"Financing, if required, is handled online and when the loan is approved, the car is delivered... Could we ever buy a house like this? Maybe so."
What learnings can we apply from the shining transformation of the automotive sales model to reimagine how we will buy homes in the future?
DENVER; Jan. 7, 2021 - Today, I want to talk about reimagining how we will buy homes in the future. Reflecting on the shining evolution of the car sales model and the pandemic's acceleration of innovation in the mortgage industry, there is much to get excited about when we think about a fully digital mortgage.
Some people have said that executives working in financial services don’t spend enough time thinking about the future. I’m not sure I agree with that as I regularly meet with industry professionals who have put a great deal of thought into what’s coming next. I will admit that it’s easy to get distracted by the need to ensure full compliance with the rules in place today, that can make it hard to look further down the road.
When one misstep can put you out of the game, you tend to keep your eyes focused directly in front of you.
From time to time, it’s in our best interest to take a longer view. That’s what I want to do here.
Preparing for a brighter future
When I look ahead, I see an industry that is embracing technology. While observers in the past have called us laggards, we are finally setting a pace that matches the other industries around us. Being so closely tied to government agencies for liquidity, its sometimes difficult to see how innovation can help to dramatically change the lending process
After years of waiting to see what would happen to the first companies that attempted to go fully digital, the pandemic has driven our entire industry quickly down that path. No more waiting to see how digital transactions will pay out in the market when borrowers are knocking on our virtual doors.
We now have a robust tool set for creating residential mortgage loans electronically. From the point of sale all the way through to investor delivery of an electronic note, we have finally eliminated most of the paper from our process. But the digital process we follow today, dragging our borrowers with us as we do so, was designed for the past. Now, we have the opportunity to create a process for the future.
Reimagining our process for the future
When it comes to taking the digital home loan manufacturing process into the future, the evolution of the automotive sales model is a shining example. While we cannot compare buying a car to buying a home, there are things we can learn from that industry’s new process.
The days of browsing the lots of every car dealership in town have been replaced with browsing one of a number of online auto buying destinations. Our own industry may not be too far behind.
Once the vehicle is found, all of the paperwork is completed online. The long negotiation for add-ons has been replaced with an online menu. The buyer fills out the form and the final price for the car is returned. However, since the home is the largest single investment most Americans will ever make, we expect to see a fair amount of negotiating remain in our process.
Financing, if required, is handled online and when the loan is approved, the car is delivered -- or, in the case of Carvana’s auto vending machines, the keys and a token are delivered that allows the buyer to pick up the vehicle when it’s convenient. What a seamless experience.
Could we ever buy a house like this? Maybe so.
Consumers driving us again toward the future
Would you believe that 45% of buyers in a recent Redfin survey said they made a bid on a home without ever seeing it. Consumers are getting comfortable with our transaction.
As we get closer to the fully digital mortgage -- and I’m talking about the industry as a whole as there are a number of lenders who are already originating completely electronic, paperless, digital mortgages -- the financing part will become even simpler. Fannie Mae and Freddie Mac already have lists of approved vendors that can help lenders originate digital mortgages that they will purchase, from beginning to end.
We are a lot closer than many people think. Now, if we can just work on the home vending machine.
To learn how lenders can harness innovation and prepare for how we will buy homes in the future, contact us today to schedule a live demo of the new Mortgage Cadence Platform (MCP).
By Joe Camerieri, EVP, Client Account Management at Mortgage Cadence
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