As customers turn to mobile and digital platforms for their banking and investing needs, the real estate buying process has lagged behind. A study of real estate businesses last year found that 42% of them use spreadsheets and/or paper to support critical operations. Until recently, the underwriting process has been a cumbersome ordeal for gig-economy workers, freelancers and startup employees.
Better.com, a digital mortgage company launched in 2016, has automated the end-to-end process for buyers and is creating pathways for freelancers and startup workers to buy property thanks to tech platforms that help underwriters easily comb through support documents. Better.com looks at two use cases that affect younger workers: freelance workers and startup workers whose collateral is sometime tied up in stock options.
“The way the current system is, [these customers] don’t qualify for traditional mortgages,” said Tanya Hayre, Better.com’s head of public relations. “They are Uber drivers, or they started working at a startup and they are paid in shares that don’t vest for four years.”
Better.com is riding a wave of innovation in the industry as incumbents rush to meet the needs of a new type of customer. To put this into context, Fannie Mae and Freddie rolled new technology earlier this year that automates underwriting for self-employed applicants. Better.com, through its suite of in-house digital tools, is looking at ways to underwrite customers that fall outside of the typical W2-based, salaried worker.
“People think of underwriting as clear cut and dry thing,” Lucy Randall, Better.com’s purchase sales director, told Bank Innovation. “What we’re really trying to get a sense for is the extremes [in terms of risk] — we’ll look at stock agreements, we’ll look at historical [data] on how the stock has been valued and the overall health of the business, and take all of those things into account.”
Self-employed workers typically require a minimum of two years of employment history — an industry standard– but Better.com also will look at cash flow analysis, Randall explained. Indeed, the company is working with its partners to push the boundaries of new cases for which it can account. “We’ll look at cash flow and the health of the business, but it’s all really about a trend rather than specific numbers.”
On user experience, Better.com is employing a human-digital approach. While younger customers want an easy, intuitive digital experience, they also want to talk to people about big financial decisions. As a result, it’s important to pair them up with agents who understand their vantage points as young, digital-native customers who also may be struggling with other financial challenges.
“Millennial customers can call in and speak to another millennial who also is struggling with student debt,” said Hayre. “It’s like calling a knowledgeable friend.”
Bank Innovation Build, on Nov. 6-7 in Atlanta, helps attendees understand how to “do” innovation better. It is designed to offer best practices, to guide the innovation professional to better results. Register here.