While many frowned after seeing Quicken Loans $5 million Rocket Mortgage commercial, Urban Institute housing and mortgage expert Laurie Goodman says the ad simply markets a new technology that allows consumers to originate mortgages more efficiently.
In fact, Goodman said in a blog post for the nonprofit think tank that a few components of the app could reduce the risks in lending and make it easier for people with less than perfect credit to get a mortgage.
1. Borrowers can give lenders easier access to bank information
Even though it has mortgage in its name, it’s actually a tool that collects information such as accessing bank statements, pay stubs, and tax returns. This tool reduces the risk of a crisis and not increasing it by actually helping lenders get the correct spelling and verify the accurate income.
2. Approvals might be less prone to human error
What is significant about the Rocket Mortgage is not that one can get approval in eight minutes, but that automating the process can help ensure compliance and reduce risks. In this way, it’s really the anti-crisis tool.
3. Automation may ease tight credit
After the housing crisis, experts show that product risk was the reason it fell. Currently credit is too tight for borrowers with less than stellar credit. Goodman states that it’s partly because lenders fear that if they make even the smallest non-substantive error in the loan documents, they’ll be forced to buy back a loan after it’s sold to an investor.
4. Digital lending is here to stay
The automated, less error-prone process is clearly the wave of the future. Originating a mortgage has become too costly as lenders double and triple check every entry to make sure they have not introduced human error that would force the lender to repurchase the loan.
In its first-ever Super Bowl commercial, Detroit-based Quicken Loans created a 60-second TV spot, which showcases Rocket Mortgage, its fully online mortgage.
It aired to the massive audience, many of whom then promptly proceeded to fuel bombastic panic on Twitter, claiming that Rocket Mortgage will lead to the housing crisis redux.
David Stevens, CEO of the Mortgage Bankers Association also thinks that it shouldn’t have received a lot of backlash.
So what are your views on it? Comment down below and let me know what you think.