Every one of us with an interest in the mortgage business, whether it be a vested financial interest or otherwise, has to be wondering what the future of the industry is going to look like.

It’s pretty clear that the complete homebuying process from selecting a home through the entire mortgage process is moving online.

How we get there, on the other hand, is a different story.

We’ve seen shifts already with Quicken Loans, for example, moving the entire mortgage process online, although the response to Quicken’s big move and the big advertising push surrounding it left something to be desired.

And one of the nation’s biggest nonbanks, Nationstar Mortgage, recently launched a platform called Xome, which boasts that it is “the world’s first integrated, end-to-end digital platform for real estate, with the promise of connecting every major touch point in the transaction process, from finding a home to closing the deal.”

Those are big moves, but the online transition is far from complete.

So how do we get to the future that we all expect to arrive at?

In a highly insightful piece posted on Techcrunch, Aaron LaRue asks why startups can’t disrupt the mortgage industry and what the future impact of financial technology (also called fintech) will be on the mortgage monolith.

In the piece, LaRue compares the next generation’s leader in the clubhouse, Quicken, to other mortgage and fintech startups to show just how far the next generation has to go to get to the pinnacle of the mortgage business.

From LaRue’s piece:

There are other companies doing innovative things, and they are definitely gaining traction — but they are a drop in the bucket compared to the rest of the mortgage market.

Let’s take a look at some technology companies I think are doing a great job in this space. My data here is limited, but I think it provides some context:

  • SoFi, according to this November 2015 Forbes article, was originating $50 million per month, or $600 million per year on an annualized basis. They did not return my request for comment, but I would guess they have grown significantly since then.

But when LaRue compared those figures to one measurement of the top performing loan officers in 2015, he found that each of the top 64 loan officers in the country closed more loans in 2015 than Lenda did as an entire company.

LaRue acknowledges the difficulties that startups face when entering the mortgage business, one that is rife with complications, regulations, traditions, and rules.

And entrenched mortgage companies face their own issues when trying to move online.

Again, from LaRue:

Mortgage companies have a hard time innovating. First, it’s hard to attract and retain the type of talent required to build an innovative market solution. Second, they are not the type of company to raise a large round of venture capital.

With an operating business in an established industry vertical, they are valued on a much different metric, and usually have to free up cash flow for any type of investment (like building technology).

With constraints on cash and expertise, most mortgage companies are left to piecemeal together an online lending solution. Using third-party providers, they string together a number of platforms in an attempt to cover the required features that the modern borrower has come to expect.

LaRue posits that part of the mortgage business’ future will include private equity of venture capitalists moving into the space by buying up smaller mortgage companies that have established call center mortgage operations, and taking that experience to an online environment.

The issues raised by LaRue and his potential solutions are all very interesting and the whole thing is well worth a read. Click below to read LaRue’s full piece.