The US housing market boom continues unabated. Some of the drivers aiding the increase in market prices are a high inflationary environment, a limited supply of homes on the market, and a post-pandemic increase in demand for larger and more spacious dwellings.
Rising prices are leading to a problematic buying atmosphere for many groups, especially first-time buyers, women, and underrepresented minorities. Working-class households who were on the brink of homeownership in pre-pandemic times are now estimated to be waiting at least 5-10 years to purchase a home. Policymakers in the US have taken note of this problem and several solutions are being tested – from billions of dollars in investment in America’s public housing infrastructure to billions more in down payment assistance for first-generation homeowners.
There are also new stakeholders in the market who aim to provide solutions to this challenge. The fintech industry has resolved to develop several applications aimed to offer valuable support for people considering homeownership.
The latest episode of the Fintech Beat Podcast is one of its most interesting yet. It brings together host Dr. Chris Brummer and guest Brian Vieaux, President of FinLocker, to discuss the current market and how Fintech startups are providing novel solutions for the challenges at hand.
Brian Vieaux is a veteran of the mortgage/lending space. With 28 years of prior experience under his belt, he has joined the fintech industry at a time when technology is looking to provide better financial services in sectors across all industries. According to Brian, there is a severe drought of housing availability which has been spurred on by several drivers. One important driver is the large number of institutional investors that are purchasing houses, removing the likelihood of home buyers being able to compete on even terms.
FinLocker is a company that partners with lenders who engage with home buyers. Traditionally, the decision-making process through which a lender provides financing involves a series of Q & A. Once the questionnaire is filled out, the consumer will provide documentation for further validation. The entire process is paper-intensive and requires completion in a specific period of time. If the process extends beyond 60 days, the documentation needs to be refreshed.
In today’s market, sellers tend to always prefer cash buyers even if their offer does not meet the asking price. This leads to enormous challenges for non-institutional buyers who must first have access to financing to purchase a home. FinLocker aims to replace this paper-intensive lending process with a digitized experience involving direct source data. Rather than working with paper statements, this solution allows FinLocker to gain direct access to data with a consumer’s consent and then use that data to streamline the mortgage process. This removes friction and shortens the lending cycle, allowing the consumer to be on the same negotiating level as a cash buyer.
FinLocker is empowering lenders of all sizes to engage with the consumer at earlier stages. Traditionally, the mortgage lender would engage a borrower at the Point of Sale, where the consumer has already decided to purchase a property. FinLocker is allowing consumers to leverage their data so that lenders can engage them at the Point of Thought.
Dr. Brummer seemed eager to engage with this novel idea and asked Brian to expound upon his rationale behind the Point of Thought. Brian explained that an average consumer goes through a specific process before purchasing a home. There are four leading indicators for an individual wanting to enter the home buying space:
- Consumers will begin searching for property online via an app or a website.
- They will want to gauge their credit standing and will access an app or their bank for a free credit report
- They will then want an understanding of what a mortgage will look like so they will access online calculators
- Finally, the consumer, who will now be at an advanced stage of deliberation, will want to understand what impact a mortgage will have on their cash flow. They will begin accessing personal financial management tools
FinLocker has taken those 4 leading indicators, which are usually happening independently of each other, and brought them into one experience, through a white label solution for its lending partners. This provides lenders with a set of tools through which they can engage and provide value to consumers at an earlier stage than before.
Dr. Brummer was also interested to find out how confident FinLocker was about operating in a high inflationary environment. Brian was quite optimistic in this regard. He explained how FinLocker is a platform company that can serve several financial verticals, which provides it with more flexibility. The segment FinLocker is looking to target is also predicted to grow over the next few years.
Fannie Mae, Bankers Association, and Freddie Mac have forecasted that nearly 1/3 of all homes purchased over the next 3-4 years will be by first-time home buyers. A large proportion of these individuals will be younger buyers with a weak understanding of financial products and mortgages. This is one of FinLocker’s target segments, and they are confident that increased demand for a digital experience will provide a strong market for FinLockers solutions.
To be a part of more interesting conversations like this you can join in on ‘Fintech Beat Podcast’ – where Dr. Chris Brummer brings together brilliant minds every Tuesday to tackle the challenges erupting at the intersection of finance, tech, and policy.
Dr. Brummer is a professor, lecturer, author, and founder of Washington DC’s Fintech Week. He teaches at Georgetown University Law Center, where he serves as the Faculty Director of the Institute of International Economic Law. He has spent over a decade researching the development of financial and regulatory policy and the impact of technology on how authorities operationalize supervision and regulatory oversight.
In addition to his service to academia, Dr. Brummer is a member of the Commodity Futures Trading Commission’s Subcommittee on Virtual Currencies. He is also a member of the Consultative Working Group for the European Securities and Markets Authority’s Financial Innovation Standing Committee, and the National Adjudicatory Council of FINRA, where he received accolades for his work on advancing investor protection.
When Dr. Brummer is not busy honing the brightest young minds of tomorrow, he is regularly involved in organizing the DC Fintech Week Conference, of which he is the founder and host. DC Fintech Week Conference is a conference that brings together the who’s who of the finance world in fruitful discussions on the fintech ecosystem.