This once shadowy corner of the lending space is now more transparent than ever
When mortgage technology evolves, the benefits are typically shared by the usual suspects: the company behind the innovation and the brokers, borrowers, and lenders who will use it. It’s rare, though, to see tech advancements spoken of in terms of how they altered the course of an entire category of lending.
Such seismic shifts, because they so often depend on coincidence, are scarce. They require a subset of the market that is one innovation away from breaking through, and for that missing piece to be addressed perfectly by one of the countless new tech offerings coming down the pike every other day. But once the shift happens, there’s no going back.
According to Elizabeth Wood, the executive vice president of Canadian Mortgages Inc, that’s been the story of private lending’s colossal leap forward in 2020. Once a shadowy corner of the lending space, Wood says private lending stepped into the light this year because of two major tech-driven regulatory changes: the opening of the Filogix platform to private lenders and mortgage investment corporations (MICs) and Equifax’s requirement that all lenders using its platform be credentialed as of September 14.
“Not only are brokers now able to access private lenders securely, but we also saw unqualified and weaker lenders exit the space,” Wood told Mortgage Broker News. “It created a far more robust vetting process to ensure that the lenders being brought into the marketplace were in the right space and making the right investment decisions.”
Filogix’s recent acceptance of private lenders is particularly exciting. The trust and confidence in private lending demonstrated by the country’s leading connector platform brings a new level of legitimacy to the space.
“At the end of the day, these changes further advance the reliability and transparency that private lenders and their clients are already accustomed to,” Wood said. “The recognition of the private lending submarket by industry leaders like Filogix and Equifax provides the credence that we’ve been waiting for, that private lending is a viable and respected opportunity for traditional and non-traditional borrowers alike.”
Being brought into the Filogix/Equifax fold shored up one of the private space’s greatest weaknesses – security. As Wood explained, brokers constructing private deals, because they had no direct access to either platform, were forced to submit paper documents to their lenders. That meant sensitive financial and personal information floating around in the ether, where it could be easily lost or stolen.
“Those are significant security concerns,” said Wood, “but the Filogix integration with private lending and the Equifax-enhanced credit report have addressed them.”
More to do
While the platform changes are a boon for private lenders, relying on a pair of externally developed tech advancements won’t be enough to gain the trust of borrowers and brokers or provide either cohort with a frictionless customer experience. Wood said that’s why CMI developed, and is constantly updating, its own in-house tech.
“We make that investment in recognition of the needs of our investors and the needs of our brokers,” she said, adding that security and transparency are the driving forces behind the company’s technology decisions. “There were no out-of-the-box products that achieved what we were trying to establish for ourselves in the marketplace. Over the years, we have built a very robust system that brings something to the market that nobody else does.”
While CMI does rely on an out of the box CRM solution for its client relationship management, its proprietary platform was built from the ground up to accommodate the underwriting, fulfillment, and administration processes. Having its own reliable, flexible system in place puts the company in a comfortable position from which to address what is, in the current COVID-19 climate, a rapidly growing consumer demand.
“What we’re seeing is that borrowers, brokers, and investors are looking for contactless – remote access - lending solutions. They don’t want to have to see people, come in contact with people, or put their families at risk,” Wood says.
With COVID-19 infections skyrocketing across the country, it’s unlikely that people will be rushing into crowded banks to speak to loan advisors any time soon. Wood says brokers looking to add private lenders or MICs to their toolbox should concentrate on the ones who can provide an end-to-end option that keeps their clients safe.
“Borrowers are going to be looking online. They’re going to be saying, ‘What money can I access from my home?’” Wood says. “So brokers need to be able to present that to their borrowers. They need to be able to say, ‘Here’s how you do it.’”
With private lending poised to receive even greater mainstream attention in the coming months and years, Wood says brokers unfamiliar with the space should reach out to firms like CMI now to learn all they can about private lending before their competitors beat them to the punch.
“Don’t be afraid to ask questions,” she says. “A good lender has nothing to hide. Gain an understanding of how they’re using technology, what services they provide, and how they’re streamlining those services.”
Thanks to a pair of fortuitous changes in Canadian lending this year, the private arena is looking stronger than ever. Consider it the genie that can’t be put back in the bottle: Once a mystery, it’s now in the mainstream, making dreams come true.
“Private lending has always had its place,” Wood says. “What this tech evolution is going to do is make private lending a standard option. It’s no longer going to be something you don’t tell your friends about.”