The housing market is still hot in many parts of the world, even if it looks different in 2022 than it did in 2021.
After reaching record highs in 2021, home prices are falling in countries such as Canada, Sweden, New Zealand, and Australia. Home prices in Canada have dropped by as much as 20 percent, meaning many home buyers are losing money on their properties before they close their sales.
In South Korea, the price of residential properties is expected to drop by nearly three percent in the next two years, even though interest rates will increase by a full percentage point.
The fluctuating global housing market means it’s more important than ever for mortgage lenders to get home buyers approved and into their new homes as quickly as possible.
Traditionally, getting a mortgage is a tedious and laborious process that requires borrowers to meet with lenders at multiple stages of the home buying process. Borrowers need a certain amount of cash upfront for a down payment.
Even in today’s digital era, much of the underwriting and mortgage approval work takes place in person. Borrowers need to sign mountains of paperwork and provide sufficient documentation to assure lenders that they will be able to afford their loan.
This has led to the question, is there a better way to manage mortgage lending?
To answer that question, it can be helpful to look at what other countries are doing and determine how to apply those lessons to the US mortgage lending market.
South Korea and KEB Hana Bank
As the third largest bank in South Korea, KEB Hana Bank is the pioneer of a digitized mortgage process. Within ten months of introducing its “one-click mortgage” in 2011, the bank exceeded $2.4 billion in sales.
KEB Hana Bank’s foray into digital mortgages was only the beginning. Over a decade after the introduction of its one-click mortgage, other banks worldwide are starting to recognize the power of digitizing the mortgage process.
Australia and the Rise of Digital Banking
While digital banking apps are available in the United States, they do not always have the features and conveniences borrowers want.
The Australian banking app 86400 is one such example. The name represents the number of seconds in a day, signifying that customers can access their banking information at any time of the day or night.
In addition to offering features such as quick access to account information and contactless payment options, 86400 also allows users to apply for a mortgage directly from the app. This move eliminates most paperwork and offers fast approval.
Many Australians qualify to apply for a home loan through 86400, including borrowers with a good credit history who are permanent residents or Australian citizens, PAYG employees, those with a good credit history, and refinancing or buying a residential property.
Borrowers can apply for two loans through the app:
Neat Home Loan
This type of home loan provides variable interest rates without ongoing fees. Borrowers can access repayments with a redraw.
Own Home Loan
With this type of loan, borrowers can have either a fixed or variable interest rate. Both loans have redraw options and a cashback option for certain loans.
The 86400 app was such a success that the business recently got bought by National Australia Bank for $169 million.
Crypto Success in Latin American Mortgage Markets
Mobile apps allowing borrowers to apply for mortgages are not the only way banks digitize mortgages in other countries.
Many countries in Latin America are now allowing borrowers to pay for their homes with cryptocurrency. These countries include Mexico, El Salvador, Colombia, Costa Rica, Panama, Brazil, Argentina, and Chile.
Cryptocurrency has become more prevalent in Latin American countries over the last few years for several reasons. First, it is convenient, particularly for people living in Latin America who are unbanked and would otherwise struggle to get financing through a traditional mortgage lender.
Another reason for cryptocurrency’s popularity among Latin American homebuyers is that it speeds up the homebuying process. People buying residential or investment properties can close on their homes faster by using cryptocurrency in Latin America than through the traditional mortgage lending process.
Europe Embraces Digital Technology to Speed Up the Mortgage Lending Process
Finally, it’s worth looking at some of the ways Europe is digitizing the mortgage lending process to make it easier and faster for home buyers to get approved and into their new homes. Independent companies and apps have recently come on the market to help buyers secure mortgages for their residential or investment properties.
United Kingdom – Molo
The fintech company Molo calls itself “Europe’s only digitally native mortgage lender.” Home buyers can use the platform to quickly apply for and receive a mortgage loan.
With Molo, every step of the lending process takes place online, from application to underwriting to transferring money. Molo can lend up to 95% of the home’s price and assures borrowers that their monthly payments will remain fixed for the duration of their loan (ranging from 15 to 40 years).
Slovakia, Poland, and Hungary – Hypomo
Home buyers in Slovakia, Poland, and Hungary can use Hypomo to apply for a mortgage at up to three banks based on Hypomo’s assessment of which banks are most likely to loan to borrowers based on their situation. Hypomo is a financial agent of the National Bank of Slovakia.
Germany – LoanLink 24
Finally, there’s LoanLink 24, a German fintech company that allows home buyers in Germany to find mortgage lenders. The company caters to foreign investors who often have difficulty securing loans in Germany, which has different criteria and processes than other markets.
Embracing Digital Tools in the US Mortgage Market
When looking at the different advancements other countries are using to help home buyers secure mortgages; it is clear that there is an urge to digitize the lending process.
Today’s home buyers don’t want to waste time talking to different lenders only to find out they are not approved. Instead, they want the home buying process to be as streamlined and straightforward as possible.
It seems like US mortgage lenders are behind other countries in many ways. However, some companies have stepped up and are leading the way towards a digitized mortgage process.
LendArch is one of these companies. LendArch can help companies digitize the mortgage process by leveraging cutting-edge technology and tools to improve operations and outcomes. Contact the LendArch experts to learn more.
As Chief Executive Officer, Tammy Richards brings over 35 years experience in Mortgage Banking, EClose/EMortgage, Robotics/AI/OCR/ICR implementation and more. She has been an executive and has led Nationally at Bank of America, Caliber Home Loans and most recently served as Chief Operating Officer for Loan Depot. She is passionate about and is an expert in the mortgage industry's ongoing tech transformation.
