Tuesday, March 17, 2015

What next for Trulia?

A little-noticed decision by a San Francisco judge is sending shockwaves through the real estate industry. That’s because Trulia (which is now part of Zillow thanks to a $3.5 billion deal last year) will lose nearly 30% of its listings. This could be a significant blow for a company whose success is dependent on being a one-stop-shop for home buyers to find properties.

So why is this happening? ListHub – which is owned by Move, which is in turn owned by NewsCorp – wants to reinvigorate its own consumer marketing play, so instead of selling data to a competitor, it’s going to treat its listings as proprietary. That’s a huge shift.

While many people are predicting dire consequences for Zillow/Trulia, this development may actually benefit them in the long term. That’s because they will FINALLY be forced to become independent and actually strike deals with the listing providers. There will certainly be some growing pains along the way, but this will ultimately result in Zillow/Trulia becoming less leveraged for the future.

Sunday, February 22, 2015

Consumer Last: The Title Industry Distribution Dilemma

There was a lot of press last month about fines issued by the CFPB to leading banks for RESPA violations related to their respective business with a now defunct title company. As the Maryland Attorney General stated, the general notion is that “homeowners were steered toward this title company, not because they were the best or most affordable, but because they were providing kickbacks to loan officers who referred consumers to them.” The kickbacks included cash, marketing materials and consumer information (presumably for targeted marketing purposes). Of course, “this type of quid pro quo arrangement is illegal, and it’s unfair to other businesses that play by the rules.”

These sorts of RESPA related fines are nothing new in the industry. While these transgressions took place years ago, what’s more surprising is that it still seems to happen. The CFPB’s intentions are honorable – penalize lenders and their partners for violating RESPA guidelines in order to make them play nice.

The problem is that the CFPB applies a band-aid on the wound as best as they can. However, they are not in a position to address the root cause of issue: the consumer today does not control their destiny in a mortgage settlement. Title officers market to real estate agents and lenders in order to deliver services to the consumer. Real estate agents or lenders select the title and escrow company. The consumer winds up paying the fees in the fracas that is called a loan closing. The average consumer is so removed from the title and escrow officers that they often complete a mortgage transaction having little clue of what their fees go towards.

But what if a title professional could market directly to a consumer and differentiate on something other than a regulated price and then engage directly with that consumer? With the traditional service delivery model in place for decades, this would be a brave new world for the title industry. But imagine how it might create opportunities and align interests among consumers, title professionals, and regulators.

Thursday, December 11, 2014

A Shrinking Re-Fi Market and Implications for 2015

The reality of the vanishing re-fi market sunk in over the course of 2014. A recent Wall Street Journal article did a great job of breaking down the likely total available market of re-financing opportunities. Through some correlation and triangulation, they estimate that of the 81 million mortgages in the US, roughly 70% purchase or refinances completed over the last three years, a time of near all-time lows in interest rates. 

A Fannie Mae study found that only 10% of people holding the remaining 16.2 million mortgages would be likely to refinance. This number would likely trend higher as the government loosens GSE credit standards and borrowers holding adjustable rate products are forced to move into new loans. That said, the analysis points to a dismal potential refinancing market relative to historic numbers. Our own data supports this. Only 28% of applications submitted on Roostify this year were for refinancing. 

It is old news that the re-fi market contraction has resulted in an industry shakeout. Small shops that had spent years evergreening their old clients have either left the industry or been consumed by larger originators. However, forward thinking lenders recognize this shift to represent a new normal and are adjusting accordingly. Expect the following trends to develop and evolve in 2015 as a result of the continued contraction of the re-fi market:
  •  Originators will continue to feel pressure to grow their purchase origination business through referral development and direct-to-consumer models. The increased demand for online leads will foster new lead generation and marketplace platforms and drive expansion of current market-leading lead generation platforms
  • Continuing on a 2014 trend, we will see more mortgage originators with traditional retail divisions establish direct-to-consumer divisions. This trend will spur innovative new approaches to consumer engagement, with advanced technologies and service delivery models
  • Banks with servicing arms must consider their captive borrowers as an alternative viable market and increase focus on converting their captive borrowers into new mortgages
  • Shrinking re-fi volume will emphasize an increased focus to drive down the cost to originate. As new tools aid and enhance general consumer financial literacy and numeracy , market leaders will invest more in experimenting with an end-to-end consumer self-service experience

Lenders must no longer view purchase and re-fi as fungible when it comes to consumer engagement and the origination process. In fact, the refinancing market doldrums offers more opportunity for innovation and disruption that will likely extend to other mortgage products in the future. 

