Mortgage Origination and the Digital Revolution


Last week, Warner Bros. announced that all of its 2021 movie releases —17 in all – will be available on HBO Max (a streaming service) on the same day they debut in movie theatres. This is a major break from previous practices that had given movie theatres a competitive advantage by delaying a film’s release to streaming services until after the theatre run was over.

Warner’s redirection in marketing strategy is a result of the pandemic but it can also be tied to the recognition that the consumer’s purchasing journey has migrated to online vendors. Is this a temporary move by Warner Media or has the digital revolution arrived in the movie industry?

In the New York Times article, “The Window on New Movie Releases Finally Shatters,” Kara Swisher, a well-known technology journalist, stated that “Warner Media has finally embraced the inevitable future — the rest of the entertainment industry would do well to pay mind.” This raises a question about what is next for the mortgage banking industry. Are we at a tipping point where technological advances will separate the winners from the losers?

Mortgage banking executives I have spoken with fall into two camps when it comes to the new world of selling. One group feels that significant technological changes will dramatically impact the market environment, while the other group believes mortgage origination will fundamentally stay the same with only minor changes being made.

Let’s look at the status quo argument first. Managers in this group argue that with all the investments in technology, the home loan process is still the same. They admit that technology has improved the mortgage process in important ways (e.g. automatic underwriting, back office improvements etc.) But, they believe that for the most part, it still takes a long time to close a loan even during normal times and that it still is not an easy process. These are valid points.

On the flip side, mortgage banking managers who feel the industry is going to be different ten years from now point out that the industry is still highly fragmented with the market leader Quicken having only an 8% market share. They reference the auto industry as the future playbook for mortgage bankers where GM and Ford dominate their sector with a total of 31% market share. These managers raise the question whether small or mid-size lenders can remain relevant if they do not offer innovative technology.

Executives in this group believe that adopting innovative technology like immediate loan status updates and 24/7 availability is a large lender game primarily because smaller firms don’t have the financial means to invest in this technology, or the personnel to develop and implement these systems.

Whatever side of the argument you are on, it seems clear that much about the home-buying process is ripe for change. While the housing market is still a locally driven business that involves county, state, and national legal issues, this doesn’t mean that it can’t evolve into something more efficient. The recent rise of I-Buyers in certain cities is an example of how the very act of buying and selling a home is being redefined.

As the home-buying process changes, this will have a significant impact on the mortgage industry. Consider that amid Covid-19 restrictions and precautions, real estate agents across the board are conducting business online from video open house tours to Facetime or Zoom meetings with prospects and buyers. Exactly how these developments will play out in mortgage banking remain to be seen but one thing is clear: If Warner Media has made the leap to digital distribution, other competitors and industries will follow. In my opinion, the die has been cast. Lenders that want to succeed in the years ahead must join the digital revolution to provide prospects and borrowers with fast, easy home loan transactions.