be able to sit down at your lunch break and your loan will be com­pleted, done. A real es­tate agent could drive a client around to look at prop­er­ties and give the cus­tomer the keys to a house the same day. And it will be a higher-qual­ity, bet­ter-un­der­writ­ten prod­uct be­cause of data, be­cause of tech­nol­ogy.”

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