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Robo Mortgages

…Robots are racing to replace mortgage brokers.”

Like it or not, we’re going to see more and more headlines like this.

This particular story comes from the UK, where British entrepreneurs have a head start on automating mortgage services.

On this side of the Atlantic, brokers seem largely unconvinced about robo-lenders eating their lunch. This recent podcast is one example. “Am I concerned that I’m going to be disrupted out of a job by an app? I am not,” said co-host Dustan Woodhouse, arguing that a human touch is needed because mortgage clients have unique requirements and large sums of money at risk.

Co-host Scott Peckford added, “The people who focus on giving advice and can add value to a transaction are still going to have lots of work…Not everybody wants to do E*Trade.”

No doubt, most successful established brokers take comfort that their existing high-touch model and referral sources will continue streaming a fountain of business. But it’s a different future facing many newer agents. I’m talking about those who operate run-of-the-mill low-tech brokering practices without the benefit of large tappable client databases. For them, automated mortgage systems (and their deep-rate discounts and online decision support tools) may pose greater danger.

Then again, some in our business pooh pooh the entire premise of automation slashing rates and commissions. They hold that mortgages are too complex to be widely automated, suggesting that most consumers need (and will gladly pay a premium for) one-on-one advice.

Well, somehow firms like Betterment have figured out how to code self-serve platforms and amass up to $5 billion in customer assets. And they’re doing it in just as complex a business: investment management and asset allocation. They’d probably be the first to tell us that AI is easier to program for prime mortgages, where fewer variables go into product selection.

How much brokers worry about all this will vary on the uniqueness of their business model, their technology, their referral networks, their database size and so on. Fortunately for our profession, things like non-prime underwriting, lender follow-up and mortgage fulfillment (i.e., the closing process) are harder to automate, assuring a place at the table for traditional brokers with Alt-A files, “B” deals, time-sensitive conditional purchases, portfolio rental financing, commercial financing, etc.

If “A” business is your meat and potatoes, however, the world is about to get more interesting. “Your referral relationships aren’t going to dry up in the next 6 months,” writes mortgage technology expert Jesse Passafiume. “…but there will be an increasing number of digital savvy competitors that earn business—your business. The time to adapt is now.”