“No one wants to get their mortgage online,” I remember a veteran agent telling me when I started brokering in 2007. “People want to look you in the eye before they trust you with the biggest debt of their life.”
I wonder if that broker would say the same thing today. He definitely won’t say the same thing a decade from now.
Times can change before we know it as technology enables customers to do things online that many once thought improbable. Discover Home Loans released a recent survey that hints at how the landscape is changing. It’s U.S. data but worth a good look regardless.
The company surveyed 1,003 people and found that
- 9 in 10 used the Internet for part of their mortgage process
- 54% have filled out one or more online applications
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36% said it would be easier to get a mortgage without any phone calls or lender/broker meetings
- But yet, 94% still report communicating with their lender by phone
(In Canada, “know your client” rules are not supportive of closing a mortgage with no verbal contact.)
- 67% still met their mortgage originator in person
- But yet, 94% still report communicating with their lender by phone
- 47% got prequalified through a lender’s website
Among other things, online mortgage origination is being driven by demand from self-directed millennials, professionals and busy families. More of these folks are looking for quick, convenient, lower-cost mortgage solutions. And they’re starting to adapt their use of mobile devices from real estate research (where 89% of homebuyers use a mobile device) to mortgage research. But it’s early days in that sense, with only 15% of online mortgage consumers accessing mortgage information from a mobile device.*
It also helps that consumers are increasingly open to emailing documentation and submitting sensitive information online:
- 86% of recent homebuyers felt comfortable sharing personal information online
- 71% said they have submitted mortgage documents via email, apps or websites
- 50% submitted scanned documents
As people become less reliant on bricks-and-mortar mortgage purveyors, several elements could drive online mortgage growth, including
- Easy-to-use online expert systems for pre-qualifying customers (Centum’s is one early example)
- Online mortgage comparison tools and advanced calculators
- Electronic signing technology (it’s widespread in the U.S. but in its infancy in Canada’s mortgage market)
- Web-based chat support and video chat
- Online screen share and web presentation technology (both of which can facilitate full-service mortgage planning on the Internet)
These trends will spawn novel ways of servicing mortgage clients, ways that will become entrenched in our industry. And if such change is indeed on our horizon, then Malcolm X said something we mortgage professionals should all live by: the future belongs to those who prepare for it today.
* Data via Bendigi Technologies and CMHC
Is there any data like this for Canada?
Hi Joel, There’s scattered data, but much of what is publicly available is not up to date. CMHC puts out a good report, however, with some interesting details: http://www.cmhc-schl.gc.ca/en/hoficlincl/moloin/sure/mocosu/index.cfm
Although I am clearly biased I honestly know of very few financial products that are better suited to online fulfilment than “AAA” mortgages. If mortgage brokers were being totally honest with themselves they would admit that for clients with perfect credit and perfect income all a mortgage comes down to is a rate, a term and contract provisions. Some mortgage brokers might insist their great service is unique or brilliant planning is their forte or that the particular mortgage broker has magical insight into the future of interest rates but really those things are just sales blather.
It is hard to be honest with ones self when your livelihood is on the line but compared with Wealth Advisors who work in a universe of about 33,000 products and arcane tax laws or Realtors who are sitting a kitchen table at midnight on a Sunday trying to get 3 days worth of negotiations finalized; we as mortgage brokers have a small range of products and a opportunity to work at our desks if we design our jobs that way. So the bottom line is our business can be commoditized and moved largely online. Don’t get me wrong: some clients are “B” credit or income clients who need customized solutions, some have specialized requirements that need intense consultation but most do not. Therefore if a smooth, convenient, efficient, low-cost online alternative proves viable it will grow and eventually form a large percentage of mortgage origination.
Based on anecdotal experience I can tell you every day when clients ask me if everything can be done online without any visit and I tell them: yes, their constant reaction is “great, I prefer that”. Don’t get me wrong, I understand that not everyone will react that way but as long as enough do, more will follow. As Rob points out there is a growing segment of the North American population who want the convenience of doing things online so they can devote more time to other things they enjoy doing. No one ever got much enjoyment out of sitting at a bank branch filling out an application form.
So here is a business where the application can be completed online, the commitment documents can be sent online, the relevant questions can be answered by email or text, the condition settlement documents returned online and the follow-up on those docs completed by email or text. Naturally there will need to be some phone conversations along the way but zero need for a visit. I think the future of mortgage origination is pretty clear: efficiency and simplicity drive cost reduction and rate competition so in the “AAA” mortgage space we should assume that will be what we should expect. Online mortgage origination providing low rates on an efficient convenient basis.
Ron: If consumers are going the way of the internet, how does this all play out? Who do you see as the winners and losers in the mortgage industry?
What happened to this website? Why do the ads blink on and blink off, moving the text up and down constantly in Chrome? Horrible.
I hate to speculate on exactly what the future will bring, so many things can change, I only know one thing: the trend in financial services is fulfilment online, if mortgage brokers believe they want to ignore that trend they will need to develop very specific systems to drill down on clients who want very personal service and likely don’t care much about a rate value proposition.
There is no way the average first time buyer should be arranging their mortgage online. The mortgage broker is the main source of information about the process. Most realtors do not take the time, or in alot of cases have the understanding of all facets of the home buying and financing process. Nothing replaces the sit down meeting to go over the process, the costs and the multiple questions. You can’t do that by email, text and even the phone. If the government is truly concerned with having future problems in the housing market then the first thing they should do is require first time buyers to meet face to face with a qualified professional. Perhaps a qualification that goes across the banks, brokerages, credit unions. No where is there a course that explains all the issues a first time buyer faces. Listings, finding an agent, interviewing agents, inspecting houses, understanding costs, insurance, condo rule, land transfer tax, property taxes, setting up utilities, negotiating the best deal. Perhaps CAAMP could the leas on this and if we really had more qualified mortgage agents then meeting face to face would become valuable. As it is right now I bet 50% of mortgage agents could not even do a good job of explaining the whole process, so they need to stick to online.
Hey Mike,
Anecdotally, the overwhelming majority of first-timers that we see self-select the full service model. Most realize that their knowledge gap necessitates personalized advice, at least the first time around.
As for advice delivery, countless top brokers—those who rarely meet their clients—would take issue with the argument that one cannot impart proper guidance by phone and email. Moreover, there’s little evidence or precedent that would justify a regulator to mandate face-to-face contact between a borrower and mortgage originator.