REwired reports Amazon Hiring Head of Newly-Formed Mortgage Lending Division.
Earlier this week, we reported to the LendingLife community that online shopping giant Amazon may be looking to get into the mortgage lending business, or at least that’s the rumor among mortgage lending professionals.
While limited in scope, Amazon’s plans are to start with offering checking programs first, then maybe move into the debt product space after.
Well, after reporting that, we’ve received information that Amazon is currently looking to hire someone to lead their newly-formed mortgage lending division. Due to non-disclosure agreements, we probably shouldn’t reveal their identities. After all, with Amazon planning a move into mortgage lending, it’s best we work with them and not against them. Am I right?
We can say that if you look at the top 10 HMDA lenders and pick out the nonbanks, that’s where Amazon is recruiting their talent.
Amazon Prime Now
TheTruthAboutMortgage reports Amazon Mortgage Might Be a Thing Soon.
A 1-Click Mortgage Sounds Kind of Nice
If you use Amazon, which I’m going to assume you do, you’re probably familiar with how easy they make everything.
While home loans will inevitably never be this simple, Amazon does seem to have a knack for making things a little less painful.
I’m not sure how Amazon would innovate in this space, but I’m sure they’d think of a way to do things faster, and perhaps in a more productive fashion while maybe driving the price down.
It probably wouldn’t be good news for mortgage loan officers, who could stand to lose their jobs to automation.
Questions Abound
These stories broke four days ago. There is no additional news thus questions abound. Amazon checking accounts? Amazon lending?
This is on top of the January announcement that Amazon, Buffett, JPMorgan Team Up on Healthcare.
What about Whole Foods? What is that deal really about?
The moment that deal was announced I figured it was all about acquiring physical space.
Can they launch drones from those locations?
Amazon Realty?
Why not?
In fact. that is precisely where I would like to see Amazon and precisely where they could do the most good.
Six percent real estate commissions are obscene. Why should commissions be 6%, not 1% or 2%?
Why not a flat fee? Is it any harder to sell a $250,000 home than a $1,000,000 home? Does the agent do any more work?
In many California cities, it may be far easier to sell a $1,000,000 home simply because there is no supply of $250,000 homes.
Who wouldn’t want to list with Amazon Realty, especially if Amazon offered lower commissions?
Mortgage lending or checking does not excite me much. Putting competition into real estate buying and selling is another matter, especially if Amazon could figure out a way to represent the buyer, offering buying agents as opposed to selling agents.
In the back of my mind though is the notion that Amazon has overreached.
You cannot be everywhere at once. Or can you?
Here’s a start: Amazon Drone Delivery Coming Within Months.
Will Amazon rule the world?
Mike “Mish” Shedlock
Amazon also wants to expand into manufacturing. They were talking about getting into making their own supplements to compete with the likes of NOW, Thorne, GNC, etc.
That is where the theory of creative destruction comes in. Those people are migrated to more productive jobs instead of becoming unemployed. The same theory as putting the buggywhip makers out of business because of the auto industry or candle makers because of electricity.
“Why not a flat fee? Is it any harder to sell a $250,000 home than a $1,000,000 home? Does the agent do any more work?”
No, but the agent who lives in that area has to afford to live there. And yes, you can automate the process and reduce the commissions. But the now-former agent has to get into debt in order to pay his/her bills. This can only go on for so long until it all blows up sometime. When exactly? Who knows?!
I think all big corporations eventually want to be banks. GM, Sears, GE, Cisco, Boeing and now Amazon. EZ financing at “low” rates to get you into a buying mood. Heck, why make anything at all?
Amazon may just have wised up to life in a world where all value add is being stolen via debasement and regulation, then handed out to asset owners via appreciation. In such a place, the only people you can hope to sell anything to, are those benefiting from the asset pumping. As the rest are literally robbed barren and destitute to keep the redistribution via asset pumping racket alive.
Drones may very well launch from trucks or area centers. Yes a truck can carry a lot of stuff, But it has to come all the way out to me or whoever, to deliver one package. The next delivery may be a mile away. That’s not exactly efficient. I think we see some combination of trucks and drones, perhaps smaller trucks. It will not be all drones. Would take too many of them I think.
Certain things with drones would be really interesting. If someone wanted to pay more to get something RUSH ordered and immediately delivered? A drone could fly over a traffic choked city and delivery it very quickly.
