When the pandemic led to a housing boom, the rapid increase on mortgage applications put pressure on the existing systems for approving and processing loan applications. To fill this need, the Fintech industry rapidly stepped into the void, and began expanding and diversifying.
Fintech is the service of melding financial services, with new technologies designed to facilitate their delivery to the client in a faster, easier, simpler, more efficient, and more affordable package.
Roger Ashworth, head of Citi’s research non-agency MBS strategy team said, “There’s a lot of process that happens around mortgage lending — looking at borrowers’ incomes, documentation, verification, and other aspects of enabling a borrower to get a loan to go buy a house. Historically speaking, it’s been a high-friction process market… anything we can do to streamline that process is certainly appreciated.”
Although housing is cooling as the Fed raises interest rates, and the costs of mortgages rise, there are still a lot of potential homebuyers navigating the market. As interest rates have begun changing weekly, new homebuyers who don’t have locked in rates will need to requalify, something which draws out the homebuying process and makes it even more protracted.
Fintech can make the underwriting process more efficient, and even help new home buyers save $1,000-$2,000 in costs by using technologies to automate and simplify that process.
Fintechs are even involving themselves in the process of selling homes.
Ashworth said, “When you think about moving from one home to another, you have to sell one home — it’s an emotional process [with] a lot of friction involved. There are companies out there looking to streamline that process by providing an instant offer to your home.”
There are even fintech companies that are developing innovative ways to tap into equity, which is especially helpful for those new homebuyers who missed out on the previous low mortgage rates of earlier in the year, and who risk being priced out of opportunities.
Ashworth points out, “Companies are willing to, instead of taking out a second mortgage, they’ll simply purchase a piece of equity for your home, for a share of that home price appreciation going forward. There’s a lot of potential market share across the board and a lot of frictions that can be removed in the underwriting process in the real estate transaction process.”
The process of homebuying is changing, and those undertaking it would be well served to investigate all the new systems and mechanisms available to them to smooth out the process and make it more affordable.
