From music to movies, from books to retailing, technology has revolutionized the way commerce is conducted in the new millennium.
Little wonder then that technology is also having a dramatic impact on the way the mortgage industry conducts business; and in recent years, perhaps one of the most significant changes to the mortgage sector has been the introduction of the “digital mortgage”.
Definitions of a ‘digital mortgage’ may vary, but in general terms, the phrase refers to a successful mortgage that may not require either a visit to a bank branch—or even a phone call to a lender. An online experience, the digital mortgage usually involves potential borrowers uploading the requisite financial documents, and completing user-friendly online forms; quite often, a digital mortgage can even ultimately be entirely paperless.
It’s worth noting there are some differences between what is considered to be a ‘digital mortgage’ and e-mortgages; the phrase ‘e-mortgage’ usually refers to loans that are backed by an electronic promissory note—and an electronic signature.
By contrast, digital mortgages can actually remove the ‘human’ aspect from the entire transaction; in effect, a digital mortgage could be said to be the mortgage equivalent of ‘self-serve’ gas stations, where no human interaction is required to complete the transaction.
The concept of digital mortgage is rapidly gaining popularity within the broader lending community.
Take the case of Quicken Loans.
In 2015, the company decided to fully embrace the notion of digital mortgages with the introduction of its “Rocket Mortgages.”
In fact, the company decided to go “all in”, in terms of embracing the concept, to the point that they placed an ad during the broadcast of the Super Bowl to introduce their clients to their new “Rocket Mortgage” product.
Quicken Loans followed that initial ad with a full-fledged, multi-million dollar national advertising campaign in support of their new Rocket Mortgage concept.
The results were impressive: in 2016, Quick Loans conducted $7 billion in closed loans via their Rocket Mortgages. Although that figure represented only about 8 percent of Quicken Loans’ total mortgage loans for the year, as a standalone lender, Rocket Mortgage would have been rated among the top 30 lenders in the country.
Not bad for a ‘rookie’ lender.
The product also became an instant success with one particular segment of the home buying public: first time purchasers.
According to Quicken Loan’s data, about 80 percent of Rocket Mortgage users were first-time homebuyers; in addition, approximately two-thirds of Rocket Mortgage customers used the platform for a home purchase mortgage, not a refinancing of an existing mortgage.
While the Rocket Mortgages remained popular among Millennial homebuyers in its first year—with 43 percent of users under the age of 35–the majority of Rocket Mortgage customers (57 percent) were over 35 years old.
And in an age when entertainment–and virtually all forms of information–are available instantaneously, Quicken Loans is quick to point out that its Rocket Mortgage slices 12 days off the loan closing process, compared to the industry average.
For both lenders and homebuyers, the mortgage process has traditionally involved literally hundreds of pages of papers; not surprising then, that one of the primary attractions of both digital and ‘Rocket’ mortgages is the elimination of paperwork, as well as the easy access for homebuyers seeking information about the status of their loan applications.
The popularity of mobile electronic communications—from tablets to smart phones—also adds to the allure of digital mortgages. The “24/7” availability of digital mortgages seems better suited to a ‘plugged-in’ world, where consumers expect to have access to information at a time that is of their choosing.
Thanks to modern technology, it is–without question–a new era for mortgage lenders. It also does not take a rocket scientist to recognize that permanent changes to the lending industry are afoot, as clearly exemplified by the rapidly growing use of digital/Rocket mortgages.