Could fintech speed up mortgage closings?
It is one of fintech's most compelling possibilities for mortgage lenders — speeding up approval times.
"This is going to be the game-changer that makes [costs] fall off the cliff," said John Harrell, a vice president in real estate lending product management at USAA in San Antonio.
The time and cost savings could be substantial when it comes to the simplest loans.
While traditional mortgage providers have been targeting 21-day purchase-loan closings, they can occur several days faster, industry officials who have worked with financial technology providers said at a Mortgage Bankers Association conference this week.
Quicken Loans' Rocket Mortgage technology, for example, can reduce closing time to a little over 15 days for a purchase mortgage and nine days for a refinance, said Regis Hardiaris, lead product developer for Rocket. Simple loans can close in nine to 15 days if they are portfolio products or otherwise can avoid more complex sales into the secondary market, Ellie Mae Executive Vice President Joe Tyrrell said.
But USAA, which has been working on providing consumer customers with technology that automates the mortgage origination process from prequalification to closing, is finding the process is "a long journey," Harrell said.
Widespread adoption of electronic closings is taking some time, said Mark Mackey, CEO of International Document Services in Draper, Utah. Most companies still use a hybrid approach of paper and electronic documents, he said.
The mortgage business' heavy regulations and complexity are partly to blame. Many lenders are shooting for closings within 15 to 21 days, but more often the process takes twice as long, according to Ellie Mae's monthly survey of its lenders.
Because mortgage lending is more complicated than other financial services, innovative technology providers and startups are finding it a business a little tougher to disrupt, so they have been partnering with traditional providers.
JPMorgan Chase, for example, recently partnered with the mortgage fintech provider Roostify, said Seth Wheeler, managing director of strategy in consumer and community banking at JPMorgan Chase.
Whether startups can completely disrupt more traditional mortgage providers remains to be seen, and the question hinges on how well large, traditional players can innovate and to what levels innovators can build up their operations, Wheeler said.
Fintech could disrupt bank revenue in five major retail business lines, including mortgages, by 10% to 40% by 2025 if financial institutions were to fail to respond to the innovation in competitive ways, according to a report by the McKinsey consulting firm in New York.
"Anyone who isn't aggressively leaning in...is going to be in a world of hurt," Wheeler said.