by Brian Brady
Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL
Mortgage Grader is a consumer-operated, automated underwriting system. Jeff Lazerson, its founder, has been working on this idea for 3-4 years. It was released this summer.
Consumers enter information and are issued an approval. The mortgage grading engine mashes up various automated underwriting systems (FNMA Desktop Originator, proprietary sub-prime engines, etc.), searches out the best terms, and delivers the equivalent of a wholesale lending approval, with wholesale rates, to the consumer. The consumer then hires an approved mortgage broker to package the loan for a flat fee.
Have we heard this idea before? Jeff Corbett has been talking about a transparent underwriting and rate search engine for some time, now.
I know both Jeffs. I met Jeff Corbett last year and have known Jeff Lazerson, since 1997, when he was selling his book, “How to Make A Fortune In Loans Without Leaving Your Desk“. Both are veterans of the industry who have seen mortgage consumers get raked over the coals by originators.
Transparency is nothing new to the mortgage industry. Mortgage brokers have practiced transparency, by law, for years. Mortgage originators often teach customers how to lower their fees by accepting a higher interest rate in exchange for lender-paid yield spread premium– I’ve done that since the mid 90’s.
Transparency is the law for mortgage brokers. Flat fee loan originations are nothing new. Innovation Mortgage has been offering a flat fee model for 6 years now.
Is this the end of the full-service mortgage originator? Absolutely not. Technology, while useful, is the consumer’s worst enemy. Ten years ago, mortgage originators feared that Desktop Originator would eliminate their utility. It was the advancement of technology, however, that allowed for more innovative loan programs. The only way for these technology engines to work is if we revert back to the “good ol’ days” of two loan programs: 30 year fixed and 15 year fixed. Nobody really wants less choices.
Nothing beats the advice of a mortgage professional. We are the first experience many consumers have with financial planning. Two hours with one of us will help a consumer to better understand how to structure their liabilities, maximize their tax-advantaged retirement assets (and contributions), and determine a college savings plan for their children.
In a perfect Web 2.0 world, consumers will search for homes on Zillow, buy them through Redfin, and secure a loan through Mortgage Grader. People, however, are perfectly imperfect. They are both fearful and greedy, usually at the most inopportune times. The value of an experienced mortgage originator has never been more obvious than the last 90 days.
Nothing beats the value of good financial advice- not even the “perfect” piece of technology. At the end of the day, folks just want to buy a home, educate their kids, and have enough money for retirement- all while feeling that they aren’t “betting the ranch.
No website can deliver that.
Todd Carpenter says:
I took a look at that web site, and to be honest, it doesn’t look any different from a mortgage broker’s site. How does a consumer really know this experience will be any different than the rest?
That site needs some demo’s, or screen shots or something. A consumer won’t realize this, but that site uses a third party vendor (Ellie Mae) to host the online application. That kind of makes me wonder just how powerful the search engine is. I mean, the Brian Brady’s Mind search engine (or any competent broker) could do everything behind the scenes that this website appears to be offering.
Since the days when I used to alienate myself at Myers Internet, arguing with the programmers, I’ve never been convinced that technology could replace a professional. It can do a lot of good though. But how can that site promise transparency when it’s processes and practices are not.
November 1, 2007 — 9:24 pm
Brian Brady says:
“It can do a lot of good though.”
It can, Todd. Interpreting the output and contolling the input makes for the best approvals.
“But how can that site promise transparency when it’s processes and practices are not ?”
That is why you must run Zillow Mortgage; you are a mortgage man with a tech addiction- or are you a tekkie with a mortgage addiction?
November 1, 2007 — 11:11 pm
Ann Cummings says:
Hi Brian,
I don’t pretend to be all-knowing about the mortgage industry, but in reading what you’ve written, my first reaction was that this was just another on-line lender, and what’s makes this any different than all the others out there, like Lending Tree, etc.? Those are the types of lenders we, as REALTORS, shy away from and try to get consumers we work with away from. Their approvals are worth less than the paper they get printed up on, and I could go on and on about those lenders.
I’m presuming since you wrote about this that this is different. How is it different, and why would an approval from this site be an approval we would place stock in?
Thanks in advance for helping clarify this for me.
November 2, 2007 — 3:05 am
Brian Brady says:
Good question, Ann. I suppose, if examined in the purest sense, Mortgage Grader is another online lender.
I think the model, however, is to negotiate a brokerage fee and decision the loan online, then have it delivered through an affiliated local broker.
Like any other online lender, performance will become an issue.
November 2, 2007 — 7:05 am
JeffX says:
3 weeks Brian, and you shall have our alpha version of RateSpeed in hand to test for yourself. We hit a serious snag with our previous technology provider, but I digress…However, today the ship is straight and sailing straight to market.
I agree 100% that no technology will replace the professional…but this one will help mortgage brokers and bankers break down many of the trust barriers that are set sky high in todays market between the professional and the consumer. I’ll leave the rest for you to opine on when you get a chance to put your hand on the wheel and drive our hybrid around a little.
Just back in town from a trip to Seattle this AM, so my comment isn’t as thorough as it normally would be my friend…
November 2, 2007 — 7:56 am
JeffX says:
BTW…
http://real-estate.blog59.com/real-estate/mortgage-grader-revolutionary-or-just-one-more-marketing-widget/
is scraping your content…
November 2, 2007 — 7:57 am
mortgage approvals says:
that problem with ‘automated’ is the fact that customers are filling out the application. most customers dont know you need 2yrs of self employment or commission, overtime, bonuses..to include it.
there are many factors that need to be reviewed by a ‘person’ and not by a computer. We already have many underwriting systems that approve borrowers. After the AU approves the borrower…the maybe declined by the Underwriter
November 2, 2007 — 1:53 pm
JeffX says:
The trick is…how do you wrap technology around an originator and leverage that to augemnt volume?
‘Transparency’ is a marketing hook and philosophy. Carrying out the message doesnt jive with mortgage 1.0 biz models. Technology can bridge that chasm.
Leveraging transparency with technology will require a change in how originators are paid (if you own a brokerage) and how independents price loans. Therein lies the rub…everything out there is still a play on the same biz model that became economically impractical about a year ago…
Im on my BB, sorry if I missspelled anything.
November 2, 2007 — 3:40 pm
Brian Brady says:
“The trick is…how do you wrap technology around an originator and leverage that to augment volume?”
…and cut costs, Jeff, THAT is the real value to technology.
November 2, 2007 — 4:01 pm