After going through a few mortgage transactions as a borrower, technologist Rajesh Bhat became convinced that lenders were generally falling short when it comes to automating consumer communication.
Bhat wondered why there are relatively few consumer-facing technologies for tasks like receiving automated status updates and electronically submitting documents, particularly considering the wide variety of tools that have been developed to help consumers complete tasks like tax preparation and international travel rentals.
"The mortgage process created anxiety. It seemed to be insufficient. It also seemed to be somewhat disadvantageous to the consumer," said Bhat, who today is chief executive officer of Roostify, a new consumer mortgage automation technology firm in San Francisco.
Since its launch in January, the company has been providing what it considers improved consumer-oriented origination technology through mobile automation to an undisclosed number of credit unions, mortgage brokers and mortgage banks.
Lenders and brokers are showing increased interest in making consumers more comfortable with the mortgage transaction, given that it's a key challenge in the origination business, and one that's gotten more difficult as rate-driven refinancing has tailed off and home purchase loans have started taking a large share of industry volume.
"It's nerve-wracking buying a house. Anything we can do to help keep people calm and aware of their loan application's status, we're going to do," says John H.P. Hudson, production manager at Premier Nationwide Lending. Premier just recently began rolling out mobile technology that was developed by Easy Mortgage Apps of Swampscott, Mass., and white-labeled with the San Antonio lender's branding.
The idea for Easy Mortgage Apps came from within the industry, but its developer has a background developing technologies for the healthcare and school system industries.
In those fields, there are many more advanced consumer automation tools that serve needs parallel to those in the mortgage industry, including protecting personal data and giving different users varying levels of access to information, says co-founder and executive vice president Michael Kelleher.
"They were really on the forefront of security and the importance of making a mobile experience available to multiple entities involved," Kelleher says of these industries and their relationship to the mortgage industry.
"If you take a sector like healthcare, there are a lot more technologies that are consumer-centric. A lot of the traditional things that are secure in those industries, such as secure messaging, real-time notifications, and alerts I think become fairly relevant in the context of mortgages," says Ritesh Idnani, the former CEO of Palm Bay, Fla.-based ISGN, and current co-founder, CEO and president of New York-based Seamless Health.
"If you look at the industries outside of financial services, or even within financial services, mortgage is probably a little behind in terms of being able to keep up," says Ghazale Johnston, managing director at industry consultant and technology provider Accenture's credit services unit, headquartered in Charlotte, N.C.
Hudson considers mortgage industry ties a key for success. Easy Mortgage Apps and Roostify both have industry experts working alongside non-mortgage technologists, and are looking to partner with established industry vendors.
Easy Mortgage Apps has partnerships with industry cooperative Lenders One and two mortgage broker groups. Roostify's partnerships include loan origination system vendors Xetus and Liquid Logics, as well as FormFree, a provider of digital asset verifications.
There are some industry vendors that compete in the space as well, serving both third parties and lenders. However, the number of mobile technology vendors in the mortgage industry is still limited, and most are relatively new, says Lenders One CEO Jeff McGuiness.
While larger banks and lenders like Quicken Loans can develop their own mobile apps, smaller players often lack those resources. Easy Mortgage Apps was founded last year and so far has 60 banks and credit unions using its technology.
Drawing on more advanced consumer technologies in other industries has helped new players like Easy Mortgage Apps gear up more quickly and efficiently to serve a growing interest in borrower mobile automation among small and midsize lenders and brokers.
"This did fill a void," says Lenders One's business manager Susan Malpocker. Consumer-friendly mobile applications obtainable under favorable business terms are something the group's members have been looking for, she says.
Growing consumer use of mobile devices suggests that it's increasingly becoming a preferred method of communication for borrowers.
Consumers spend 2 hours and 42 minutes per day on their mobile devices, up four minutes from last year, according to a recent report by Flurry, a San Francisco-based analytics company that studies consumers' use of mobile technology.
The volume of loans where consumers applied or pre-applied online appears to be falling at a slightly faster rate than the overall mortgage market. Online lending by this definition was down on average by 54% year-over-year in the fourth quarter of 2013, according to the Quarterly Data Report. Overall volume among top lenders in general was down on average 46% during the same time period.
So-called online lenders traditionally do a little better in refinance-heavy markets, but it still has its uses when it comes to today's more purchase-oriented loan product mix.
"We're not looking at this mobile app to be the holy grail of new originations. We are looking at it as a way to help loan officers communicate with consumers and to use it as a recruiting tool," he says.
Consumer-focused origination technology has generally taken a backseat to business-to-business tools and have developed slower than in other industries because the complexity of mortgage transactions has limited the extent to which lenders can automate processes.
"With the regulatory environment we're in, it's still way too complex to take an application through a mobile phone, but it's an easy tool for the consumer to use to have a better home-buying experience," says Hudson.
But growing borrower disclosure requirements under regulations like the Dodd-Frank Act are now helping promote the development of automated, consumer-facing technologies that can help loan officer more efficiently communicate at least some of the overwhelming amount of information they need to provide borrowers, says Kelleher.
Particular areas where more transparency is needed include how the appraisal process works and how closing costs are calculated, but the jury is still out whether using mobile technology to transmit this highly regulated information will help clear up confusion.
"Do more details confuse the consumer or does it help the consumer? I don't know if I can answer your question except to say that right now, the pendulum is swinging toward more detail and consumers are more tech-savvy than they've ever been," says Brian Benson, CEO of the La Jolla-based ClosingCorp, a provider of closing cost data and technologies.
Consumers can use mobile apps to shop for loans online, track loan status, receive notifications about missing documents needed, as well as other tasks like accessing mapping software to get directions to the title company. This helps support loan officers' relationships with borrowers, as well as with their business and real estate agent referral partners. Apps also generally pair the consumer interface with an equivalent one for their real estate agent.
"The Realtor really does still drive the mortgage bus," says Hudson. Given the nature of their work, showing houses to prospective buyers, agents are constantly on-the-go and increasingly using mobile technologies.
A consumer technology expert from outside the mortgage business can help make sure the borrower perspective stays prominent, despite all the business-to-business concerns, Bhat says.
"One thing we've observed is this is an industry where there weren't too many consumer-facing technologies, and ones that have come out in recent years have been consumer-facing, but they haven't been consumer-oriented," he says.
Bhat finds borrower communication is an area the industry needs to improve on based on his experience as a consumer.
"There is just a lack of transparency to the consumer, really from the beginning of the process to the very end," he says.