How Innovative Banks Make Mortgages Work

“Push button. Get mortgage.”

That’s the simple value proposition touted by Rocket Mortgage — and it’s a message that was heard by over 100 million people this month in a star-studded Super Bowl 54 ad that may have cost upwards of $15 million. How can community banks compete with such bold promises and big budgets? The secret could lie in working with the same technology titans that have shaped current customer expectations around financing home purchases.

Mortgages are a notoriously volatile product for financial institutions to offer — both from an economic standpoint and a regulatory one — and many banks struggle to break even on them. While a spike in refinancing and a healthy purchase market led to increased profits in the last half of 2019, the Mortgage Bankers Association (MBA) warned that an anticipated dip in refinancing during the second half of 2020 could once again increase margin pressures. Those pressures may result in numbers reminiscent of 2018, when mortgage banking production profits fell to just $367 per loan, according to data from the MBA.

The challenges posed by heightened competition and pricing pressure are accompanied by rules and requirements that are constantly shifting. For banks, it’s not as simple as “Push button. Get mortgage” to make these loans safely, soundly and profitably.

Yet mortgages are a touchstone product that customers expect their bank to provide. This is the rock and the hard place that Brett Fulk, president and CEO of Riverview Financial Corp., found his institution between after his team worked for over a year to set up an FHA loan product.

“We no sooner got ourselves approved, with all of the vendors we needed lined up, [when] the market shifted from FHA to USDA,” he says. “We were now ready to go with a product that wasn’t necessarily the lead product anymore in our market, and I thought there has to be a better way to do this.”

The bank, which has $1.1 billion in assets and is headquartered in Harrisburg, Pennsylvania, found an unlikely ally in Quicken Loans, the parent company of Rocket Mortgage. And Fulk built a partnership that gave the bank access to technology and new products, while insulating it from rivalry with Rocket.

Riverview is working with Quicken through its wholesale program. The bank uses Quicken’s technology platform, underwriting and servicing to make mortgages to its clients, who benefit from Quicken’s slick interface and fast turnaround. Riverview keeps the customer relationship through the application process, staying front and center to provide customer service and also exploring in-house loan options if the application doesn’t conform to Quicken’s protocols.  Quicken retains the servicing for the life of the loan so customers won’t see their loans being sold and resold.

The bank’s customer relationships are further insulated by some rules of engagement that Rocket Mortgage must follow. Riverview customers do not receive offers from Rocket and, if a current bank customer applies through Rocket for refinancing, that application is immediately kicked back over to the bank.

The partnership has translated into tangible benefits. It gives the bank access to Quicken’s full suite of products, while removing processing and underwriting pressures from the bank’s staff. Quicken has made it possible to increase the bank’s mortgage volume without increasing headcount, Fulk says.

And technology isn’t just helping in terms of efficiency. Riverview makes more on transactions when they sell loans because of the volume the bank has achieved through Quicken.

Banks that are examining their mortgage businesses closely need to consider a wide range of technology options at play. Word on the street is that Black Knight Empower is a popular choice for big banks looking to completely replace legacy loan origination systems, and it’s hard to miss the mega funding rounds that Blend, a San Francisco-based fintech firm, has raised for its mortgage-focused consumer lending platform.

Headliners aside, there are numerous other technology companies helping banks of all sizes make mortgages work from multiple angles. Some help banks take part in aspects of the customer’s home-buying journey that institutions don’t usually play a part in; others streamline back office requirements and closing processes. Whatever the application, mortgage tech solutions could be a critical component to helping banks stay in the game.

Fulk says the partnership with Quicken helped keep Riverview Bank in the mortgage business. It stands to reason that the right technology partners could help other institutions do the same.

Potential Technology Partners

Blend

Powering the mortgage experiences for Wells Fargo & Co., U.S. Bancorp and community banks alike, Blend’s “one-tap” pre-approval feature launched in 2019 to compete head-to-head with Rocket Mortgage.

Roostify

This digital mortgage solution boasts impressive loan officer adoption rates. The company has invested heavily in new integrations with pricing systems, document originators and other key vendors over the last few years.

NestReady

NestReady helps banks become hubs for the home-buying journey with a co-branded search tool that locates everything customers need from their real estate agent to their ideal neighborhood and mortgage loan officer.

LenderClose

This aggregation platform accelerates loan processing by delivering all of the reports and services required to close on a loan — from flood certification and valuation products to title reports and e-recording — in seconds.

SimpleNexus

SimpleNexus automates the information flow between loan officers, borrowers and referral partners. The digital mortgage platform allows banks to track loan officer activity and see when referral partners are sharing the app with potential clients.

Learn more about the technology providers in this piece by accessing their profiles in Bank Director’s FinXTech Connect platform.