Freedom Finance Bank Offers to Get a Mortgage Loan in Just a Few Minutes

Freedom Finance Bank has announced its new service of digital mortgage, which can be acquired in just a few minutes via mobile phone number and Individual Identification Number (INN). It sounds unbelievable but you can get keys from your new apartment on the same day because all stages of that process are digital. The offer conditions are the following: loan not less than $ 7000, initial installment at least 20%, duration of a loan up to 15 years with 10.5% minimal interest rate (annual effective rate of return 11%). According to Timur Turlov, the head of Freedom Holding Corp., the new project will make it easier for both sellers and buyers of properties.

– How did you come up with the idea of a new digital product for a mortgage?

– It’s a long story but we’ve made the best digital product in this segment across the globe …

– Across the globe? That’s a bold statement!

– Yes, it is. At the first stage, we analyzed what other countries have done in this area. Among the top results are the U.K., the rate of the coverage mortgage market by digital services is about 55% here, Russia (50%), Netherlands and Estonia (44%). These figures mean that you can go through half of that way with the help of your smartphone but the rest of that process should be finished in person.

What we’ve done here in Kazakhstan is a process of mortgage loan acquiring solely online. The relevant rate is just 90% because you have to visit the notary office in person, which is what Kazakhstan’s law requires.
 
Photo credits: Valeriy Ayapov

– Did you hire someone to get this data?

– No, we didn’t. We just had set on the phone and called all banks in these countries, we’ve talked to operators as well because we were interested in everything: how they secure loans, what rate they use, and so on. There is no way to get a mortgage loan online for 100% all over the world. What we’ve done here has no analogs. But of course, we reviewed all these processes in South Korea, Estonia, Finland, Australia, Sweden, New Zeeland, Netherlands, etc.

– What are these processes?

– As you know there are three parties to the mortgage deal: a seller, a buyer and a bank, which provides funding for the purchase. Before we started work on the project, we split the process of an online loan application into nine points: an application, preliminary scoring, property valuation, final decision, registration of transaction, agreement signing, collateral registration, mortgage loan issuing and after-sales service.

Kazakhstan has been doing a lot in pursuit of the full digitalization of the economy. Currently, the vast part of state online databases are now available to businesses, which makes routine processes incredibly simple and fast. For example, when we work on our digital mortgage solution, we get access to fifty databases.

We have also automated the processes of onboarding (account opening and application submitting), preliminary approval and confirmation of the borrower’s solvency. We use the Big Data model for real estate valuation, which provides an instant collateral assessment. Moreover, the quality of assessment based on Big Data is much higher than the assessment we used to see before. There were a lot of backtests, including blind ones. In addition, the automatic valuation model cannot be bribed to inflate the price of an apartment, so it is more accurate.

Please note, we are talking about standard apartments worth up to $ 105,167 in Almaty and Nur-Sultan, which is about 80% of the entire market. The final decision and registration of the transaction also occur automatically online.

– Is there any stage when a client can’t accomplish a task online?

– The only offline process is the signing of documents by a notary, who receives a set of contracts. After that, the buyer and the seller come to the notary to sign a contract and close a deal. According to the law, the notary has to take a look at all these documents before they are registered with state agencies. We were okay if a notary would check such documents in 24 hours, but in practice, this process takes just a few hours on average.

At the end of the transaction, the bank does not have a single paper of the client’s document in the archive, and the pledge is registered in the state register on the blockchain.

As far as I know, today Freedom Finance Bank is the only bank that has integrated with this collateral registration service. We issue a loan online and we put that money into the borrower’s account. Then we transfer money to the account of the real estate seller, which is also opened in our bank. As a result, there is no need to visit the bank to get a mortgage loan. On the other hand, because everything goes automatically, our staff can work on other projects.

– So, all you need is a digital notary?

– Many want to change this, and so do we. That’s why I believe that this problem will be gone. However, I have a feeling that we have to move forward gradually and not accelerate this process because regular people are not morally ready to sell or buy real estate 100% online; they want to go somewhere to put their signature by hand to feel the deal is real. But times are changing, the dominance of digital technologies is no longer just a fashion, it’s part of our daily life, so we all have to get used to it!

 
– Is it possible to ask a notary to visit a client and solve the «last mile» problem this way?

– Yes, a client always can ask a realtor, intermediary or notary for help. All they need is access to the bank’s website.

– What if a notary came to the buyer, but he does not have an electronic signature? 

– We can issue an e-signature in a few minutes, it’s not a big deal.

– What does a borrower reviewing process look like?

– An IIN and telephone number are the only two things we need to open an account for a client and to see whether or not he is solvent enough. First of all, the bank looks at the client’s income and credit history. If some additional information is needed, the bank can ask a borrower to show a statement from another bank – our online robots have learned to read and understand these statements. If this is also not enough, then we can ask a client to add co-borrowers: a wife, brother, son, another relative who can add some additional income to a client’s application.

Before starting a mortgage process, any person can check whether he or she fits into this program and look at the final price. We call this prescoring.

– How does the bank evaluate real estate?

– In my opinion, this is the most challenging part of the project. It’s hard to assess an apartment in just a few seconds but we made it. We use two models: one of them is based on geofencing, the other is based on the historical value of a real estate in the area. The system takes into account almost everything: infrastructural aspects, such as the proximity of the facility to transport hubs, education and health care institutions, the number of trees, and so on. The situation at the macro and micro levels is also taken into account: currency fluctuation, income per capita, individual indicators of a particular region, the number of housing, investments in construction, etc.

In total, the process of real estate appraisal includes 120 indicators. All collected data then is sent to the trained model, which gives a verdict on the price of a certain apartment. This allows us to control the situation if the market changes, prices rise or fall; we see all of this in our model.

Because we rely on a machine there is no longer a human factor. I mean, the results of the appraisal now are more accurate and fair.

– What should the Kazakhstani mortgage sector expect in the new future?

– Mortgage is one of the most important financial products for any government. It’s a tool to support citizens and all civilized governments do this because of the huge multiplicative effect on GDP by the sector. Let me explain: a million people are born in Kazakhstan every year. They graduate from school, go to university, and so on, and one day they need an apartment.

In Kazakhstan, the level of urbanization is still low. There a lot of work to be done in that area, even though statistics show a pretty good picture. It is necessary to build new houses and facilitate young Kazakhstanis to buy these apartments. That is why I believe that the government will continue to use mortgages as one of the main social instruments.

Ulyana Fatyanova contributed to this article.