Last November, U.S.-based Quicken Loans launched what may go down as one of the biggest mortgage innovations ever: The Rocket Mortgage.
In a few words, Rocket Mortgage is a fully online system that lets people apply for a mortgage and be “approved” in less than 10 minutes. In many cases, borrowers can avoid submitting documentation manually. Instead, Quicken can validate income, employment, down payment and existing mortgage status from an assortment of public and private sources and databases (Quicken must be connected to the document source to obtain the data electronically).
Here’s Quicken promoting it in Sunday’s Super Bowl ad (see if you notice any overstated macro-economic claims):
- Will people really get a mortgage on their iPhone?
- You bet, and they’ll do it successfully. But most people would rather have their chest hairs waxed than type a five-page app with their thumbs. Expect PDA-based mortgage applications to garner no more than a single-digit share of application volume for the foreseeable future. Note: We’re talking full apps here, not glorified contact forms with just your name, phone/email and a few mortgage questions.
- Will mortgage originators be out of jobs?
- “The Rocket Mortgage system does all the work,” said Quicken Loans Rocket Mortgage Product Lead Regis Hadiaris in a Bezinga interview. Only “occasionally” does a “real live person” review the application. So the answer is, yes, it will cost mortgage jobs, but far from all, and far from anytime soon. Full-service mortgage brokers are not going extinct. Too many consumers want personal service, too many crave guidance and recommendations, and too many don’t fit today’s tight credit boxes. Besides, direct-to-consumer lenders won’t build in objective advice about other lenders’ mortgages anyway. That’s the realm of brokers. Nevertheless, as competitors copy Quicken’s technology, a sizable swath of mortgage agents will shift from being commissioned full-service brokers to hourly information providers in call centres. Quicken says the Rocket Mortgage will actually generate more action for its Mortgage Bankers, but it has to say that. It employs thousands of mortgage reps. The key question is, how long it will take for those commissioned mortgage agents to get replaced by relatively low-cost customer service agents?
- Will it fuel more rate competition?
- “There is no cost to go on to Rocket Mortgage, create an account, use the system, get a solution, get approval, lock an interest rate or get a pre-approval letter,” says Hadiaris. Moreover, there’s very little HR cost per application. That makes the margins wider and this will absolutely fuel rate competition over time. Mind you, it may not happen until Quicken gets more competition. For now, it can sell Rocket Mortgage on its core benefits (speed, simplicity and convenience) and milk the higher margins of a less-human system for all it’s worth.
- Will first-time buyers use it?
- Quicken seems to think so. “Rocket Mortgage is for the first-time homebuyer who wants to know how much they can afford or for someone looking to refinance an existing mortgage,” says Hadiaris.
“If we show a number, we show the breakdown of how we arrived at that number. If we show a payment, we show the breakdown of the various components that make it up.”—Regis Hadiaris, Quicken Loans
Will it come to Canada?
The short answer is yes, in some shape or form, but likely not for a few years, minimum.
Rocket Mortgage is a monumental IT feat. It took 500+ software engineers, designers, etc., over three years to create. It’s got automated underwriting, a real-time multi-factor pricing model, automated document validation, credit report analysis (applicants even get their credit score while they’re waiting), immediate rate locks, instant funder approval and e-signing. That is a technology project that perhaps only our major banks could complete in the next few years. Of course, no one knows what inventive Canadians are building in their garages as we speak.
On top of that, Canadian lenders’ conservative nature makes our industry a slow adopter. e-signing, which has revolutionized U.S. mortgage closings, is but one example. Certain Canadian lenders have been painfully slow in allowing brokers to submit e-signatures. That’s despite e-signing’s proven security and authenticity, full legality, positive impact on consumer satisfaction and workflow efficiency.
U.S. online lenders like Quicken Loans, Loan Depot, SoFi and Guaranteed Rates all have a huge head start on tapping the next wave of e-savvy mortgagors. Canadian mortgage providers, some of whom still don’t have online mortgage portals for their clients, have miles left to catch up. But you can bet your basis points they will.
