The increasing number of consumers starting the home buying process online, combined with the ongoing contraction of the refinance market, will lead more lenders to start their own consumer direct channels in 2015.
"Lenders are recognizing the need to start experimenting with different delivery models," said Rajesh Bhat, the chief executive of Roostify.
Mortgage bankers have been approaching the San Francisco-based technology company about creating their own consumer direct operations. Roostify's Web-based technology lets
Lenders are seeking "innovative new approaches to consumer engagement," he said.
It might seem counterintuitive to use
Furthermore, mortgage originators realize they need to find new books of business because they've exhausted their existing customer bases, Bhat said. These originators are trying
"The referral sources that are going to be lucrative and interesting already have previous relationships that you are effectively trying to displace," he said.
So originators are looking to go directly to the consumer to get more purchase business.
Longer term, Bhat expects home buying trends to shift in that as consumers begin the process of searching for homes online, they'll also engage with a lender online to understand their financing options, often before working with a real estate agent.
"A healthy demographic of consumers aren't working with Realtors when they engage a loan officer. As that trend extends, I would expect the lenders who don't have direct-to-consumer practices to recognize that and start to invest in" this line of business, he said.
Consumer self-service tools have been a
Even with this initial contact coming through the consumer-direct channel, many lenders will still seek to pair customers with loan officers who have connections with real estate professionals.
Providing consumers a full self-service experience is a goal for some lenders. Right now, Bhat sees a more realistic interim step being "semi-self-service," where consumers do bits and pieces of the process on their own, requiring a "lower-touch" from lenders.
Warehouse Lending Revival
The warehouse lending business is also experiencing a transformation of its own. After a period when many originators have faced difficult finding firms to
Banks large and small, and even some credit unions, are
Banks have realized the return on the warehouse lending business is phenomenal, but Rubin warns that the biggest gains only come from originators with a lot of volume.
A lot of creativity is going into how these lines are structured, too. For example, some warehouse providers are allowing their originator-clients to lend out a portion of their lines of credit to other entities,
But many of these mini-correspondents are going into these arrangements with "a broker mentality," Rubin said, adding they often have no idea about the complexity of the mortgage banking secondary marketing process.
"That broker mentality can really do a lot of disruption and harm to the industry," Rubin said.
Last summer, the
Some originators making the mini-correspondent move don't have the accounting background to handle a warehouse line. Rubin recounted a conversation with a mini-correspondent lender who said he does his accounting himself at night. "I asked him what his tangible net worth was and he didn't know what I was talking about," Rubin said.
Yet there are warehouse lenders "tripping over themselves" to give this mini-correspondent and others like him lines of credit.
Warehouse lenders' relaxed standards could create a bubble, and combined with originators that aren't equipped to be mortgage bankers and products with looser terms could result in that the bubble bursting, Rubin said. That's unlikely to occur in 2015, but could happen soon after.
"I think there are a lot of situations out there where people who shouldn't have the credit are getting it and if things ever really go bad, they have no way of digging themselves out," he said.