The Need for an Expedited Closing
As lenders continue to find new & innovative ways to compete for borrowers and their business, the offer of an expedited closing is garnering much attention, as it should. Lenders have increased staff & beefed up their internal systems, which has resulted in faster closings. On average, we close loans in 20 days+/-.
via The Wall Street Journal
Feeling the Need, the Need for a Speedy Close
Lenders are deploying new algorithms to close home loans faster than their competitors. Borrowers in a rush are the real winners in this race
Lenders are racing to be the fastest to close home loans
By Katy McLaughlin
Mortgage lenders are promoting a hot new feature these days—speed. Some are even offering cash payments if they fail to meet the tight closing deadlines they promise.
It took an average of 43 days to close a home mortgage in 2018, according to mortgage software company Ellie Mae . But lenders big and small are attempting to blow past these figures. Chase Home Lending announced in mid-February that it can close mortgages within 21 days—or it will pay the borrower $1,000. Eave, a Brooklyn-based lender that launched in 2015, offers up to $100,000 on any good faith deposit lost if it fails to close within 21 days. Neither Chase Home Lending nor Eave have yet needed to pay up.
If cash guarantees don’t get borrowers’ attention, other lenders’ eye-popping closing times should do the trick. LoanDepot, a large nonbank lender, just announced a new mortgage, called the “mello smartloan,” which it says it can close in just eight days. The company invested roughly $80 million in the technology that makes it possible, said Chief Operating Officer Tammy Richards. Lenda, a San Francisco-based company that launched in 2014, says its record for a mortgage close was 13 days from when the customer created an account with the lender, said Chief Executive Jason van den Brand.
While lenders say their new systems will shave time off the refinancing process, their marketing and speed promises are geared toward home purchases, where the ability to close quickly can matter a lot to a buyer competing for a house. These vanguard programs herald a sea change in the industry, experts say.
“Everyone is shooting for under 30 days to close on a mortgage,” said Theresa Williams-Barrett, vice president of consumer loans and loan administration at Affinity Federal Credit Union, which has 160,000 members.
Quicken Loans threw down the gauntlet in 2015 when it launched its Rocket Mortgage technology, enabling clients to close on mortgages “two weeks faster than the overall industry average,” and some as fast as eight days, said Jay Farner, CEO of Quicken Loans.
The mortgage industry long doubted that consumers would accept a mostly online process to secure a mortgage, said Micah Jindal, partner at Boston Consulting Group in charge of its North American mortgage practice. “All of the major players have a version of the same thing now,” with many having adopted new digital systems in last 18 months, he said.
Some lenders have created their own proprietary software to digitally interact with customers applying for a mortgage. Others use customized software provided by two San Francisco-based companies, Blend and Roostify, said Mr. Jindal. Blend currently has over 130 mortgage-lending clients, including Wells Fargo and U.S. Bancorp; Roostify, which doesn’t disclose how many lenders use its platform, serves JP Morgan Chase and TD Bank, said Roostify chief executive Rajesh Bhat. Many of Blend’s customers, even shortly after adoption, shaved between two and 10 days off closing times, said Mr. Jindal, who examined the company in a white paper he co-wrote in January.
These platforms cut down on one of the greatest time sucks in mortgage lending—the back and forth between the borrower and the lender. Traditionally, lenders have required a borrower to mail things like W2s, pay stubs and tax returns to a loan officer and the loan officer had to manually inspect the paperwork, then let the borrower know what was missing. The new technology allows borrowers to link bank and pay stub accounts to the loan application system, so the system can go in and grab the documentation or data required. Some of these platforms are designed so that the software can predict what additional paperwork might be needed for atypical cases, such as for someone self-employed or newly divorced.
Some parts of the process are more resistant to speeding up, such as scheduling in-person appraisals and states’ legal requirements for “wet signatures,” observed by a notary. LoanDepot said it can, in some cases, avoid the in-person appraisal. The company is able to check with both Freddie Mac and Fannie Mae and determine whether a property is eligible for an “appraisal waiver.” Additionally, in nine states where it is permitted, loanDepot can “do a full e-close, with a remote notary,” said Ms. Richards. Customers who take full advantage of the company’s new online capabilities could close in 18 days or less, said Ms. Richards.
A few things to note about speedy mortgages:
1) Money-back guarantees come with a raft of conditions; check offers for specifics.
2) The slowest part of any mortgage application, said Mr. van den Brand of Lenda, is waiting for borrowers to upload or send in documentation. If you want speed, be speedy yourself.
3) If you are competing for a property with cash buyers, make that clear to lenders who market fast closings. Some will provide the seller’s agent with assurance that the loan will be funded at top speed.