With home mortgage activity starting to slow in the wake of rising mortgage rates and home prices, some of the country’s biggest banks are turning to mobile apps to post business.
Reuters reported that lenders are picking up investments in websites and apps in order to eliminate error-prone paperwork and to make it easier and quicker for customers—particularly younger borrowers—to get mortgages.
While they are pouring billions into the efforts, the investment will provide only a modest short-term return. New mortgage originations at the big banks are at their lowest level in four years, with mortgage-related revenue dropping 21 percent since 2012, according to data from Goldman Sachs.
Take Bank of America. According to Reuters, the bank has spent $1 billion on digital banking during the course of the past six years, including a line of tech-focused mortgage products that launched last week. In one example, its app automatically fills in customers’ information to simplify the process of applying for a mortgage.
“Buying a house is supposed to be a joyful thing,” said Steve Boland, Bank of America’s head of consumer lending. “Filling out 330 fields is not, I think, something that brings you joy.”
Meanwhile, Wells Fargo launched a website and app for mortgages during the first quarter, and JPMorgan Chase is pouring $1.4 billion into technology initiatives in 2018, with plans to launch its digital mortgage product later this year.
While the big U.S. banks are eyeing the market, they already have a formidable competitor: Quicken Loans, which gained a lot of traction in 2016 with Rocket Mortgage, its mobile mortgage app. More than 98 percent of the $20 billion in first-quarter lending volume has involved customers accessing Rocket Mortgage at some point during the loan process. As spokeswoman Brianna Blust told Reuters, Quicken ended the fourth quarter as the biggest lender in terms of volume.
While mortgage activity is down overall, of the consumers who are in the market for a new home, 34 percent are accustomed to using smartphones and computers for everything, including home purchasing. “The biggest group of new home buyers in 2018 and subsequent years are folks … who are very comfortable with transacting digitally,” said Daren Blomquist of ATTOM Data Solutions, a real estate research firm. “Lenders who are catering to and marketing to those digital natives are the ones that are experiencing the most growth.”