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Not Even Rising Rates Can Curtail Industry Innovation

A recent blog by Paul Hurst, Chief Innovation Officer for First American and Managing Director for Parker89, analyzed the issue of rising mortgage rates and the impact of this rise in rates on technology and innovation that has pushed the mortgage space forward in the digital era.

In his role with First American, Hurst is responsible for identifying opportunities to innovate through strategic venture investments, partnerships, and mergers and acquisitions. He also serves as Managing Director of the company’s venture investing arm, having guided investments in more than 20 high-growth proptech companies. Prior to joining First American, Hurst was a partner at a leading international consulting firm, where he applied a process-based approach to innovation to launch and scale five venture-backed companies across three continents, spanning insurance, financial services, and real estate. Before that, he advised Fortune 100 companies on corporate strategy, mergers and acquisitions, and digital transformation.

“The impressive pace of investment in real estate innovation in recent years will be hard to match,” said Hurst in the blog. “In 2021, venture-backed proptech companies raised nearly $21 billion–according to Crunchbase. And that doesn’t include the substantial sums that large, established players have poured into enhancing their transaction processes.”

In “Five Areas Real Estate Innovation Undeterred by Rising Mortgage Rates,” Hurst looks at five major areas that are driving the transformation of the real estate transaction experience for market participants, and remain critical despite market fluctuations, including:

  • Streamlined, digital document management and eClosing: Through the increased adoption of electronic and digital processes, the industry inches closer to enhancing its digital grip on the process. As consumers grow more comfortable with the adoption of digital processes, the inevitability of an eMortgage becomes more of a reality.
  • Adoption of remote online notarizations (RONs): Ushering in an era of social distancing during the pandemic, the process of remote online notarization was hastened. Now approved in 40 states, RONs offer a fully digital process in which electronic documents are eSigned and eNotarized, thus speeding up the process.
  • “Instant” title decisions: As advancements are made in the artificial intelligence (AI) and machine learning field, simple steps and advancements equate to expediting the process through investments in automation and forward advances in product offerings. Hurst cites in the blog that more than 95% of refi transactions now flow through First American’s Clear2Go automated title decision engine. “Through the use of Clear2Go, First American has achieved a fully automated underwriting decision on 50% of its residential refinance and home equity transactions, and another 40% of those are partially automated,” said Hurst.
  • An efficient digital closing process: Combining several digital processes feeding into the closing, takin steps toward an all-digital mortgage transaction will require participation by several parties involved in the overall mortgage transaction. “Demand for a streamlined real estate transaction closing process is the secular shift driving the growth of Endpoint, First American’s digital-native, full-service title and settlement services company,” said Hurst.
  • More efficient funding of transactions: Overlooked in many innovation discussions is the opportunity to streamline the transfer of funds in a real estate transaction. The ability to manage the escrow process more efficiently and transfer funds any time can significantly enhance the efficiency of the closing process.

“Established lenders are unlikely to throttle back on innovation in any significant way in the medium- to long-term, particularly in areas where that innovation can reduce operating expenses,” explained Hurst. “And newer models, such as iBuyers and Power Buyers, rent-to-own, single-family rental (SFR) investments, and fractional ownership will continue to make the real estate market more liquid and deeper. That means home buyers and sellers, real estate agents, lenders, developers, and other market participants can expect further transformation in their ability to initiate, evaluate, negotiate, manage, and finance real estate transactions.”

About Author: Eric C. Peck

Eric C. Peck has 20-plus years’ experience covering the mortgage industry, he most recently served as Editor-in-Chief for The Mortgage Press and National Mortgage Professional Magazine. Peck graduated from the New York Institute of Technology where he received his B.A. in Communication Arts/Media. After graduating, he began his professional career with Videography Magazine before landing in the mortgage space. Peck has edited three published books and has served as Copy Editor for Entrepreneur.com.
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