Friday, November 7, 2014

Roostify and the Yodlee FinDat Disruptor Program

We are ridiculously psyched to share that we have been selected to participate in Yodlee Interactive’s FinDat Disruptor program, a six month program that provides complimentary access to the company’s award-winning API along with strategic, marketing, and technical support. The Disruptor program brings together select early stage companies in different FinTech verticals that are all on a mission to improve and demystify the consumer experience in their respective spaces. Yodlee’s sophisticated API plugs into thousands of financial institutions and allows us to to provide our users instant access to their checking, savings, investment, retirement, and mortgage accounts in order to accelerate and simplify their mortgage experience.

As we have articulated elsewhere, the mortgage industry is slowly but surely shifting from an analog to digital way of doing business. As consumers demand more of a self-service mortgage experience, they expect to leverage their online data in the mortgage application. We see this everyday through utilization of our integrations with LinkedIn and online tax filing platforms. Consumers are eager to improve the speed, integrity, and quality of their online experience.

The implications to the mortgage industry are significant. Data that until now was grabbed from static documents through manual data entry or OCR technology is now available direct from source, at the touch of a button by the consumer. The result: a pristine, high integrity mortgage application that is completed quicker than ever and is immediately actionable to an underwriter, significantly driving down the cost and risk of the origination process.

In addition to an accelerated application and underwriting process, lenders will benefit from an unprecedented ability to intelligently prospect and triage borrowers as a result of upfront access to borrower data. The result is a more efficient and predictable experience to consumers and an improved yield and reduced risk to lenders.

We are looking forward to meeting kindred spirits in the Yodlee Interactive FinDat Disruptor program and, as importantly, bringing to our customers a unique and exciting capability that will change the way they operate. We can’t wait to get started!

Friday, October 31, 2014

Quick thoughts on MBA, and the changing role of loan officers

We had a great time at the MBA National Convention last week. We were grateful to be able to meet with so many prospective customers and partners in a setting that fostered great conversations about everything under the mortgage industry sun: consumer behavior shifts, the impact of loosening credit, the industry’s slow shift from analog to digital, etc. We intend to touch on each of the other topics on this blog at some point, but I’d like to highlight another theme that kept re-surfacing among many originators with whom we met: the changing role of the loan officer.

In short, there is a clear push among direct lenders of small-to-medium size to experiment with the loan officer (LO)-lite model. The model, which has been discussed for ages, is simple. In this scenario, they don’t acquire the consumer, they do not run numbers for the consumer and steer them into a product, and they do not hand hold. Instead, they serve as a super-processor of sorts.

The aspiration to pursue the LO-lite model is nothing new. In many ways it’s the Holy Grail – an origination with sales personnel cost of less than 15% of loan production per transaction. And as the market comes back, it will be a great way for lenders to scale up. What was fascinating was the shared conviction about the consumer’s readiness to support this model. To be sure, consumers have been routed to call center-based lenders for years now. But are consumers ready to select their own product and pricing without the assistance of a loan officer or some sort of advocate? 

The industry’s answer, particularly direct-to-consumer lenders, seems to be “Yes.” But there is also a clear frustration about the lack of tools or solutions to intelligently and definitively steer a consumer to real options. Mortgage calculators and home affordability tools seem to gather data geared towards filling out variables in a formula. But in order to confidently lock a rate, prospective homebuyers need to pull in all sorts of information that they may not even be aware of – their spouse’s student loan payment, their property holding strategy, their job outlook, how the zip code in which they intend to buy influences the risk quotient…and on and on.

So consumers seem ready to do it on their own, and the lenders seems eager…but the bridge is still coming together. 

