As Amazon looms over the mortgage industry, expert views differ on the retail monolith claiming its stake in the sector.
Jeff Bezos’ trillion-dollar company was a popular topic of discussion during CB Insights’ Future of Fintech conference in New York.
Since hiring a head of mortgage lending last year, it’s only a matter of time before it enters real estate finance. With the rise of digitization and younger generations coming of home buying age, asking Alexa for a mortgage seems like a realistic evolution.
“They have a big reach and that’s powerful,” Jay Farner, CEO of Quicken Loans, said at the conference. “We have a really good understanding of how complex the space is and having great reach is one thing — you’ve gotta be able to reach millions of people.”
Amazon could easily put a ton of capital behind the initiative and a titan of industry coming into the fray presents a daunting proposition. However, the natural complexities and regulations of home lending should help mortgage executives sleep at night.
“Processing, underwriting and closing loans in all 50 states, in 3,700 counties, with different rules, different traditions, real estate agents, brokers, all these different parties involved … it’s complex,” Farner continued. “We have made it our life’s mission to be great at it. Amazon has a lot of things they’re doing right now. If I was sitting in Amazon’s shoes and thinking strategically about where I wanted to place my resources, I’m not certain that all that complexity would be the best place for me to do so.”
While the barriers to entry could prevent Amazon from becoming a traditional lender, the scenario would be a welcome development for some.
“I would love Amazon to get into the mortgage planning space because we doubt that they’re going to get into the space of actually making the loans themselves,” Vishal Garg, CEO of Better.com, said. “What they would likely do is figure out a way that a customer can get automatically decisioned and delivered a mortgage in as little as two days.”
Amazon’s real estate ventures thus far mostly revolve around prefabricated houses in the $25,000 to $75,000 range. Mortgage brokers working on commission wouldn’t want to deal with loans of this size. However, Amazon could leverage its machine learning initiatives for this cluster of the market.
“Traditionally, the mortgage industry actually struggled to service people who want to buy $50,000 or $75,000 houses,” said Garg. “The benefit of a brand-new ecosystem in infrastructure where the machine is doing between 80% and 90% of the work means the machine doesn’t care. The amount of work is the same to do a mortgage for $50,000 versus $400,000. So we welcome Amazon getting into homebuilding and helping people buy $25,000, $50,000 to $75,000 houses and eventually more.”