In the evolving mortgage landscape, Big Tech such as Intuit Credit Karma, Zillow, Amazon, Google and Facebook have made significant inroads into the lending industry by virtue of their search and advertising businesses. Within the mortgage realm, companies known as iBuyers are emerging with the use of technology to instantly buy properties and establish direct-to-consumer penetration.
Direct-to-consumer penetration fueled by large tech investments and marketing budgets add to the concerns many in this industry have about real estate professional disintermediation. On top of this, large third-party origination shops that retain servicing continue to cause consternation among originators over who “owns the customer relationship.”
“You are competing to create and provide a compelling experience to your consumer and a combination of high tech and high touch will get you there.”
With all of this turmoil, how should mortgage professionals think about Big Tech? Is it an ally or a disruptor? Is it a way to eliminate the go-between in the mortgage process — in other words, a broker and Realtor annihilator?
It depends on how the mortgage professional views their role and builds on their strengths to create relationships. It also hinges on how they utilize their hyperlocal intelligence to create effective engagement and deliver long-lasting outcomes for homeowners and prospective buyers.
Let’s look at how these large tech companies can add value to the mortgage business, where they will disrupt the business, and how the industry can adapt and thrive in this evolving environment. By understanding these trends, mortgage professionals can have the best chance to embrace technology without succumbing to its risks.
Consumer expectations
Let’s get one thing out of the way: Big Tech’s digitization of the end-user experience and data-driven business, in the aggregate, has been fantastic for consumers — and, therefore, for the mortgage industry. No business can operate today without matching the experiences offered by Amazon, Google, Uber and others, providing consumers with what they’ve come to expect: instant value, instant gratification, transactional certainty and more.
Innovations made in point-of-sale software, data validation services and e-closings/e-notes were all accelerated by the Big Tech effect. So, the mortgage industry owes these tech giants a great many thanks for pushing the business into the digital age. Several mortgage companies even use Amazon’s Alexa or other voice channels to serve borrowers.
Mortgage originators commonly use Facebook, X and Google to generate and manage leads, and to communicate with borrowers in frictionless channels across mobile, voice and desktop devices. Big Tech has also allowed the mortgage industry to move its business into a data-driven world to continuously refine business activity, from customizing lead generation to improving product selection and optimizing processes.
Most fintechs have their roots in Big Tech, gestated from Apple, Microsoft, Alphabet (Google), Meta (Facebook) and Amazon, as well as Intuit, eBay and PayPal. This is a good thing. Startups founded by industry outsiders provide a different perspective to solving a particular problem or offer efficiencies in ways that a mortgage company, which is focused on the entire spectrum of its business, is too close to see.
Big Tech has made invaluable contributions to the digitization of the mortgage industry. A good portion of mortgage lenders and servicers, as well as technology providers, use Big Tech as the core infrastructure provider through their cloud services.
Big Tech has developed new tools and services for image and document recognition that can significantly boost productivity for the mortgage business. This improves how tax transcripts, pay stubs, and other loan origination and servicing tasks can be digitized. This high- quality, verified data is essential to underwrite and close.
Enticing opportunity
By any measure, the U.S. housing market is massive. The total value of homes hit a record $47 trillion this past summer, more than doubling since the Great Recession. Homeowners collectively owe $12 trillion on their mortgages for an average debt of about $236,000. With numbers this large, Big Tech will definitely take notice.
With so much fragmentation and several other characteristics (value-chain optimization, innovation potential, etc.), there is undoubtedly an opportunity for any of the Big Tech players to take a direct role in the mortgage market. There are two main ways for this to happen.
The first is through partnerships with consumer financial services. Nearly all notable offerings — from Apple, Amazon, Facebook and others — have started through relationships with financial services institutions and related players. Initial offerings were in the payments space, then credit cards, and now checking and savings services are being introduced.
Given the fragmentation of the online mortgage and real estate brokerage markets, expect to see more partnerships similar to the one between Amazon and Realogy. While that deal was canceled during the COVID-19 pandemic, Big Tech will likely work with established real estate and mortgage companies as it expands into the space.
The second area where Big Tech will get more directly involved in real estate is by acting on the affordable housing crisis that’s impacting its workforce. Already, the likes of Google, Amazon, Facebook and others are contributing to affordable housing solutions in the communities where they operate. This will be a valuable learning opportunity for Big Tech, shaping how and when they tackle more direct roles across the entire residential mortgage market.
Continuing role
In general, mortgage originators and real estate agents should not be overly concerned that Big Tech will make them fully replaceable. That is not who you are competing with. You are competing to create and provide a compelling experience to your consumer, and a combination of high tech and high touch will get you there.
If you do not add fintech solutions to your business, you will lose clients to similar-sized competitors down the street that have adopted these tools to attract leads, nurture their pipeline, provide a digital mortgage process and retain clients. Look to leverage technology as a partner to better serve your borrowers.
There are many opportunities where Big Tech can help you do your job. These include partnerships to offer quality digital and mobile experiences to your millennial and Generation Z clients; proptech providers that can help with virtual home tours; and document management fintechs that can make e-closings seamless.
The idea to eliminate jobs usually works well in the low-value steps of a business process. But in a human-centered and emotional investment- based business such as the mortgage industry, the value of a knowledgeable real estate agent or loan originator who is a trusted adviser cannot truly be replaced.
Many of the most successful people in the mortgage industry believe in the customer-for-life model and deploy the fintech with the right fit to manage their business. Big Tech can add to the mortgage process and be a complementary partner. But if mortgage originators remain transactional and do not generate enough value for their paying clients, much like any other industry, they will be impacted by tech through reduced margins and lost business.
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So, how does a mortgage professional get back to the basics of home lending, remain a key part of a community and forge relationships that are an essential ingredient for supporting the journey to homeownership? It’s done by using Big Tech for its strengths and fintech for its innovation, then complementing both with what the mortgage professional is good at — relationships. ●