Wednesday, October 1, 2014

News Corp Buys Move Inc. – The Media Double Down

As you probably know, News Corp has announced that it will acquire Move Inc. and its key online property realtor.com for $950M. Some might argue that the purchase equates to the rescue of a company that was perennially underperforming relative to its peers. However, much more can be inferred from the transaction. A few thoughts:

·         NAR has recognized Zillow and Trulia as an existential threat and have acted accordingly. This deal is as much about preservation as it is about achieving a “multiplier effect”. As the unique visits show, consumers have accelerated their long term gravitation towards a neutral self-service online experience that Zillow, Trulia provide and NAR needs to find a way to offer something different and higher value to the consumer. The tie up with News Corp allows them to market a matchless eyeball exposure across multiple platforms and publications. This is truly unique.

·         Real estate search properties cement their reputation as media companies, not marketplaces. Any question of where the near- and mid-term focus of these companies may be – spreading deeper and wider to capture more consumers in the real estate and mortgage search process vs. finding ways to monetize the same consumer post-search – is now answered. The transaction-ready home buyer is an attractive asset that offers many different monetization opportunities pre-transaction. A company like News Corp can take that asset into verticals well beyond real estate and mortgage to really achieve a multiplier effect on the revenue opportunity.

·         Google:Amazon :: Zillow: ? The recent mergers and acquisitions in the real estate vertical point to a vacuum that is sure to be filled rapidly by forward thinking companies. It helps to look at Google and Amazon as a comparable. Google is the market leader in online search for goods. Yet, once a consumer finds what they want, they rely on Amazon to purchase the good. Google specializes in helping the consumer find the good. Amazon leverages a sophisticated distribution and logistics network to get it to their door. As users of Google Express know, the two companies are quickly and aggressively moving into one another’s wheelhouse. But it took a while (in Silicon Valley terms) to get there.

As realtor.com and Trulia/Zillow double down on the real estate and mortgage advertising and lead generation space, one invariably looks at the opportunity to offer the same consumer a way to buy and close online the home that they found online. To be sure, transacting residential real estate is not like buying an airline ticket online, or insurance for that matter. Home purchases are subjected to local, state, and federal laws that are complex and fairly idiosyncratic. Mortgage transactions, which are tied to roughly 80% of residential real estate transactions, are just as complex, highly regulated, and require sharing of extremely sensitive personal and financial information. The hurdles to moving the mainstream online are high. In short, it is not easy – but this is the opportunity. 

Monday, September 15, 2014

The Mortgage Application Evolution

When we started Roostify, we set out make the home buying experience easier. More to the point, we sought to make the home financing process – which determines the success and timing of most home purchases – simpler and more transparent. At a time where more than half of consumers bank online, 20%+ file taxes online, and so many pull pay stubs online, the idea that we still have to fax, scan, or even capture copies of hard documents seemed antiquated and nonsensical. Yet that remains the process today for just about every mortgage.

However, the tide is changing. Mortgage companies are beginning to realize that they can replace an antiquated, paper-based system with digital tools that let consumers apply for mortgages in a matter of minutes, not days or weeks. This is not only more efficient for lenders, but it also benefits home buyers in a superheated housing market where speed can be a major factor in determining whether they have a shot at their dream home.

Yet, there is more to do to make the mortgage experience safer, faster, and more predictable.  We have often talked about the virtues of pulling information direct from a “source of truth” such as a financial institution, a payroll service, a credit bureau, or a tax filing repository. As consumers move the personal finance activities online, it only makes sense that they should be able to leverage this data in their most important financial decision.

In the past couple of months, Roostify has completed integrations with a number of personal finance and automated asset/income providers that bring this vision to life. Borrowers can link with their online tax filing provider and their checking, savings, investment, retirement, and mortgage account providers to pull in documents such as tax returns, W-2s, and account statements.

Just as importantly, they can pull data in directly from these sources into their mortgage applications, and we let their loan officers know when this data is pull from a source, which signifies a new level of data integrity that has not been seen in mortgage applications to date. Borrowers are able to do this with the touch of a button, making mobile submission even easier, and lenders are able to assess fit with a prospect more quickly and then seat their clients into loan products more confidently than ever.

There is still a lot of work to do. As data pulled direct from source can be validated as trusted and tamper-proof, it seems odd that documents conveying the same data would still be required. Borrowers require assurances on the security and privacy of their data, and many borrowers must be coached on the benefits and simplicity of pulling this information and documentation online. And now we are one step closer.