The mortgage market has been stagnant for a while now, but new tech startups are shaking up things in the industry, pushing innovations on traditional lenders who are not necessarily happy to see a piece of their market go to new players using automated online processes.
Silicon Valley Players
It is hard to make a dent in the U.S. home loan market that totals close to $1.45 trillion, but some of the upstarts that are tech focused have been making waves and causing the industry to take a good look at them as a possible future threat. Companies such as SoFi, Roostify, Sindeo, and Lenda are making big banks, which are tentative about increasing their lending following the billions of dollars they lost settling lawsuits relating to mortgage, rethink their strategies.
The new upstarts hope to benefit from the fact that lending has been moving away from the banks to lending companies such as Quicken Loans. These types of lenders now cover nearly 38 percent of the home loans made in the U.S., a significant increase compared to 2013, when it was around 27 percent.
Lower Costs a for Bigger Market Share
The biggest advantage new tech startups have over big banks is the lower costs that come with an automated process. For example, Lenda has managed to fund over $60 million in mortgage refinancing by cutting costs through the use of technology, thereby offering loans at significantly lower rates when compared to traditional loan providers.
The whole process is set up so that all interactions with clients are usually limited to short conversations of 5 to 10 minutes long. In some, although rarer cases, not even that is necessary. Speed is an additional benefit, as people who apply for a loan can discover if they qualify for one within moments of answering a list of questions online, saving both time and money for the company and the applicant.