How Open Banking Streamlines Mortgage Origination

Few areas in the financial services industry have experienced a shift quite as dramatic as mortgage origination. According to the latest data available from the Consumer Financial Protection Bureau, Wells Fargo plummeted from 24% of the market share in 2011 to 2.86% in 2019. At the same time, non-banks such as Quicken and United Shore eclipsed Wells Fargo, and a bunch of other new entrants flooded the top 10 as well. 

It’s a trend that doesn’t seem to be changing. For instance, in the first quarter of 2021 alone, Wells Fargo saw a 12.5% decline in loan origination compared to the prior quarter. 

Put simply, traditional financial institutions are losing share to a wide range of new competitors.

Why are people going with non-bank competitors?

One reason has to do with convenience. Rocket Mortgage from Quicken Loans used the “Push button. Get mortgage.” slogan in a Superbowl ad featuring Jason Mamoa to solidify the perception of their app as the simplest origination experience on the market. This perception of convenience is changing customer expectations, and traditional lenders are struggling to keep up (as evidenced by the table above).

To compete effectively, banks and credit unions must make the mortgage origination process more convenient.

Digital portals and origination processes have helped on this front, but they’re still not enough. After all, they too often require customers to track down a bunch of documents from a range of sources, download those documents, and then re-upload them to the lender’s portal. 

It’s a process that comes with two major downsides. First, the customer has to remember all their passwords for each separate login — a process that can be quite a chore if the customer doesn’t remember each password. Second, downloading and uploading PDFs that have sensitive information can lead to data leaks as customers save those PDFs to their desktop, attach them to emails, or upload them to portals. 

Open Banking and Mortgage Origination

One of the best ways to securely streamline the mortgage origination process is via open banking APIs, which enable tokenized, credential-free data sharing. These connections are immediate, dynamic, and give the customer complete control over what data they want to share and when. 

Here’s what the new process with open banking can look like:

• Customers consent for the lender to access a variety of information, including bank account information.
• Lenders use a data aggregator to gather information from a variety of accounts simultaneously.
• Data goes through a cleansing and enhancement process so lenders can see expenses automatically categorized by type, giving the lender better insights into the customer’s spending habits. 
• Lenders can sign into a portal to further analyze the data in a range of formats as needed.

As consumers see how simple it is to go through the lending process with open banking, they’ll be more and more likely to use it and less and less likely to want to ever go back to an hours-long hunt for passwords, PDFs, and banking portals. Open banking also brings a major benefit to banks, which can analyze aggregated cleansed and enhanced transaction data to better figure out who is creditworthy and who isn’t.

To understand how open banking and mortgage origination works in action, see the MX FormFree case study, which talks about how MX helped FormFree reduce their connection times from an average of 3 minutes and 30 seconds to just 22 seconds and see a 15% annual lift in revenue in the process. Financial institutions that leverage companies like FormFree in partnership with MX will give their customers a far more seamless mortgage origination experience and retain or even win business as a result.