This Could Be The Mortgage Industry’s iPhone Moment

The goal was to allow a person to get a mortgage or refinance their home while standing in line for a cup of coffee.

It took nearly five years and a team of 450 people, but today Quicken Loans is announcing Rocket Mortgage, an online mortgage that takes just a few minutes to complete. Quicken Loans sees Rocket Mortgage as the turning point in home financing. It’s home financing’s iPhone, Quicken Loans founder Dan Gilbert tells me. And he could be right.

The process takes less than 10 minutes. Like TurboTax, the service repackages complicated applications into a simple online form. But it’s important to note Rocket Mortgage is more than just an online application. The service also verifies information, then provides a conditional approval as valid as something a loan officer would issue.

The process starts with the basic: What is the person trying to do? Pull cash out of the property? Lower their monthly payment? Purchase a new home? The rest of the application is then tailored to the stated goal.

Name and address comes next. Rocket Mortgage then pulls information about the property such tax history, local assessments and historical data. The application asks for employment information, but does so using the person’s social security number.

Then, using a combination of internal and public data, Rocket Mortgage attempts to find and verify that person’s employment history (read: You don’t have to provide pay stubs).

Asset and credit information comes next. This is a standard affair, really. Most loan applications require a person to prove they have a certain amount of money sitting in a bank or retirement fund. Except with Rocket Mortgage, the system verifies the money on the fly instead asking the person to send in bank statements. This is done with a system similar to where the applicant logs into their bank account through Rocket Mortgage.

After the person inputs all the data, the system will then spit out a breakdown of fees, the interest rate and their new mortgage payment. Several slider bars allow the mortgage-seeker to play with the fees and interest rate. If, say, the applicant wants to buy a better interest rate, slide the bar a bit and the data will adjust to show slightly higher closing costs, but a lower monthly payment and less interest that will be paid over the course of the loan.

Unlike most online mortgage applications, the rate, the payment, and the fees provided on this screen uses live market data. If the person likes what they see, there’s a button at the bottom of the screen that locks the person’s new mortgage into the rate displayed and sends the form off for approval. About 30 seconds later, the loan is either approved or denied with the same amount of certainty someone would get through a loan officer.

Quicken Loans hopes to instill trust back into the process of getting a mortgage, and there is no cost to apply for the loan or to lock in interest rates. Not ready to do the mortgage at this time? Fine by Quicken Loans. Rocket Mortgage allows you to check the rates and options later on. Meanwhile, Quicken Loans gains valuable information about a potential customer.

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Demystifying a Mystery

Quicken Loans is one of the largest mortgage companies in the United States. The private company accounts for 6% of all mortgages, trailing just Wells Fargo and Chase in the first half of 2015, according to some reports. The company prides itself on being an online mortgage company, but the process has never fully taken place online until now.

As Quicken Loans Founder and Chairman Dan Gilbert explained, the current loan process often involves a person applying for mortgage by inputting basic data into an online form and then talking to a loan officer who will then move it along to the next human in the process. The process is the same in every mortgage company big and small.

“There’s still a feeling of I hand over my information, I wait patiently, and I hope to understand what’s going on with the interest rate and fees.” Quicken Loans President Jay Farner

“There’s still a feeling of I hand over my information, I wait patiently, and I hope to understand what’s going on with the interest rate and fees,” said Quicken Loans President Jay Farner. [Quicken Loans] spent the last 3-4 years thinking where this industry should go and how to streamline the application process and make it easier for people.”

“How do you pull income information,” Farner said. “How do you pull asset information from sources that already exist? How do you pull property information? How do you give someone complete transparency into the interest rate and fees and how a person can adjust the interest rate and see what it does to the fees.”

He explained that Quicken’s goal was to take the mystery out of mortgages and provide a system where a mortgage could be completed without the need to talk to anyone.

After an application is approved by Rocket Mortgage, the loan proceeds as normal. For most applications, the client will not need to provide additional information or documentation. An appraisal could still be needed. The loan can close in as early as a week but as Dan Gilbert explained, Quicken Loans is only as fast as the slowest vendor such as local municipalities and insurance companies.