Everything changes, who would have thought 15 years ago that Google would replace the Yellow Pages, that buying music in a store would cease to exist, that you could have 5000 books in a device the size of a paperback or that you would watch movies on your phone.
Our broker world will change as well, not overnight as Rob points out but it will change.
I read an article about this today where the Quicken President defended the ad…BUT, the article sheds some light on how he over stepped his place a bit. The app only allows you to apply and gives you a broad “approval amount” but the leg work and paper work still takes up to 30 days…especially if there is an appraisal to be completed. Here is the link. http://finance.yahoo.com/news/8-minute-rocket-mortgage-super-bowl-ad-191147514.html;_ylt=AwrTHQ3ha7pWHB4A9ARXNyoA;_ylu=X3oDMTEycHYzNzlyBGNvbG8DZ3ExBHBvcwM3BHZ0aWQDQTAxMDVfMQRzZWMDc3I-
Hey Jason, Thanks for the link. In speaking to Quicken on this, they clarified that they can obtain most documentation electronically if they’re connected to the source of those documents (e.g., the IRS for W2s, your payroll company for pay stubs, Turbotax for tax returns, etc.). If for some reason they can’t get something automatically, the applicant uploads the document to Quicken’s website. Some things must be uploaded regardless, like purchase agreements.
So in short, as long as the documentation and valuation pan out, that electronic approval is valid and the approval amount is specific (they say it’s not a range unless it’s a pre-approval). The fulfillment process is still largely human, though. That includes the appraisal when needed, job verification (a letter goes to the employer that the employer must fill out), and manual underwriting as required. And, as with all lenders, Quicken can always ask for more docs if they spot irregularities.
It’s akin to representing yourself in court…it can be done, but is it wise?
I have a Questrade account where I buy and sell my own ETFs without a broker and I do pretty well. Is that wise?
IMO anything that makes the application process easier is better. Our last mortgage took 5 hours of my life that I will never get back. I just wish this was available in Canada.
It’s a fascinating concept, but still has a long way to go. Personally, there is no way I’d want to fill out that form with my thumbs; it’s just not my thing. And I wonder why after five years of development the commercial shows their logo as backwards on the phones. That’s a really easy fix and if they can’t get that right, is it possible they are missing something else. As a broker, I really prefer a chat with my clients personally because is so much more than just the rate to consider.
Sadly, this app will gain a lot of attention from consumers everywhere as it simply panders to the average person’s wants rather than their needs. We live in a society consumed by the want (not need) of convenience and bored by the idea of talking about money. In my experience, I have come to notice how little so many people seem to care about their money after they’ve received their pay cheque.
The question is, how do we as mortgage brokers, give people the convenience that they want but, make sure they receive the service that they need? Or are we already doing it and we just need to do a better job of advertising it?
Hi Ian, One thing we know is that most consumers want it all: speedy service, simplicity, less hassle, convenience, amazing rates and sensible objective guidance — and why shouldn’t they? So many mortgage providers offer exceptional service and advice, but fall short in other areas. And that’s fine for some brokers. They can still have a viable business and be $20+ million producers, as long as they keep pace with evolving consumer needs for service delivery. But if rapid growth is the objective, it’s the providers with the whole package that will scale fastest in this day and age.
Consumers are always looking at doing business faster, cheaper, and more convenient. Businesses are looking to make more money at a lower margin. This fits the bill for both consumers and clients.
With probably close to 100,000 people in our industry (bankers, mortgage brokers, underwriters, funders, etc.) this looks to knock out huge groups of employment. Although, the adaptation time will take maybe a few years, this should eventually become the new norm in the industry.
Banks are going to be all over this and the first bank to develop the tech here will win, big time. Especially if they pass the savings to the client.
Unfortunately, as technology improves, there will be less and less peer to peer interaction and more person to app interaction.
Lebron,
Give my regards to your boss Dan Gilbert and tell him to stay out of Canada.