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Julie Muhn of Finovate says that the US real estate market is at an all-time high, so mortgage technology is attracting more interest from the banking sector. And as the new Lender Price alliance shows, Regions Banking is no different. Together with the Lender Price alliance signed with the $124 billion assets house, Californian financial services provider FINTCH receives an unpublished amount of debt financing.
It comes just a few and a half weeks after Lender Price revealed an Ellie Mae merger. The regions, for their part, are keen to use the partnerships to step up their digitisation credit drive by facilitating interaction between banks, borrower and the banks, reducing the number of information enquiries to the consumer, incorporating extra resources for authorisations and certifications, and providing quicker answers.
Lender Price's proprietary Lender Price platform was launched in 2015 and helps banks try to rival pure digitally based mortgage lenders such as Quicken Loans' Rocket Mortgage and SoFi. Indeed, the Bank of America has just heralded the launch of its own dedicated mortgage services.
The aim of SoFi is to rock the mortgage markets.
One of the most important mortgage markets in the US has a new actor planning to conclude transactions valued at over one billion US dollars by the end of 2015. These ambitions are a clear indication of how non-banks are putting the glove down for those traditionally creditors who are constrained by strict rules and regulatory requirements.
SoFi has built a $100 million mortgage book since opening last fall, providing up to $5 million in mortgage loans in 17 states. Necessary deposit is only 10 per cent of the value of the real estate, well below the 20-30 per cent threshold demanded by most conventional banking institutions.
The SoFi is mainly financed through stock facilities of well-known finance groups such as Crédit Suisse, Barclays, Goldman and Sachs. The firm was also the first to securitize peer-to-peer loans in 2013. SoFi' s objectives are typically for a new kind of non-bank financiers taking over businesses from entities burdened by tighter prudential supervision, regulatory questions related to mortgage-backed securities and new regulations obliging them to hold more upside.
In 2014, according to the Inside Mortgage Finance magazine, non-banks made up 38 per cent of the mortgage subprime mortgage subprime markets, valued at an estimate of $1.2 billion. The year before, it was 27 per cent. Quicken Loans of Detroit, the largest of these initiators, took third place and outperformed Bank of America and Citigroup. The Freedom Mortgage of New Jersey and PennyMac Financial also recorded significant increases.
Goldman Sachs estimates that these non-bank financiers, who have lower overhead costs and less stringent oversight than conventional banking, could redirect an estimated $11 billion in net income from banking over the next five years. From this amount, $2.3 billion could come from the mortgage service and guidance, which is second only to uncollateralized retail loans in terms of profits.
Goldman-based Ryan Nash writes that while current stock markets are at an early stage, stocks within a large open equity investment universe are quickly moving towards non-traditional financiers.