Market Disruptors // Loan Officer Friend or Foe?

At the Knowledge Coop we are very sensitive to technology Market Disrupters.  Not because we fear them, on the contrary we are excited about how they can benefit our key market - the Loan Officer’s and Mortgage Companies - by allowing us to make greater CE that is more impactful and more enjoyable every time.  In another venue online-only lenders are technological disrupters that have the potential to drastically impact traditional mortgage banks. These technological disrupters can come about based on demand, but where does the demand come from?

Here are a couple concepts and key terms that we must understand before moving forward: Moore's Law and the Diffusion of Innovation.  

Both Laws, one based on physical development and one based on psychological preferences, discuss the advancement and involvement of adaption to new technology.  

A great analogy of these behaviors is to think through where you would be, both professionally and personally, if the iPhone had not been released on the world in 2008?  How has that technology, and your personal adaptation of it, affected your life?  If you were an early adopter of the iPhone on the AT&T cell service you live in the 2.5% Innovators club, but if you found yourself just lately adopting to a touch screen phone (or still haven't) then you are in the Laggard group.  Both extremely important to the advancement of technology.  

Moore's Law discusses the advancement of physical technology over time, and now that we've moved so deeply into digital we see the Law can be applied to different areas of Technology.  The floppy disk, hard disk, zip drive, thumb drive, micro SD, the list goes on.  Those are areas of advancements based on the needs and demand of the market.  But what else will drive technology advancement? 

Now we get to the Mortgage Industry, Real Estate transactions, and the Financial Industry as a whole. Technological disrupters can come about based on demand, but where does the demand come from?  In this case the demand is driven by response to regulation and compliance, with the supporting demand coming from an increase of customer drive for streamlined processes.  So what are these market disrupters we are thinking about? 

How about a freshly funded Online Only lender?  They are here, based in California, and from the looks of their website they will be poised to disrupt.  Last week National Mortgage News reported on the new online lender Clara launching with $27M in financing.  Currently in California they are looking North and East for expansion. 

And we hear you saying, "But this isn't new.  Rocket Mortgage is running already." Rocket Mortgage, part of Quicken Loans, is indeed a bit of a disrupter.  The difference is that Rocket Mortgage was a growth point from a standard lender.  So how is Clara different? 

"We've brought together a unique team with diverse backgrounds in technology, design, finance, and public policy to build a modern mortgage bank from the ground up," Clara co-founders Jeff Foster and Lukasz Strozek wrote in the blog post. "We're re-imagining how lending can and should work, simplifying the origination process, lowering borrowing costs, and making the U.S. mortgage finance system more transparent and stable" (National Mortgage News, August 19, 2016).

So you really are witnessing a market disrupter in action.  And no surprise, they're coming out of San Francisco.  The Knowledge Coop works to be a market disrupter too (but from Vancouver, WA). We re-imagined how the Mortgage Learning Management System (LMS) could work, how the Mortgage Industry would really want their internal intranet, and how we can help make sure they are Compliance Audit Bullet Proof.  

So how do you view these Market Disrupters?  We think you need to be flexible and aware.  Don't fight it, but also don't jump too early.  From the law of Diffusion of Innovation we would encourage you to be an Early Majority.  We recommend this for a couple of reasons: 

1. The market is beginning to demand more online resources, but the demographic that traditionally demand these online resources are also the slowest growing home buyers.

2. There will be regulatory headache that the Innovators and Early Adopters will work through with the regulators and states.  

But the key, do not be afraid, instead identify what your strengths are and how you are the best option for lending vs. market disrupting competitors.  

And if you think it's only the mortgage industry facing this, you may not have heard of Zillow latest maneuvers.  Check out Ryan's report on theREsource.tv talking about what they've been up to lately.