Scotiabank bills its eHOME online mortgage as a “faster and easier” way to get financed. It’s also been a hell of a lot cheaper in terms of rate, at least compared to the bank’s standard retail and broker pricing.

That’s why you’ll find a lot of mortgage brokers glad that the channel’s #1 lender has kept eHOME relatively low profile.

But that may be changing, as many always suspected it would.

I recently spoke with Scotia Mortgage Corporation’s President & CEO, and industry icon, John Webster, in hopes of learning what Canada’s third-largest bank has up its sleeve with eHOME. Here’s what he told me…

On how eHOME has performed thus far:

• “I’m pleased with how eHOME operates functionally,” Webster says. “It’s right up there with anything I’ve seen in North America in terms of a digital mortgage experience.”
• “My ambition when we started [eHOME] was to get it up to 10% of originations and build it from there.” (You get the feeling from talking to Webster that the bank is now ready to take eHOME to the next level.)
• But he concedes, “We have a lot of work to do to inform consumers that it’s out there…We need to make more people aware of it.”

On how eHOME has evolved since it launched in 2019:

• Since bursting onto the scene in March 2019, the bank has added pre-approvals, refinances and switches.
• “We wanted to get it out there [quickly] and we knew we’d be adding functionality as we go along,” he says.
• “We’ve [also] added dedicated underwriters that just do eHOME [mortgages] and that helps with things like turnaround time and efficiency.” That’s been the bank’s “biggest move” behind the scenes.

On how eHOME differs from the regular retail mortgage experience:

• In the Home Financing Advisor (HFA) channel, “what you’re really looking for is advice,” he says.
• Those who go through the eHome process tend to be younger people who are more comfortable with all the uploading and downloading and they usually already know what their income will qualify for…We haven’t seen anything really different with respect to credit profile…”
• “People who come to eHome are [more often] thinking about making a purchase and have seen the rate sites.” That rate awareness is one of the reasons that eHOME pricing has to be sharper.
• Other than that, “The customer profiles aren’t really that different, other than [customers’] degree of literacy with technology.”
• From the consumer’s view, the entire mortgage process can happen online, save for signing documents with a lawyer. No branch visit is required.
• Online-only customers aren’t left alone, however. They can talk to a dedicated (salaried) eHOME rep anytime if they choose.
• “That is the biggest learning of all….[that] digital really means digital plus,” Webster explains. In other words, most mortgage customers still aren’t comfortable doing everything themselves on a computer. Things like “click for help” are key, Webster says, so applicants can get immediate answers. Immediate answers are reassuring, and reassured customers are sticky customers.
• All eHOME mortgages are Scotia Total Equity Plan (STEP) collateral charges, and the bank eats the cost of appraisals (property valuations) on purchases.

On eHOME interest rates:

• “I don’t think in any financial services business you can do wrong being transparent on pricing.” And Scotia has easily been the most transparent Big 6 bank in the nation on mortgage pricing. Until recently, its online 5-year fixed rates were upwards of 20-30 basis points lower than its peers’ advertised “special offer” rates.
• “Brokers will call from time to time and say they’re ticked off about an [eHOME] rate,” Webster says. “I explain to them that I love you guys but you’re the highest cost acquisition channel.”
• “Our acquisition costs are simply lower using that space, [eHOME],” says Webster. “And as we move into more full automation, we can pass [further] rate savings along to consumers.”
• “Our friends who are mortgage advisors aren’t very comfortable [with that] at times,” he admits, but he says the technology and efficiencies benefit them as well.
• Ultimately, however, it’s the “customer’s needs and wants that are paramount….We’re seeing customers choosing to adopt eHOME. We’re not dictating it.”
• Interestingly, however, Webster says he’s noticed a psychological tendency among customers who are more analytical. They sometimes move “to the HFA channel to get a better rate.” They’re suspicious that the bank would really put its best pricing online.

On why other big banks haven’t copied eHOME yet:

• “[Large] competitors don’t seem to be that interested based on my discussions with our peers.”
•  Competitors thus far have focused on “making the front end look good,” but they then send the customer to a traditional advisor. “I don’t think they were committed to a complete online origination channel in the same way.”
• “Monolines are opposed to it because they don’t want to do anything to hurt brokers.” To that end, he respectfully advises them: “Don’t be in the buggy whip business.”
• It’s ironic that people who knock automated online mortgage models “shop at Amazon all the time,” he says. Digital shopping, which disintermediates traditional product advisors, puts ‘mom and pops’ out of business. But some in our industry attempt to hold mortgages to a different standard, he says.
• That said, “I think the broker space is very healthy and will continue to be healthy,” he predicts. Brokers and retail reps serve their own target markets, and he makes it clear that the bank wants all channels to succeed.

On whether eHOME, with its digital uploads, is susceptible to fraud:

• “From my perspective fraud is always a concern,” Webster says.
• “Overwhelmingly” mortgage fraud consists of “fraud for shelter” from people who are misrepresenting themselves “to get approved or get a lower rate.”
• “And they tend to pay,” he says.
• Professional fraudsters are different. They look for vulnerabilities in the system that they can exploit. It doesn’t matter what channel it is if you’re up against a professional, he says. “We have technology to spot fraud, but you can make [fake] documents so compelling, even underwriters miss them.”
• When setting up eHOME, he says “We learned a lot from credit cards and other businesses” who have more experience with online security.

On what’s next for eHOME features-wise:

• “We’ve been working on virtual closings to make the process fully digital…We’ve already piloted it and people can even do it with their iPad…”
• “Eventually, land registries will all get to full digitalization…The title companies are on the cutting edge of responding to this.”
• The bank is also “working on click-to-chat and click-to-call” to make it faster and easier for customers to connect with a human electronically.

On the future of eHOME:

• “Now we’re in a position to add capacity,” he says.
• “Over time, there’s going to be greater customer adoption…Eventually you’ll see more and more transactions happening on the platform.”
• “We haven’t done as much social media and marketing as planned because of other priorities, so we need to do that.”
• How eHOME impacts competitors will ultimately “depend on how quickly we can raise the level of awareness. So, we have a big opportunity there.”

Article feature image: Rafael Henrique/SOPA Images/LightRocket via Getty Images