US banks tap mortgage apps as home lending slows

New York

BIG US banks are racing to launch websites and mobile apps to make getting a mortgage faster and easier, investments that may have modest near-term payoffs as home lending activity slows.

Lenders have been spending on digital tools to cut costs, eliminate error-prone paperwork and appeal to younger home buyers. However, they are chasing a shrinking pool of refinancing business, and new home loan volumes are still below pre-crisis levels.

Bank of America Corp has spent US$1 billion on its digital banking services in the last six years and launched its line-up of techy mortgage products last week.

Wells Fargo & Co rolled out its website and app service during the first quarter, and JPMorgan Chase & Co - which is investing US$1.4 billion in technology in 2018 - plans to launch its offering later this year.

Bank of America's app automatically fills in a customer's address, employment history and other information that the bank already has, cutting out hundreds of boxes that customers would otherwise have to fill. JPMorgan's app lets customers e-sign important documents.

Quicken Loans was the first to gain traction with digital home loans following its 2016 Rocket Mortgage launch. The app is now key to its mortgage sales with more than 98 per cent of the US$20 billion in first-quarter lending volume accessing Rocket Mortgage at some point in the mortgage process, Quicken spokeswoman Brianna Blust said.

Quicken was the biggest home lender by volume in the fourth quarter of 2017 and first quarter of 2018, Ms Blust said. It was the second-largest US mortgage lender for the full year 2017, according to data from Inside Mortgage Finance Publications.

"Buying a house is supposed to be a joyful thing," said Steve Boland, Bank of America's head of consumer lending. "Filling out 330 fields is not, I think, something that brings you joy."

Refinancing volumes have plunged as interest rates have risen, meaning that lenders must compete for a much smaller revenue pie in fresh home purchases.

The average rate for a 30-year, fixed-rate mortgage of less than US$450,000 was 4.66 per cent in the week ended April 13, and could reach nearly 5 per cent by year-end, according to the Mortgage Bankers Association.

New mortgage originations at the big banks are at their lowest levels in four years, and mortgage revenues have fallen by 21 per cent since 2012, according to a Goldman Sachs research note.

Wells Fargo, Bank of America and JPMorgan - the first, third and fourth-largest US retail mortgage lenders according to Inside Mortgage Finance - reported declines of US$700 million to US$5 billion in mortgage originations for the first quarter compared to the year-ago period.

As the business mix is shifting, the average US home buyer is also changing. Many potential borrowers who were born after 1981 had delayed moving out of family homes or remained renters for longer than prior generations.

But people who grew up using computers and smartphones now make up 34 per cent of home buyers, compared to Gen Xers who make up 28 per cent of the market, according to the National Association of Realtors.

"The biggest group of new home buyers in 2018 and subsequent years are folks . . . who are very comfortable with transacting digitally," said Daren Blomquist of Attom Data Solutions, a California-based real estate research firm. "Lenders who are catering to and marketing to those digital natives are the ones that are experiencing the most growth."

Even if websites and apps do not make up for lost refinancing revenue, there is evidence that consumers quickly gravitate towards such tools.

Wells Fargo saw 10 per cent of retail mortgage applications coming from its digital applications in March 2018, spokesman Tom Goyda said. REUTERS