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7 Bright Ideas Illuminating Mortgage Tech

Editor’s Note: This story was originally featured in the April issue of MReport, out now

It seems many would agree that 2017 was a banner year for technology-related acronyms. From AI to IoT and VR to 3D, a veritable alphabet soup of new tech innovations were announced on a daily basis. Of course, that changed in December when the nation’s focus turned to the meteoric rise of certain cryptocurrencies turning a lucky few into overnight millionaires (and billionaires). The recent Forbes cover, “Crypto’s Secret Billionaire Club” even featured the Crypto Overlord “CZ” who went from “zero to billionaire in six months.” As one technology luminary said, “crypto stole the show.”

Those of us in the industry who did not make the Forbes list will be seeing a lot of innovative technology in 2018, much of it centered on the digital transformation of the transaction process. Here are seven technology trends to track in 2018.

1. Consumer Technology

It’s no secret that the consumer has more tech to choose from than ever before. From wearable tech like the Apple Watch to “smart home” door locks and thermostats to “connected cars,” the onslaught of new tech released this year will continue to set consumer expectations for ease of use across the real estate, mortgage, and title industry technology.

2. Artificial Intelligence

One blogger humorously awarded the term “Artificial Intelligence” with their buzzword of the year award. While AI was most definitely overused in 2017, the technology is real, and a growing number of use cases are successfully implementing it. Industry professionals should look for advancements and opportunities in two specific areas of AI: machine learning (ML) and robotic process automation (RBA).

  • Machine learning is the ability for a system to learn rules over time. These systems “learn” from each manually-reviewed mortgage document thereby reducing future exceptions. For example, if a human reviewer
    repeatedly rejects a form due to a borrower accidentally leaving a field blank, the machine learning algorithms will begin to reject subsequent errors thereby reducing or eliminating the need for human review.
  • Robotic Process Automation is a set of tools that generally automates and coordinates tasks across multiple systems. Think of “macros” for the enterprise but with added capabilities like optical character recognition, analysis, decisioning, and reporting. Though RPA vendors are industry-agnostic, several financial institutions have reported automating tens of thousands of processes with these “robots.”

3. Real Estate Technology

While not as buzzword-rich as the mainstream tech, the real estate industry is awash in cool innovations fueled by a seemingly endless supply of venture capital. It is helpful to separate real estate technology into three separate and distinct “buckets” that I call broker-tech, agent-tech, and rental-tech.

  • Broker-tech was the one to watch as Compass; the fast-growing, tech-empowered brokerage received more than $775 million in funding in 2017. Add to that the highly successful IPO and profitability of Redfin along with financing for game-changing “iBuyers” like OpenDoor and OfferPad, then you start to see that the smart money is very interested in re-imagining and re-tooling the real estate model.
  • Agent-tech is the vast array of tech tools used by agents to continually define their brand and refine their process. This includes everything from traditional CRM, lead management, and transaction systems like Zillow’s dotloop and DocuSign’s Transaction Rooms to 3D or Virtual Reality home tours and drone photography. For the technology-inclined, 2018 is a great time to be a real estate agent (or team).
  • Rental-tech is not widely tracked in our purchase and refi-centric industry, but it is growing and so worth mentioning. Startups are creating portals and apps to address the increasing importance of both the single-family home and apartment rental markets. In fact, Nooklyn recently raised a seed round to create an end-to-end leasing product for rentals and roommates.

Expect this trend to grow as TechCrunch reported in August that at least 108 real estate pure-tech startups (only in North America) garnered over $400 million in funding.

4. Digital Mortgage

The digital transformation of the mortgage application process continues to unfold. This is great news for consumers saddled with gathering all kinds of documentation from numerous sources. Many of the new, specialty tech firms are laser-focused on improving overlooked, yet troublesome and time-consuming, aspects of the mortgage application process. After all, who likes looking for copies of W-2s and bank statements, or having to ensure correct employment verification? Watch for announcements from Silicon Valley tech firm, Blend, who recently became the first end-to-end platform to be approved by Fannie Mae to provide asset verification reports for Desktop Underwriter as part of Day 1 Certainty.

5. e-Closing

If there was ever a real estate-related technology that took a long time to gain adoption, it was electronic closing or “eClosing” for short. eClosing is the name given to the elimination of the paper from the real estate and mortgage closing through the use of technology. As the CFPB pointed out in their eClosing Pilot of 2015, “eClosing is a win-win for consumers and industry alike.” In 2017, we saw rapid adoption of eClosing technology from mortgage lenders seeking to improve the consumer experience, while also eliminating common errors such as missed signatures. The major benefit for lenders is significant savings gained from being able to sell their loans faster. Last year also brought a new flavor of e-closing— the “remote online notarization”—which allows the closer or notary to be in one location, while the buyers and sellers can sign from the comfort of their own homes. If your doctor can see you over webcam, then certainly you will soon be able to close on that home you’re buying with the same convenience.

e-Closings now come in three varieties: hybrid, full, and online. Though online e-closing is now officially called remote online notarization,” it is only available in a small but growing number of states. Be sure to track this trend. Embracing everything from e-signature to e-closing can bring big efficiency. Mortgage lenders, title agents, and even the National Association of Realtors are fueling this effort.

6. Cryptocurrencies

It is fair to say that “crypto-craze” is gradually moving toward “crypto-calm.” As with the dot-com boom of the late 1990s, this craze shall pass. What will remain will probably be a viable cryptocurrency market that will impact commerce. There are many players in this space. Some will make it and some won’t. In the meantime, be sure to track the startups, like Los Angeles-based Aperture, that is promoting their asset-based Property Coin.

7. Blockchain

No technology trend mentioned here is more important to keep on your radar than blockchain. People often misunderstand blockchain because it is the technology underpinning for cryptocurrencies like Bitcoin. That said, blockchain is also a very different type of technology with great potential for disrupting entire industries (such as ours) where there are many parties to a transaction, each with their own database and documents.

In short, blockchain is a shared digital ledger that spans a network of computers where no central authority is required. No single party can edit or tamper with the records through the use of unique algorithms. As some say, the math keeps everyone honest.

Nine of the new Forbes Fintech 50 are blockchain startups with their sights set on much more than cryptocurrencies. The opportunities are endless, especially around improving collaboration in the transaction process among the parties (and the identification of those parties).

2018 is shaping up to be a great year for technology and those who use it to make a difference in the real estate, mortgage, and title experience. While there are multiple technology trends to watch, blockchain gets my bet as to which might ultimately be the most significant potential game-changer. There are some very big money players (think Microsoft, Google, IBM, Oracle, and Salesforce) investing in blockchain-as-a-service offerings that can be used by the smallest of ingenious startups to disrupt the current model.

About Author: Marvin Stone

Marvin Stone serves as SVP, Business Integration for Stewart Title Guaranty Company. He’s focused on digital transformation and blockchain use cases within real estate, mortgage lending, title, and closing space. He is also a regular speaker at industry conferences and tracks emerging technology trends across all digital platforms within and outside the industry including social media.

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