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Tom Kelly
Tom Kelly
The Real Estate Adviser

February 2, 1996

HIGH TECHNOLOGY AND THE HOME LOAN

  • Fewer loan officers will be closing more loans.

    • BY TOM KELLY
    The Real Estate Advisor

    I can see where Kerry Killinger and Lennox Scott have at least one thing in common. And, it's the reason why so many Washinton Mutual reps are so close --certainly logistically -- to John L. Scott agents.

    The president, chief executive officer and chairman (is the man holding most of the marbles?) of Washington Mutual Bank and the president and chief executive officer of Bellevue-based John L. Scott Real Estate want to provide potential homeowners with the ability to locate and buy property faster than ever before.

    "I anticipate the couple touring a weekend open house could close on the house later in that week," Killinger told the Seattle Mortgage Bankers at a recent meeting.

    The session, highlighted by a panel discussion addressing "Mortgage Lending in the 21st Century," brought out some interesting prognostications of the home-loan process. Scott was not in attendance but has long pushed for nearly instantaneous closings.

    For six years, Scott has envisioned an all-encompassing real estate center with prepackaged services (appraisal, title, inspection). One of his goals is to streamline the process of buying a house so the deal can close within five working days.

    Scott was part owner of The Mortgage Company, a residential loan brokerage once located within selected John L. Scott Realty offices. He abandoned his two-year experiment with a mortgage division because he saw it was much easier to play loan partner than loan broker. Several of his offices now house Washington Mutual loan representatives. Part of the John L. Scott-WaMu alliance can be traced to the bank's commitment to approve buyers in just one day.

    WaMu's Killinger, who leads the biggest mortgage lending operation in the Northwest, was one-third of a president's panel that also included Dick Swanson of Continential Savings Bank and John Fairchild of Lynnwood-based Phoenix Mortgage & Investment.

    Killinger, who said that new technology would not only bring faster closings and lower operating costs, also predicted that commercial banks and smaller "portfolio" lenders would no longer be significant players in the home lending game.

    "Commercial banks have become a decreasing breed," Killinger said. "They, along with many others, no longer are able to sustain a sufficient return on equity on mortgages."

    All loan originators have felt the twinge of competition and costs. Many fringe players only enter the market when rates are low, but the lenders looking to the long term have returned to check how their basic philosophies can be braided with superfast software.

    "We have to be sure we have the people who can adapt and be flexible to the needs of our customers," Swanson said. "Our emphasis will still be 'are we creating value?' "

    Fairchild, who has started three mortgage companies and seen at least that many stampedes to refinance, said the borrower is not going to accept today's loan fees when tomorrow will bring speedier service.

    "If you put in a credit card at one end and get escrow papers out at the other, the customer is not going to sign off on 1 percent loan fee," Fairchild said. "They are going to see all that speed and wonder why they should be paying the same price of a process that used to take closer to 30 days."

    Fairchild's bread and butter is still built on the relationship his reps have with competent, efficient real estate agents. He doesn't see that changing but allows fewer reps will be doing business in years ahead.

    "The days of loan officers closing 3-4 loans a month and making $40,000 a year will be gone," Fairchild said. "In fact, that's a job I would like to have. There will be fewer loan people but they will be closing more loans than they're used to closing."

    Can lenders permit computers to remove the human element from a business that so greatly relies on return customers? How fast is too fast when it comes to locate, buy and move in?

    "You don't take technology, add it to what you are doing, and expect it to work," Fairchild said. "You look at what you are doing, see how technology can help you and then go from there."

    That's true -- even if you don't want to close your home loan two, five or even 30 days after the first time you've seen the house.



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