How much can one drone carry? A delivery truck carriers hundreds and hundreds of packages as it drives a city. Is it effective to send a drone out from a warehouse to someone fly in a swoop down and drop off one package at a time to someones house? Doesn’t sound very cost effective and seems like there would be thousands of drones buzzing around. Then there is the logistics of landing, releasing a package, etc… ??
Mish asked if Whole Foods could launch drones. I only know one Whole Foods and it is in a luxury condo building near DC. Most seem to be in urban areas. They should try some kind of pneumatic delivery service.
Bye-bye bank’s excess credit spreads. Some fools suggested that higher rates would help bank profits. I laughed at them. Not only do higher rates destroy loan volume, but they also destroy spreads as more competitors seek to lend to increasingly poor credit prospects.
The real estate business is 80/20 like many others. A small % of the listing agents and brokers make most of the money. Weather it is 4%, 5%, or 6% I think that is way too much to sell a house. 5% of a $500k house = $25k. Why should it cost $25k to sell a house? That is more then a new car costs! The problem is EXPOSURE. Listing with a Realtor gives sellers EXPOSURE to buyers, that is why they do it. But if EVERYONE listed with Zillow or Amazon that would automatically give buyers all the exposure needed to sell.
Because the National Association of Realtors has one of the most powerful, organized and well funded lobby’s in DC. Just like our outdated, corrupt, rip off health care and pharma industries have powerful lobbies that make sure the status quo making them rich doesn’t change
Remember 25 yrs ago when you actually had to call up each airline to get prices for flights?!! Imagine if you still had to do that and couldn’t go to Expedia.com or Google Flights. The Internet revolutionized air travel. Same needs to happen to our real estate industry, mortgage industry, title ins, etc. But a lot of people who get rich off the status quo will fight TOOTH AND NAIL prevent change.
Imagine if the Realtor MLS was replaced by Zillow and Amazon and anyone would wanted to sell their home could just upload it to Zillow or Amazon for say $99 (vs 6%!!!)? 6% of a $500k homes is $30!!! Even 4% is $20k! That is RIDICULOUS. The Realtor industry is a big industry that markets hard to get “listings” from sellers to put into their private MLS. What needs to happen is a sea change where the public no longer believes they need to call a Realtor to list their home. They merely upload it to Amazon or Zillow and the whole world immediately sees it. This will make buying and selling homes much more fluid. Real estate companies get rich parasiting off home ownes equity. That extra $10k, $20k, $30k….should go into the SELLERS pocket not the Realtors!
Good post. Maybe Amazon can bring a better, cheaper way to buy buy and sell real estate. Real estate agents should be on notice that change is in the air.
I totally agree. Real estate still hasn’t been full disinter-mediated by the Internet. The National Assoc of Realtors lobby protects the MLS and Realtors. 6% is ridiculous. You should be able to pay like a $595 flat fee to Zillow or Amazon to sell your house. And you should be able to hire a “consultant” for a flat fee if you are a first time buyer if need help evaluating a house. Lending fees and title insurance are also ridiculous. Consumers get robbed blind with closing costs when closing on a house. All those real estate industries (just like health care, big pharma) protect the status quo so with millions and millions spent on lobbying in DC. So certain people at the top can keep getting rich off the status quo.
Yes, you can do it – but if you are not on MLS the odds of you selling a property are pretty low. If you’re doing it as a “hobby”, fine. Good luck to you.
Universal basic income for all of us.
Hope is what I read here. Hope is not a strategy.
Amazon reminds me of Sears when I was a kid in the 80s. In fact, 100 years ago, you looked in a catalog, you ordered and your stuff was brought to by railroad, a commercial carrier. Amazon’s PE is 349 per Google. Does anyone ever think they will ever achieve earnings to justify this number? History says no. They would have to eliminated all other competitors. Eventually anti trust has to kick in or they become the govt store.
Another new business, seriously? Two weeks ago it was expanding into delivery with “Shipping with Amazon,” or SWA. Then it was about how Amazon was going full tilt into the grocery business, a sector that has always been challenging. Now it is banking or better yet “checking” which does not normally create huge profits.
So again I ask, how does Amazon merit such a high stock valuation? Amazon is ready to launch a delivery service for businesses that would compete toe to toe with United Parcel Service Inc. and FedEx Corp. The delivery arm of Amazon will be named “Shipping with Amazon,” or SWA.
