Page 30 - June 2018 Disruption Report Flip Book

TRANSFORMING MORTGAGE LENDING JAJNUUNAERY20210818
TRANSFORMING MORTGAGE LENDING
It has to be better than this—opportunities in the mortgage space
Andreeseen Horowitz’s Angela Strange wrote:
...Given the historical evolution and current fragmentation of the mortgage industry and process, the obvious question is: How can it be made better and easier today? More specifically, where can new technologies and new companies come in? And why haven’t the existing players already in the market improved the process themselves?
TODAY’S MORTGAGE PROCESS
Simply put, they don’t have to. Why bother improving the customer experience when you have so little competition? Also, banks face another set of challenges: legacy systems. For incumbents, replacing their intricate and interconnected systems is very onerous not to mention risky.
As for startups, it’s been hard for entrepreneurs to build a new mortgage company for several reasons. There’s a huge distribution challenge: Finding home buyers who need
a mortgage is costly. For example, mortgage keywords on Google are the third most expensive, so it’s difficult for startups company to acquire customers cost effectively. And then it’s even more cost prohibitive due to the capital requirements (the pool of capital used to actually grant mortgages). There’s also a catch-22 here: In order for a new company to prove out the validity of its new business model and therefore attract investors, it needs
a large amount of money to make loans with. However, capital providers are unlikely to
© 2018 by Canfield Press, LLC. All rights reserved. www.canfieldpress.com 30