The Rise (And Fall?) Of “Fast Food Mortgages”

For most of us, getting a mortgage is one of the biggest decisions we’ll ever face. Before securing my own I spent hours doing preliminary research and met with a broker on several occasions. True, my self-employed status made the process a little trickier than most, but I still don’t think my path was all that out of the ordinary.

Now, imagine getting a mortgage in just eight minutes.

Except you don’t have to imagine it, because a company in the US is making it a reality. Rocket Mortgage, powered by Quicken Loans, aims to secure a mortgage for users – and that’s an actual mortgage, mind you, not a decision in principle or a pre-approval – in less than ten minutes.

Rocket Mortgage made headlines earlier this year, with their “Push Button, Get Mortgage” campaign ad that debuted during the Super Bowl. The response was… sceptical to say the least.

“Let’s do the financial crisis again, but with apps!” tweeted Dave Weigel of the Washington Post. And Weigel wasn’t the only one to draw parallels between Rocket Mortgage’s model and the fast and loose approach to mortgages that were a key driver in the financial meltdown of the mid ’00s.

However, Rocket hastened to add that a simplified mortgage application process in no way means that they are no way skirting around the appropriate due diligence or providing risky loans.

Is accelerating the mortgage process really so bad?

Let’s play Devil’s advocate for a second.

Applying for a mortgage is a very lengthy process. Going from first enquiry to mortgage acceptance can easily take a month or more, and inadequate planning or complications in the process can often derail the purchase of a home.

Plenty of people in the UK apply for loans through Wonga and QuickQuid with just a few taps of their iPhone. Services like Intuit’s TurboTax in the US allow citizens to get a jump on filing their tax returns with a few snaps of their wage and tax statement plus some other relevant data. Merchants all over the world receive instant payments via PayPal rather than having to wait for cheques to clear.

In other words, technology has streamlined countless different processes that used to take much longer. So is getting a mortgage in a matter of minutes using a mobile app a bad thing?

The problem that most people have with services like Wonga is that the interest rate is (or was – they actually brought their interest rate down considerably in 2015) extremely high. It stands to reason that people might also be concerned that they wouldn’t get the best possible rate using a service like Rocket Mortgage.

Well, it turns out that such a comparison isn’t exactly fair. Quicken Loans, the company behind Rocket Mortgage, is no shady inexperienced lender but one of the largest mortgage companies in the USA. Rocket Mortgage’s model may be disruptive, but its credentials certainly appear to check out.

Are speed and the best deal compatible?

Because the site is powered by a single mortgage provider, Quicken Loans, users will probably be able to count the options they receive at the end of the process on one hand.

Contrast this with the average mortgage broker, who has access to thousands or even tens of thousands of different mortgage products, and it becomes even more difficult to believe that you can possibly get the best deal in 8 minutes or less.

To return to the Wonga example, it’s widely regarded (whether true or not) that typical users turn to the service because they’re unable to get credit anywhere else.

While it doesn’t feel like that’s quite true in this case – Rocket Mortgage launched with an eye-watering $100 million ad campaign and clearly aim to capture a big chunk of the mortgage market – the point remains that users may be taken in by the quickness and ease of the process, not realising that they may be able to get a better deal elsewhere.

Still, it’s possible to argue that the same is true of going into any bank to get a mortgage directly without consulting a broker.

The future of mortgage applications

As inflammatory as the “Push Button, Get Mortgage” campaign is – and successful, by the way; 14,000 people visited the Rocket Mortgage site in the minute after their Super Bowl ad aired – Mark Green highlights in an article for Forbes that the company isn’t actually doing anything as outrageous as it might appear:

“In the end, this is high tech, low touch, space age mortgage processing, that’s all. It does not short cut underwriting guidelines or mark the dawn of the next mortgage apocalypse; it is super-efficient electronic loan processing, no more, no less.”

What’s really interesting about Rocket is the potential that the idea represents, rather than the current execution of that idea. Whatever your stance on the concept of an eight minute mortgage, it’s difficult to argue with the idea that a more efficient way to input data throughout the process of applying for a one is a good thing.

Writing for MarketWatch, Andrea Riquier states that:

“Rocket’s breakthrough is to allow applicants to import original source documents like paystubs and bank statements, rather than letting applicants input data which must be verified later in a separate submission.”

It’s not much of a stretch to imagine that in the not too distant future, we’ll be able to feed some verified information into a smart mortgage product that uses APIs and mortgage data to calculate the best deal based on a potential customer’s earnings, spending habits and so on.

But Rocket Mortgage is not that product.

And, if we’re being honest, most of us probably won’t be too heartbroken by that fact. To expect a computer program to be able to figure out the nuances of taxation, self-employment, bonus structures, spending habits and so on feels a little bit scary.

We may be comfortable letting Spotify Radio figure out what we should be listening to and trusting the Starbucks app to place our regular order for us, but there’s still a lot to be said for the knowledge and expertise that an experienced broker can offer.