Last month we were really lucky to host several of our major customers and valuation firm partners at at CoreLogic's biggest mortgage and financial event of the year - EPIQ™ 2019.
EPIQ is a meeting of the major mortgage lenders, government housing agencies and real estate professionals looking at the trends that are changing the markets and the innovations that are changing the future.
The major market forces in the American housing market are very similar to ours:
- 50% of people prefer to apply for mortgages digitally
- 45% of millennials make an offer without physically seeing property
Challenge of housing affordability
- 25% of construction costs tied up in red tape
- 250,000 unfilled construction jobs
- 400,000 dwellings being demolished each year
Cost pressure on lenders
- Cost to provide a loan is $9.3k (up from $2.5k) due to poor loan origination productivity (a loan officer used to write 200 loans per month, now this is 35)
- Doubled in the last decade, limiting housing supply and increasing costs
From a market perspective, USA is now in its 121st month of home value growth. While this is slowing the prediction is that home loan values will continue to grow, all be it at a slower rate, given the stimulus of lower interest rates. Today, you can get a 30 yr fixed rate mortgage at 3.80%!!
Fintechs remain well ahead on digital origination, but remain a long way behind in the time to get an unconditional home loan. Overall, the themes remain customer first, digitalise origination, automate where possible and provide humans when needed. It is purely an execution race. All banks are racing to digitalise the origination process, it is getting more and more standardised, which is limiting risk appetite (as all about winning the vanilla deals). This will stimulate a greater need for differentiation, which will most likely be achieved through a more holistic experience (ie getting moving beyond loan origination and more into the ‘find’ part of the customer journey). This is an area CoreLogic is very much looking to support.
Many of the presentations focused on home loan affordability, which seems to be bigger than an Australian and NZ problem. To combat this, considerable focus is on the following:
- Housing construction technology. Today 13% of all homes sold are manufactured off site (and can be built in 5 days!!)
- Build to rent is an increasing trend for developers. One developer had 8000 applicants for their 500 built homes (typically side by side single family dwellings)
- Freeing up more land for development
The overwhelming trend is better utilization of data and re-imagining the mortgage origination process into many parallel processes rather than digitising the current linear workflow
The major mortgage origination firms such as Loan Depot and Quicken have incredible user interfaces for their loan officers, with highly prescriptive workflows, strong interfaces to multi credit bureau scores and detailed comprehensive credit information showing all liabilities and payment status.
Some comparisons and ideas for our markets:
- They have interfaces to a number of major payroll aggregators that cover a large number of salaried employee’s nationwide and use this for income verifications
- The largest origination firms are settling $4bn per month of mortgage lending growing to $4.5 this quarter
- They are working with the real estate community to generate leads but it seemed that the majority of leads come via digital comparison sites and a physical distribution footprint
- Their Loan officers can work remotely and make themselves available or unavailable via the loan origination ap (like a well know ride sharing service!)
- It only takes 6 weeks to train Loan officers
- They focus more on the customer conversation than the process as the system takes care of much of that
- They are only now getting the ability to rely upon AVMs in specific low risk originations (amazing for the Australian and NZ community)
- There’s a similar income and expense debate as in Australia (although the regulation is far more prescribed in the US around a 43% debtt to income) and the lenders can pretty much rely upon what the borrower/bureau tells them rather than detailed verifications
- The major AVM providers have 40 years of data, including 34m appraisals
There are some incredible innovations emerging many of which we will be bringing to the region in the very near future. Take a look at the following video to get a glimpse of some of these: https://bcove.video/32Z1ro1