“Evangelize these ideas early and allow people to vet them out before adopting them,” he said, noting that the Silicon Valley startup culture of quickly throwing untested innovation into the market place and failing fast does not work as well in the mortgage space where so much is at risk — particularly for the mammoth government-sponsored enterprises like Fannie Mae and Freddie Mac and big bank lenders. “You can’t just apply technology and analytics … you have to apply things with rigor and do a lot of back-testing ... (or) it can result in billions of dollars in losses for these big organizations.” Marshall said nonbanks have been more open to leveraging data and technology in the mortgage origina- tion space.

market share and traditional banks losing market share compared to the first three quarters of 2017. Among the top 10 mortgage origi- nators in terms of origination counts in the first three quarters of 2018, the five with the biggest increase in market share were all nonbanks: United Wholesale Mortgage, Fairway Independent Mortgage, Guaranteed traditional banks among the top 10 originators saw a decrease in mar- ket share compared to a year ago: Wells Fargo, Bank of America and US Bank. The exception to this was JPMorgan Chase, which posted a 5 percent increase in market share. While most of the top 10 origina- tors posted a year-over-year de- Rate, LoanDepot and Quicken. Meanwhile, three of the four

said, noting that the industry was not yet ready for such a tech-heavy solution, both in terms of psychology and availability of data. “The valua- tion data was stuck in a PDF form, so it was really hard to have high-level understanding of valuation condition and change over time.” While Clear Capital pulled back from the ahead-of-its-time SaaS product, the company continued to push the envelope when it came to leveraging technology for its valuation services, according to Marshall. In the wake of the Great Recession, the industry began to recognize the need for more data- and tech-driven solutions. “Once Freddie and Fannie intro- duced the uniform collateral data portal (in 2011) and other types of data, and started getting data in XML that’s when we started viewing the valuation industry as a data industry and not a PDF industry,” he said, adding that Clear Capital clients no- ticed the company’s internal analyt- ics were better than anything else in the marketplace and began to invest in those types of analytics for their own businesses. The push for innovation paired with patience for the industry to catch up is what Marshall refers to as “inno- vation gravity.” “We’ve always wanted to innovate just ahead of what the industry is will- ing to adopt,” he said. “Let’s do some really cool things today but let’s look ahead and think about what can be done because what can be done is a lot easier than what should be done.” The drive toward a digital mortgage is one example of where the concept of innovation gravity can be employed, according to Marshall. In the context of the digital mortgage, there is a gap between what can be done in terms of efficiency and transparency for borrowers, and what should be done in terms of introducing too much risk to the marketplace. That gap can be bridged by innovation gravity, Mar- shall said.


Q1 TO Q3 2018

Q1 TO Q3 2017


Wells Fargo

JP Morgan Chase

United Wholesale Mortgage


Bank of America

Caliber Home Loans

Fairway Independent Mortgage

We’ve always wanted to innovate just ahead of what the industry is willing to adopt. Let’s do some really cool things today but let’s look ahead and think about what can be done because what can be done is a lot easier than what should be done.

Garanteed Rate

US Bank


a 9 percent decrease in purchase originations. Again, the exception for traditional banks was JPMorgan Chase, which posted a 20 percent increase in purchase originations. STOP THROWING PEOPLE AT THE PROBLEM LendingHome is the epitome of a nonbank startup with tech roots that’s set out to disrupt the mortgage indus- try through data-driven innovation. “We saw the space as way too brick-and-mortar driven, way too paper-driven and just throwing peo- ple, people, people at the problem, and we thought we could do better,” said Matt Humphrey, co-founder and CEO of the Pittsburgh-based compa-

ny, which launched in 2013 and has since generated more than $3 billion in loans, primarily in the form of short-term bridge loans to fix-and- flip real estate investors. Although Humphrey initially had the broader mortgage marketplace with its average cost of more than $8,000 per mortgage origination in his sights, he decided to start with the low-hanging fruit of the fragmented fix-and-flip lending space, which his- torically has been the domain of local “hard-money” lenders charging dou- ble-digit rates on short-term loans. “These real estate operators are not being forced to go to the predatory local lender; they can have certainty of capital with us,” said Humphrey, noting that the typical hard money

loan charges 3 to 5 points upfront and comes with a 12 to 15 percent interest rate while the typical LendingHome bridge loan is 1 to 2.5 points upfront with an 8 to 10 percent interest rate.

“The nonbanks are really inter- ested in grabbing market share, and they are all about the user experi- ence,” he said, noting that user expe- rience focus is good for the big banks as well because if they frustrate the borrower during the mortgage origination process it could put other business that consumer does with the bank at risk. “We and our lender clients are absolutely in the business of not frustrating the borrower.” An ATTOM Data Solutions analysis of publicly recorded mortgage origi- nation data in the first three quarters of 2018 shows nonbanks gaining

crease in total mortgages originated, driven by a sharp drop in refinance originations, the majority of non- banks posted double-digit gains in purchase mortgage originations. United Wholesale Mortgage led the way with a 51 percent increase in purchase originations followed by LoanDepot (30 percent increase), Guaranteed Rate (25 percent in- crease), Fairway Independent Mortgage (19 percent increase) and Quicken (12 percent increase). Meanwhile Wells Fargo posted a 24 percent decrease in purchase origi- nations, and Bank of America posted

We saw the space as way too brick-and- mortar driven, way too paper-driven and just throwing people, people, people at the problem.


16 | think realty housing news report :: february / march 2019

thinkrealty . com / hnr | 17

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