The idea Amazon is entering into the delivery business or any of these should force any logical investor to question why Amazon stock is trading at a PE 300 time future earnings. It is insane to think any of these businesses can ever be worth such a high multiple. More on how insane this has become in the article below.
link to brucewilds.blogspot.com
My experience since buying a house 2 years ago is that Quicken Loans is already the Amazon of home loans. Very easy to work with, streamlined online experience, great portal.
They should supply mortgages to people with no income, no job or assets and call it Amazon Sub-Prime. 2007…..It’s like deja-vu, all over again.
Yup. My wife is a realtor. That 6% has to be split usually about 3 or 4 ways. The Century21 brokerage where she works automatically gets 1.5% of everything she sells. The sellers agent gets 1.5% and then the listing agent gets another 1.5%, leaving her with 1.5%. On the rare occasion that she sells one of her own listings, she might get as much as 3% on that sale. We live in west-central FL and most of the houses she sells are in the $150,000-$250,000 range so we are usually talking about $3,000 or less in commission for each of her sales. It’s a decent living, but by no means easy money.
A great post. I agree with everything you said.
Amazon is getting too greedy and overconfident. Stock is grossly overpriced and Bezos thinks he can do no wrong. A recipe for disaster.
The mortgage industry is ripe for disruption. You have thousands of nonbank mortgage companies all offering essentially the same products with high closing costs. One of the biggest costs that nonbank mortgage companies have is marketing to attract customers and all of them claim to offer the “best rate and best service”. The costs of finding a customer contribute to making a mortgage refinance or purchase a very expensive process. Consumers have a very tough challenge in trying to figure out which lender they should use which is why about 65% of home buyers simply go with their realtor’s recommendation on what lender to use.
No need to conflate realtors, lenders, and mortgage brokers. Very different activities. Being active in one area has nothing whatsoever to do with being active in the other. Also, Amazon isn’t trying to disrupt everything. They’re trying to disrupt transactions. If your job is collect and move information, they want to destroy it. If your job is to make or do things, they’re not interested. Process loans, yes please. Show homes, no thank you. They only make and do things that nobody else will make or do for them, like their branded stuff and their same day delivery networks. And they only make and do those things as a way to make the transactions easier. They’ll only get into realty if they think that is the best way to source loans to process or capture customers for other transactions.
I think there will be disruption in real estate sales via by owner or reduced commissions. I would think Zillow or Realtor.com would be the disruptors in that area. As far as home lending good luck competing with the big names like Quicken Loans, etc. I have had people tell me Quicken loans was the best experience they have had in that space. As a matter of principle I don’t like Bezos because of his political views and try to buy from competitors like WalMart.com instead.
I suspect that they already have underwriting info all in cloud databases for all prospective buyers in the whole world…..wait, that would be Google. But maybe the data is obtainable on the cheap in that case.
Thanks Jim – How are the agents in big cities – NY San Francisco – etc.
doing?
Amazon currently trades at 270x earnings, representing an earnings yield of a scant 0.4%. Amazingly, at this valuation AMZN seems to be under no requirement by “investors” to post a reasonable profit or ROE. Its own operating margins are miniscule and its growth strategy seems to be nothing more than to enter existing industries and destroy the margins of the existing constituents. By taking market share without the onerous requirement of actually being profitable (while existing constituents in the targeted industry are hammered when their own profit outlook dims), AMZN is continuously rewarded with an ever increasing share price, which is a bit bizarre, don’t you think? I have to believe that at some point investors are going to demand profit and a competitive ROE from AMZN as opposed to a company that essentially does nothing more than destroy operating margins in every industry it invades. It will be interesting to see where AMZN’s share price trades at that time.
Hi Mish. First the disclosure: I am a Realtor. There is quite a bit of difference between marketing a 250,000 property and a 1,000,000 property. The extensiveness of the marketing is one part. Sure, everything goes on line, but there are different expectations of how a property is to be sold at different price points. And believe me: 6% is not an automatic path toward rich realtors. Just check to see how many realtors are making six figures–precious few. There is a lot of overhead associated with selling properties that most people don’t realize.
All have failed so far….
Many an internet start up has tried to “creatively disrupt” the realtor commission space…
I forgot to mention whole foods. The moment that deal was announced I figured it was all about acquiring physical space. Can they launch drones from those locations?
“Will Amazon rule the world?” They may rue the day they got into mortgage lending, not to mention Whole Foods.