Fueling the Rocket

Quicken Loans is putting a $100 million ad campaign behind Rocket Mortgage. This is a major product from the company. It was built by an engineering team of 450 and over 1,000 people have touched it throughout its development. Parts have been tested by clients for the past year.

The trick here is that Rocket Mortgage works throughout the United States. It complies with regulations in all 50 states and the thousands of counties within.

The trick here is that Rocket Mortgage works throughout the United States. It complies with regulations in all 50 states and the thousands of counties within. This could be Rocket Mortgage’s secret sauce, really, and why Quicken Loans thinks competitors will be unable to match the product’s offering for a long time.

“We think the way we’re using the data is unique and it will be hard to match,” said Regis Hadiaris, Rocket Mortgage product lead.

“Someone could put an electronic 1003 form online,” said Jay Farner. “But to actually build the interface to get the rate locked, to get the DU approval, electronic signature and make it all seamless, that’s a boat load of work.”

Farner explained that Quicken Loans, which prides itself as a technology company instead of a mortgage company, employees 1,280 people to manage and develop its technology. A significant chunk of them have been working on Rocket Mortgage, he said.

“If we ran hard, it would take 18 months to two years minimum [to build the product starting today],” Gilbert said. “There’s so much to this. I’m sure competitors will react, but by that time, we’ll have the brand. It’s not just one of those things that you can match.”

I had an opportunity to go through the product and it’s as painless as promised. The product works equally as well on mobile as desktop. It truly only takes a few minutes to go through the prompts. There are notes of TurboTax throughout. As you’re filling out this online form, it’s easy to imagine the system transposing your data onto a more complicated one.

Up until now, there hasn’t really been anything like this. Sites and companies including Quicken Loans have long offered online mortgage applications, but this is something much more inclusive. Suddenly, instead of filling out paperwork for a loan officer to send off to an underwriter, the person applying is inputting the data directly into the underwriting system. Along the way, the information provided is approved, not by checking pay stubs or bank statements, but by checking online databases that already hold that information.

Security is a concern. I was assured by Regis Hadiaris, Rocket Mortgage product lead, that the company did extensive penetration testing on the Quicken Loans systems touching Rocket Mortgage to ensure all the client data are safe. He indicated that the system uses bank level encryption and all the shared APIs and accounts are also encrypted.

If anything, Quicken Loans is selling itself short. The product design is underwhelming. Rocket Mortgage offers significant advantages over competitors’ products, yet it looks and acts in a similar fashion to standard mortgage applications. Upon completing the forms and getting approved for the loan, it’s not immediately clear you’re, in fact, done. The mortgage is approved baring unforeseen issues outside of the control of the applicant. Five minutes later, a person can be approved for a mortgage without waiting around for hours or days for a loan officer to get back to them with a stack of paperwork that has to be turned in.

“Because mortgages are so complex, people only think to do something with their mortgage when it really becomes a pain point,” said Jay Farner, “and that’s unfortunate. For most folks it’s the largest monthly payment they have and so if they had the ability to very easily of what could, or should or might be done, think how much power you give back to the homeowner to make a smart financial decision.”

Human vs. Machine

The flipside of using Rocket Mortgage is that a person might lose out on a smarter option. Through Rocket Mortgage, a person can lock in a new interest rate and mortgage term in minutes. Most often, there are several different mortgage programs a person qualifies for, but sometimes, one makes more sense than another. An experienced mortgage banker could guide a person into the best mortgage for them. Of course Quicken Loans employs plenty of mortgage bankers, too, who would love to earn the commission from writing your mortgage.

Rocket Mortgage boils the loan application and verification process down to just a few easy steps while still playing nicely with all of the regulations applicable to each situation. Is this the mortgage world’s iPhone moment like Dan Gilbert says? That remains to be seen, until the rest of the banking industry decides to clone the product.

Disclosure: I worked as a mortgage banker at Quicken Loans from 2007 to 2008 where I made more money blogging for Engadget in my cubical than selling mortgages.