Kathleen Pender of SF Chronicle is out with a must-read piece this weekend on why the mortgage industry is so hard to disrupt. This is a tricky topic to cover properly because the disruptors and the incumbents are both right: lenders absolutely must deliver an Amazon like transactional experience to customers, and they also must master the regulatory and financial maze of acquiring customers and approving/servicing loans at scale.
Doing it all is way harder than it looks. Here’s my take on why from the Chronicle piece:
Mortgage-tech companies are attempting to save people time and money by letting them shop and apply online and either upload their documentation or give the mortgage company permission to pull it directly from employers, financial institutions and the IRS. But it’s still a Herculean task.
A true digital mortgage “lets consumers run the loan from application to funding from any device, with the choice of working on their own or having a loan adviser jump in at any time — and enabling the lender to have a fully documented loan that passes all rules and regulations from both lawmakers and investors,” said Julian Hebron, an executive vice president with RPM Mortgage.
On top of hiring engineers and attorneys, “you need a huge investment in customer acquisition. In the end, it proved to be too much for Sindeo, and it will prove too much for the other mortgage disruptors.”
To compete, a company needs lending, technology, regulatory and marketing infrastructure, Hebron said.
One firm that does it all well is QuickenLoans. They’re the number one non-depository mortgage lender in the U.S. and the number three mortgage lender overall behind Wells and Chase. My friend Regis Hadiaris who runs Rocket Loans at Quicken shared his division’s stats with the Chronicle:
Quicken makes loans directly to borrowers, traditionally over the phone. In early 2016, it launched Rocket Mortgage, an all-digital loan whose ads are hard to miss. In 2016, Rocket accounted for $7 billion of the company’s $96 billion in loans.
About two-thirds of those getting Rocket loans are buying rather than refinancing and about half are Millennials, said Regis Hadiaris, Rocket Mortgage product lead at Quicken.
That’s just over 7% of Quicken’s total 2016 volume in Rocket Mortgage. Yet “Rocket” is the lead message for the company as a whole, and to say it’s been a successful message would be the marketing understatement of the last two years. Regis and Co hit it out of the park with Rocket Mortgage, and Rocket marketing has been the tail wagging this industry big dog.
Quicken’s ads say it perfectly: Everyone Loves Rockets.
That’s what makes them so smart. Bring everyone into the funnel with a message everyone loves even if everyone doesn’t happen to take the same path down the funnel. In the end, they still do $96 billion.
So here are the two nuanced lending/marketing lessons to take away from all of this:
1. Quicken couldn’t play marketing offense like this if they didn’t have the other three lender infrastructure pillars firmly in place.
2. Note that Quicken never mentions “fintech” in their marketing like so many startups and other players. In their narrative, fintech is just assumed, and the message is about simplification. Push button, get mortgage. Everyone loves rockets. Etc.