The iPhone was years away from launching when
More than 20 years later, the San Antonio bank's mortgage business is coming back — and this time, customers can complete the whole process on their smartphones.
"We're an expanding company," said Bobby Berman, group executive vice president of research and strategy at Frost Bank, a unit of the $52.9 billion-asset Cullen/Frost Bankers. "Getting a home is an important transaction in someone's life. The technology is in a place where we could provide the right experience."
The bank is hoping to differentiate itself by blending two philosophies that are sometimes seen in opposition: a highly digital experience, where users can apply for, monitor and pay for their loans online or by smartphone, and an emphasis on human service, where mortgage loan advisors will coach customers through the process. To reinforce its commitment to customer service, Frost is not paying commissions to its loan advisors and will service customers for the life of the loan; to make borrowing a slick digital experience, it designed a "smart" application that aligns questions to the borrower's situation and can be completed end to end on a smartphone.
Frost decided to reenter mortgage lending about a year and a half ago.
Previously, Berman said, "it felt like a very transactional business to us."
After exiting the business roughly 20 years ago, the San Antonio bank is working with tech consultant Infosys to help it build out a digital consumer lending business that will include home loans.
The balance of human and digital is important because it captures changing demographics and rising expectations among borrowers. Customers will be able to complete the process end to end online or on their phones, including filling out the application, snapping photos of documents to upload, monitoring their loan status and making payments once it is approved.
The smartphone emphasis "is fairly unique, and especially good for Generation Z," said Tammy Richards, CEO of LendArch, a mortgage consulting firm. "This is the first group that is coming into the homebuying market that had cellphones when they were born."
She has also seen research suggesting that experienced homebuyers who have worked with banks for a long time also favor smartphones, because they are used to the process. At the same time, some first-time homebuyers will appreciate the personal touch.
Frost's mortgage application is smart, meaning it only asks for information relevant to the individual applicant. For example, if an applicant does not name a co-borrower, they won't see any further questions about co-borrowing.
This is another new, and uncommon, aspect of mortgage loan applications, said Richards.
Frost combined a front-end customer portal from the cloud-based banking company Blend and a loan origination system and loan servicing software from the homeownership software company Black Knight. At the outset, Frost
The bank brought on 80 new employees while building its mortgage business. That included business analysts, compliance experts, legal staff and technologists. The project also necessitated hiring loan advisors and staff to process, underwrite and service the loans. They will grow in ranks as lending increases.
"It's been like a startup," Berman said.
The timing of these hires worked in Frost's favor. As mortgage refinancing went down in volume, "there have been a lot of really good people who lost their jobs at mortgage companies," said Berman. "We could be picky."
Frost is currently taking applications from employees, and approved its first mortgage shortly after Christmas.
"We had so many people working on this," Berman said. The mortgage loan advisor for that first loan "was in tears."
The bank expects to open the program to customers this year. Customers will be able to choose from three products: a standard mortgage, a jumbo loan and a "progress" mortgage for low- to moderate-income customers that does not charge private mortgage insurance and incorporates alternative data for underwriting.
The final piece of the puzzle in Frost's new strategy is the absence of incentives. Mortgage loan officers will not earn commissions, which "changes the game from the start," Berman said. "We're trying to hire people who care about getting people in their homes, not about the dollar volume of the mortgage."
It's an origination model that Richards expects to see more of.
"There are new models coming out that will make mortgages more accessible to all, less costly and more transparent," she said. "That is needed."
