Oct292018

I recently teamed up with Joe Tyrrell, EVP at Ellie Mae, to speak at the California Mortgage Association Conference in Las Vegas.  Joe and I discussed “Understanding the Digital Mortgage” from the Hard Money Lender (HML) perspective.  This is an important topic and it will be broken up into two parts.  This month we will review the Requirements for a Hard Money Digital Mortgage and then next month we will review the Elements of a Hard Money Digital Mortgage.

 

Bill Emerson, CEO of Quicken Loans, at the recent MBA Conference stated that his company strives to “Continue to Improve the Customer Experience”.   This customer experience mantra is also manifesting in the Hard Money world where, many times, how lenders deliver is at least as important as what they deliver.

 

It is tough to find a real definition of a Digital Mortgage, but we know besides a better “experience”, that the elusive Goal is to provide a borrower with a seamless and collaborative digital experience that uses Artificial Intelligence, self-service, standardized data, automated decisioning and intelligent workflow to create a fast, compliant, secure, pleasurable and less expensive mortgage.

 

While we might know what conventional borrowers desire, the question remains: What is driving the need for a Hard Money Digital Mortgage for the Real Estate Investor or Business Owner?

  1. Acceleration of the Self-Service Culture: For many transactions, customers prefer self-service?   When was the last time you went inside a Bank Branch to get cash vs. the ATM?
  2. Online Collaboration: Group texts, emails and transaction management systems are all commonplace now and borrowers want the same synergy in their loan request.  In a Hard Money Loan, collaboration amongst company contacts, Real Estate Agents, Insurance Agents, Appraisers, Title, Escrow, and other stakeholders is a necessity
  3. FinTech Creating Efficiency and Speed Requirements: Typically, a hard money loan is a manual process with many checklists. Legacy systems anchor current lenders into processes that do not leverage today’s cloud-based technologies.  FinTech lenders, armed with institutional capital, are entering the Private Money space.  For example, Amazon just announced a $1 Billion venture into Private Money.   Current Hard Money Lenders need to embrace change and the need to create a faster, cheaper and more pleasurable experience or risk becoming the next Blockbuster or Sears.
  4. Increased Loan Production and Servicing Costs: According to the MBA, the cost to originate a loan continues to rise and is now approximately $8,500.  Similar regulatory, software, employee and commission costs exist in Hard Money Lending.  The right technology should make the online intelligent application, underwriting, processing, servicing and loan officers more efficient and effective, directly impacting the cost associated with closing each loan.
  5. Increased Competition: In addition to traditional Hard Money Lenders, these firms from a variety of industries entering this market segment:
    1. Non-QM Lenders expanding their stated income products as conventional refi’s dwindle
    2. New FinTech Competitors – Lending Home, SoFi, Realty Mogul and others
    3. New Institutional Lenders – Blackrock, Wall St. Firms
    4. PACE and HERO Lenders – Energy related loans

 

The requirements to change are clear.  The process and steps to get there are murky.  We know that the winners will be those that embrace this transition, apply technology wisely and delight their customers.

If you have a hard money loan requirement, and want a great experience, please contact us at 949-632-6145.