Rocket Mortgage, the dominant player in mortgage lending with more than a 9% market share, looks to build that further with its announcement of a partnership with Salesforce Financial Services Cloud. The move signals an acceleration of the trend toward digitizing mortgage origination, closing and servicing, particularly for smaller financial institutions. This powerful new combo will go up against several smaller companies (outlined below) that have pioneered similar services in mortgage lending, giving community banks and credit unions another option.
In addition to a market expansion move, the partnership recognizes the power of combining digital and in-person services in mortgage lending, and area where community institutions have a distinct advantage.
The stakes are high. The U.S. mortgage industry earned an average profit of $4,202 per loan on a record $4.4 trillion in new loans in 2020, according to J.D. Power’s 2021 U.S. Primary Mortgage Origination Satisfaction Survey. Low interest rates and high home values have persisted through 2021. Community banks and credit unions, hampered by infrastructure costs, risk losing out on this market unless they can partner with specialized fintechs.
Building a Hybrid Tech and Touch Model
Several factors have converged to make what traditionally was a labor-intensive, complicated, and drawn-out process become more approachable. For one, the Covid-19 era has boosted the viability and acceptability of remote interactions, both for financial institutions and potential home buyers. For another, younger home buyers not only are adept at digital interactions but many prefer them.
The time, effort and cost for a smaller financial institution to establish and run a mortgage operation in-house has been prohibitive — until the arrival of advanced technology now available.
“It’s not enough to provide consumers with electronic applications and digitized tools to streamline and expedite activities up to and including loan closing,” says Jim Houston, managing director of consumer lending at J.D. Power. “Today’s mortgage customers expect personalized, highly customizable experiences that include the right mix of technology and personal interactions based on their unique needs and wants.”
J.D. Power’s survey found that three quarters of Gen Y and Z mortgage customers who use both live personal service and digital self-service channels during the application and approval process say they `definitely will’ consider their lender for their next refinance.
The Rocket Mortgage announcement reflects this realization. “We recognize the important and personal role local banks and credit unions play with so many Americans,” says Jay Farner, vice chairman and CEO of Rocket Companies. “They have a trusted relationship with their customers.”
The Rocket Mortgage/Salesforce partnership no doubt will bring heavyweight attention to its touted “mortgage-as-a-service” capabilities. For example, it offers to provide a simple client experience to home buyers and those refinancing their mortgage, while forgoing the need for financial institutions to engage underwriters, processors, compliance professionals, or closing teams. Instead, it will work through the financial institution’s licensed mortgage loan officers, while handling all the back-office processing.
“This will be the first time a home lender will provide an end-to-end `mortgage-as-a-service’ solution through Salesforce Financial Services Cloud,” says Farner.
Read More: Top Mortgage Lending Trends for 2022
A Look at Three Other Players in the Field
Rocket’s new arrangement isn’t the only, and certainly not the first, to offer banks and credit unions an all-in-one mortgage package. Several other companies have provided similar services, albeit on a smaller scale.
San-Francisco-based Blend launched in 2012, specifically to offer automated mortgage services. In its latest development, it expanded its relationship with Paramount Residential Mortgage Group, to ease mortgage origination, closing, title, income verification, and homeowners insurance services.
Blend partners with financial institutions across the size spectrum, from Wells Fargo to Community Development Financial Institutions, and counts more than 330 financial services firms as clients. At many banks, the mortgage department is separated from the rest of the consumer banking. The reality is that consumers aren’t divided in the same way.
Blend addresses this by helping to integrate in-person and digital interactions. Loan teams have the option to start applications over the phone, in person or by sending a link to borrowers, as noted in a Mortgage Bankers Association article.
Hawthorn River, a 2018 startup based in St. Louis, provides end-to-end loan origination platforms for a variety of lending types, and specializes in servicing community banks.
“Mortgage is just one element of our solution but, surprising to me, it has rapidly become the focal point for our company based on demand from our client base,” says Jon Rigsby, co-founder and CEO. The company has grown from four customers in late 2020 to 27 now. A former community banker himself, with 20 years’ experience, Rigsby formed the company after observing software providers catering to larger banks. Now, he says, “We are focused on serving the industry with a high-value solution that allows community bankers to level the playing field in a rapidly consolidating industry.”
The company lists Salesforce.com as one of its partners, although not specifically Salesforce Financial Services Cloud.
Another company, Roostify, began automating the mortgage application process in 2012. Since then it has rolled out a variety of tech- and data-driven products and services geared specifically to large and mid-sized mortgage lenders — although it also serves community banks and credit unions. Its products and services are geared to take the manual work off the table and speed up the whole process from application to approval.
“To be clear, there will never be a 100% automated solution,” Roostify Co-Founder and CEO Rajesh Bhat, told the MBA publication Insights. “We want people to still be part of the mortgage process, and we believe that technology will allow loan teams to spend less time in systems and more time with customers, helping them buy homes.”
Roostify lists Salesforce as a partner but, again, not specifically Salesforce Financial Services Cloud. It’s mentioned among 15 other online partners. It currently supports more than 200 lending institutions and handles about $50 billion in loan volume monthly.