Credible made a name for themselves in student loans. They are the first and largest marketplace for people looking to refinance their student loans. Borrowers could enter their information at Credible and be confident that they are getting the best interest rate for which they are qualified. With deep connections into many leading lenders they can provide this high level of confidence and therefore a better user experience.
They are now bringing this expertise to another vertical: mortgage refinancing. I caught up with CEO and founder Stephen Dash last week to talk about this latest move. He said the key differentiator at Credible is that they are the first company to ever give you actual rates (not the usual estimates) from multiple lenders in three minutes and they don’t share their customer’s data with any lenders until the customer is ready to pull the trigger. And then they will share this data with just one lender. Because they are integrated with the underwriting models of their lending partners they are highly confident that their customers will be approved once they pass this information along.
This is all about user experience. Stephen said that customers today do not want to be spammed by multiple lenders all vying for their business. They want a partner who will sort through the different options available and recommend the best one. They are also the first marketplace to allow customers to go end to end so borrowers can close their chosen loan without leaving the Credible marketplace.
They launched their mortgage refinancing marketplace last week with six lenders on the platform. Some of the leading real estate lenders in the country are on their platform with Quicken Loans and loanDepot two of the marquee names. Interestingly, they are integrated today with only non-bank lenders. When I asked Stephen about that he said that it was not a deliberate strategy to focus on non-banks. He pointed out that they have bank partners in their student loan product but that banks are slower to adopt new technologies. Their non-bank partners were able to work on their timetable to come to market. He is quite sure that they will integrate with banks over time, particularly when it comes to jumbo loans.
I asked Stephen about the timing of this launch given we are in a rising interest rate environment. He pointed out that between now and the end of next year there is expected to be $500 billion in mortgages refinanced representing two million Americans. Not only that but people have built up a lot of equity in their homes and they are using a cash-out refinance product as a way to consolidate debt or pay for college.
There is another interesting trend in real estate happening today. People are staying in their homes longer and the housing stock is becoming more dated. Today, people are more likely to improve their existing home than move to a new home. For these kind of projects taking cash out while refinancing a mortgage can make a lot of sense.
Credible is working with several national mortgage lenders. But the way this works from a regulatory perspective is that they are officially an online mortgage broker. They have obtained the necessary licenses initially in 20 different states but they plan to roll out nationwide in the near future.
They have been running a pilot program in California and North Carolina for the last few months. There they have demonstrated the speed with which they are able to get this complicated process completed. With one early client Credible required just three pieces of documentation and were able to close on the loan in just 21 days, about half the traditional time required.
The largest transaction that most people ever make is financing their house. Yet there really are not many options out there for people to compare rates between lenders without doing a good deal of work. This is destined to change as more millennials become home buyers and demand a better user experience. Companies like Credible are looking to capitalize on this gap in the market.