This post is the third in a series explaining that, at Blend, we work on mortgages because they’re HARD: Human, Astronomically Large, Regulated and Data-rich (Insight-poor). Check out our first and second posts.
An aerial shot of a housing development near Markham, Ontario. November 2005. (Wikipedia/IDuke)
Huge Market + Underserved Industry = Astronomically Large Opportunity
It’s not often we as technologists come across enormous markets that haven’t yet been well-served by software. Unbelievably, the mortgage industry creates $1,600,000,000,000—that’s $1.6 trillion—worth of its productsevery year. However, the software powering this trillion dollar-plus sector predates the 2000 dot-com bubble.
In fact, when you walk into mortgage lenders’ offices, it’s not uncommon to see black screens with green text, rooms full of mainframes and fax machines and, above all, reams and reams of paper. Through no fault of their own, mortgage lenders are stuck with technology from the past. And while it might have once been possible to operate profitably this way, that is no longer feasible in the rapidly-changing regulatory environment following the 2008 mortgage crisis. To us, this presents an astronomically large market opportunity.
Skyrocketing Lending Costs
When you break down the average costs involved in a mortgage transaction, it’s clear lenders are leaving money on the table. Because the industry is still so document-driven—with humans required for painstaking collation and QA on the backend—the mortgage industry is spending billions of dollars each year on largely repeatable and automatable tasks.
Sources: MBA 2003 Cost Study; 2015 MBA Quarterly Mortgage Bankers Performance Report
The Current State of the Mortgage Technology Market
Though mortgage lenders aren’t completely without technology—thanks to the work of a handful of innovators, we’ve seen automation, direct-to-source connectivity, e-signature capabilities and a mobile-first experience gather steam in the industry—the lack of comprehensive innovation in the space offers a massive opportunity that has been largely ignored by technology companies. As a result, many of the large lenders have had to build systems on their own. Some have worked, but many have failed, costing lenders hundreds of millions of dollars and, above all, years of lost time.
At Blend, we believe the combination of rising costs, risks of in-house technology solutions, and growing expectations of what a delightful mortgage process should look like will collectively lead to the mortgage industry’s Uber moment. Lenders are ready and willing to adopt platforms that digitize the mortgage process and optimize the speed, cost and pain involved in their business—thus improving the lives of everyone involved.
Identifying Common Pain Points To Transform The Industry
Digital transformation is the answer to many of the mortgage industry’s problems. With the proliferation of technology, the mortgage process is being brought into the 21st century and enabling quicker, safer lending for both lenders and borrowers.
At Blend, we want to solve as much pain for as many lenders, and ultimately borrowers, as possible. There are many different types of lenders—large and small, across many regions, serving different borrowers with distinct needs—so listening to each of our customers to identify common pain points is absolutely critical. By prioritizing new features and functionality based on direct feedback from our customers, Blend is ensuring its technology has an outsized impact on this astronomically large market opportunity in a way that delights millions of borrowers.
Alex Berman is a Product Manager at Blend, a Silicon Valley technology company powering the next generation of mortgage lending.