In the past, all home buying processes, such as viewing, inspecting and closing, were done in person. COVID-19 changed all that.
TechRepublic’s Karen Roby spoke with Phillip King, principal product manager for EXOS, about the home buying industry and the mortgage process since the COVID-19 pandemic started. The following is an edited transcript of their conversation.
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Karen Roby: We’ve been talking a lot, basically this entire year, about how the pandemic has impacted different industries. And we’ve all been impacted in one way or another, every industry. Truly the mortgage process, the home buying process, that was just turned on its head. We had to stop meeting in person, because that’s a very person-centered process, every bit of it. This had to be really huge, changes, quick pivoting for companies like yours.
Phillip King: Yeah, it was it. I mean, when you think of the pandemic and the ripples it sent across the industry, it certainly disrupted everybody. And we had to take a look at what technology was out there and accelerate the adoption. I think that was one good thing about our space, was a lot of the technology was there. It was just a matter of figuring out how do we adopt that technology, put it in play and use it at scale. As you said, the volume was sky high, we had low interest rates. So, we had demand for the industry to quickly adapt, put the right technology solutions in place so that we didn’t lose any ground with that increased demand.
I think when you really look at that borrower’s journey and you look at that whole experience, the beginning in the process was pretty locked down. Lenders had already been spending quite a bit of time on the point of sale or that engagement where they apply online, upload documentation, sign disclosures. All of that was already table stakes for all the lenders. So, there really wasn’t any disruption upfront.
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Then you look to the buyer, how does the buyer shop for a home now if they can’t get into homes or if they’re stuck? There were a lot of technologies, again, already available. You can get online, you can do virtual tours, and you’re looking at videos at homes and a lot of pictures inside the home. It didn’t really disrupt that much from the buyer’s perspective, because they have quite a bit of tools there available to them.
In fact, I talked to a few real estate agents just last week, and they said nearly 25% to 30% of their buyers now are making offers on homes without even visiting the home, which is quite a change.
That’s a lot of adoption to newer technology, so we certainly saw the progression. But I think when you look at that mortgage life cycle, there are two parts where there’s a lot of person-to-person interaction, and that’s the appraisal and the closing. Your appraiser normally goes out to the property. They’re engaging that customer, they’re walking through the home, taking photos and gathering information. Then they go back and do that appraisal report. The pandemic obviously created an obstacle there of not being able to be inside that home.
There were a few virtual technologies out there, virtual inspection technologies available. In fact, we introduced one just before the pandemic that allowed the borrower to download a mobile app. We walk them right through the inspection. They collect videos, they answer questions, they’re inputting data. Then we can pass that over to the appraiser and then now they’re able to do that appraisal report.
The challenge there is a little bit the regulatory environment, where what’s allowable for us to be able to do that valuation. That’s not quite there yet, but there is quite a bit of discussion going on in the industry right now of how we can use that type of technology. But fortunately for all of us, the GSEs did come forward and allow us to do exterior appraisals or desktop valuations, where the appraisers are using just the tremendous amount of data that’s available. And they were still able to produce valuations for us, so we were able to meet the demand and be able to keep those loans going.
Then the last part is just the closing. You’re obviously normally face-to-face, you’re sitting across from a signing agent or a notary, and you’re filling out that monster, huge closing document, signing all those pages. That had to change. Similarly, there were technologies there. There are remote online notarization platforms that enable us to be completely remote. The borrower can be in one place, they pull up their camera. They’re online with that notary, they’re reviewing documents, they’re e-signing things. That technology was there. I think the challenge there, again, from a regulatory perspective, the states didn’t accept that or didn’t have rules and requirements around being able to use that.
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What we had seen was a hybrid approach, where the lender would say, “Mr. and Mrs. borrower, here are all the documents you can sign electronically before the agent even gets there.” You e-sign all the documents that you can, and then the notary’s only there a few minutes. You’re signing the note, the agreement between you and the lender that you’ll pay the loan off, or the mortgage deed that needs to be recorded and notarized.
They were making our way down that process. But now we’re seeing, I think close to 30 states will allow you to do a full e-closing. We’re making progress there, adopting that technology, but the technology was really there for us to continue to be successful.
Karen Roby: Well, and how much I think the question would be, because there’s always people that say, “Well, we did what we had to do during that time to get through and to keep loans closing and people buying and selling. But it needs to go back to how it used to be, because we got to do things in person and you can’t properly assess a house unless you’re actually in it. You can’t truly buy a house unless you see it.”
But truly, what the pandemic it seems, with so many industries and this one especially, what it’s showing us is that, no, we can do things differently. And the technology certainly is there, and it’s just a matter of getting people on board. Mainly it sounds from your all’s perspective, from a regulatory standpoint, getting all of that shifted over to where, “No, it’s OK to do it this way.”
Phillip King: I think it’s a comfort level. I think it’s everybody understanding that there are fraud controls. There are risk mitigation steps you can take. I mean, it can be done in a secure fashion and it doesn’t have to be this major change. The technology has evolved. I mean, you have players out in the industry now that have spent a tremendous amount of time building out really solid platforms that we don’t have to be fearful of it. We can still do the same things.
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To your point on the appraisal side of things, it’ll be real interesting to see how those loans perform that were using alternative valuations in the years to come. Did the loan perform well, did the valuation still look to be solid? And if that’s the case, then it really makes you step back and say, “Well, do we have to enter the home every time?”
“And can we use this as an alternative now?” And to your point, there are going to be people that say, “I need to get inside that home.”
That’s obvious. There are going to be certain criteria, “I need to see that interior,” but could that be a virtual inspection? I mean, could you send that to the borrower with the right tools in place and have them walk through in a few minutes, now you’re cutting days off of that process.
You’re not scheduling with an appraiser and waiting for them to come out a week from now, you’re able to do that today. I mean, you send them the mobile app, they download it, they do it. And then within minutes you’re able to produce an inspection.
I think the technology’s there, and I don’t know that we’ll completely revert back now that we’re seeing the adoption that we are.
Karen Roby: Yeah. I’d say so. I mean, it makes things easier, quicker. If you had told somebody, even 10 years ago, that things would be done this way, They’d say, “Not a chance.” It’s just one of those things that has to be done in person every step of this, but as you’re proving certainly it doesn’t have to be.
Phil, thanks so much for being here with me today. Really interesting, again, to see the impact of this pandemic on different industries, and you guys have been impacted from really every angle.
Phillip King: We have, we have. I’ll tell you, at the same time it’s exciting. I think the potential to bring in new technology opens up artificial intelligence-enabled automation. You can speed up that entire process. Now you don’t have to do a 30-day process to have a mortgage completed. Now you can do things in days. You can really speed up that process of processing and routing documents and making sure the quality control checks are there.
It’s just exciting to see where we could go, based on where things were even a year or two ago when we were 30, 60 days to do a mortgage. You could really legitimately be in the week timeframe, so it’s exciting.