While Banks and non-bank mortgage lenders battle it out to capture a larger slice of a shrinking pie, Marketplace Lenders have appeared on the mortgage lending scene to upset the pie chart. What effects will such lenders have on the future of mortgage lending, and how it gets done?
What is a “Marketplace Lender”? Presently, these are non-bank lenders offering innovative products that bring together consumers and funding sources. This may be for business loans, personal lines of credit, student loans, and now for mortgages.
Today, most homebuyers are served by traditional lenders offering traditional lending products, under traditional rules and processes. Marketplace lenders offer financing to those on the outskirts of what traditional lenders service, but for how long? When will these lenders move into the traditional mortgage market?
Since the crash, traditional non-bank lenders have found somewhat of a niche in FHA financing, now representing about 70% of all FHA loans made.
Banks, having shied away from FHA, are trying to serve the needs of the larger customers seeking more traditional conventional mortgage financing.
Marketplace lenders are offering peer-to-peer products and services to consumers who fall somewhere outside these more traditional borrowing needs.
Through the expanded use of technology, these lenders bring together those seeking alternative financing and those offering it. The process is done online and in real time through advanced technology and communication.
The online process eliminates paperwork, streamlines the process, while it tracks and ensures regulatory compliance. One example, Rocket Mortgage, has catapulted QuickenLoans to become #3 among all US mortgage lenders.
So, what does this mean for traditional mortgage lending? Mortgage lenders of today continue to believe that their process, and the use of a Loan Originator, is not going away anytime soon.
Marketplace lenders, offering online, real-time chats, present a real and present danger to that way of conventional thinking. For now, both will probably exist, but for how long?
I believe that, in time, these processes will merge to create a hybrid form of mortgage lending.
- Will you be ready to compete?
- Do have the resources and technology to offer the products and services desired by tomorrow’s homebuyers?
- Do you have the online capabilities to accept loan applications and paperwork, verify data, communicate with consumers, and ensure legal and regulatory compliance?
Marketplace lenders do.
The game has changed. Play different.