A recent blog from Paul HurtDirector of Innovation at First American and Managing Director of Parker89, analyzed the issue of rising mortgage rates and the impact of that rate hike on the technology and innovation that has moved the mortgage space forward in the digital age.
In his role at First American, Hurst is responsible for identifying opportunities for innovation through strategic venture capital investments, partnerships, and mergers and acquisitions. He is also Managing Director of the firm’s venture capital investment arm, having guided investments in more than 20 high-growth proptech technology companies. Prior to joining First American, Hurst was a partner at a leading international consulting firm, where he applied a process-based approach to innovation to launch and grow five venture-backed companies on three continents, spanning insurance, financial services and real estate. Prior to that, he advised Fortune 100 companies on corporate strategy, mergers and acquisitions, and digital transformation.
“The impressive pace of investment in real estate innovation in recent years will be hard to match,” says Hurst in the blog. “In 2021, venture capital-backed proptech companies raised nearly $21 billion, according to Crunchbase. And that’s not including the substantial sums that large, established players have invested in improving their transaction processes.
In “Real Estate Innovation in Five Areas Undeterred by Rising Mortgage Rates“, Hurst examines five major areas that are driving the transformation of the real estate transaction experience for market participants and remain critical despite market fluctuations, including:
- Simplified and digital document management and eClosing: With the increased adoption of electronic and digital processes, the industry is getting closer to improving its digital grip on the process. As consumers become more comfortable with embracing digital processes, the inevitability of an e-mortgage is increasingly becoming a reality.
- Adoption of remote online notarizations (RON): Ushering in an era of social distancing during the pandemic, the remote online notarization process has been accelerated. Now approved in 40 states, RONs offer a fully digital process where electronic documents are signed and notarized online, speeding up the process.
- “Instant” title decisions: As advancements are made in the field of artificial intelligence (AI) and machine learning, simple steps and advancements equal to speeding up the process through investments in automation and advances in product offerings. Hurst cites in the blog that over 95% of refi transactions now pass through Clear2Go from the first American automated title decision engine. “Through the use of Clear2Go, First American achieved fully automated underwriting decision making for 50% of its residential refinance and home equity transactions, and 40% of those are partially automated,” Hurst said.
- An effective digital closing process: With the combination of multiple digital processes powering the close, taking steps towards a fully digital mortgage transaction will require the participation of multiple parties involved in the overall mortgage transaction. “The demand for a streamlined real estate transaction closing process is the age-old change driving the growth of Endpoint, First American’s digital-native full-service securities and settlement services company,” Hurst said.
- More efficient financing of transactions: In many discussions of innovation, the possibility of streamlining the transfer of funds in a real estate transaction is overlooked. The ability to more efficiently manage the escrow process and transfer funds at any time can significantly improve the efficiency of the closing process.
“Established lenders are unlikely to significantly slow down innovation in the medium to long term, especially in areas where such innovation can reduce operating expenses,” explained Hurst. “And newer models, such as iBuyers and Power Buyers, rent-to-own investments, single-family rental (SFR) investments, and condominiums will continue to make the real estate market more liquid and deeper. means that home buyers and sellers, real estate agents, lenders, developers and other market participants can expect a further transformation in their ability to initiate, appraise, negotiate, manage and finance real estate transactions.