Transcription:
Jeremy Sicklick: (
Hi, I'm Jeremy Sicklick, founder, CEO at HouseCanary. I'm excited to join you all today to talk about "How close are we to actionable home valuations for consumers, lenders and iBuyers." I'm joined today by two industry leaders and titans in the industry who are driving massive change. First off, JJ Jha, CMO of mortgage at Wells Fargo. JJ leads the marketing of the mortgage organization, $156 billion through Q3 21, $1 trillion servicer, $1.4 trillion in deposits, just massive scale. JJ, it's great to have you here today.
Jalaj "JJ" Jha: (
Thank you. Excited to be here.
Jeremy Sicklick: (
And Nate Harbacek. Nate is the VP of partnerships over at Opendoor. Opendoor is the leading iBuyer. They really built out the iBuying category, and now they've really driven innovation, not only around iBuying, but increasingly, a full-service consumer real-estate experience. Nate, it's great to have you.
Nate Harbacek: (
Thanks Jeremy.
Jeremy Sicklick: (
So first off, JJ and Nate, again, it's phenomenal to have you here, look forward to the conversation over the next 30 minutes. Let me start by asking each of you to really start off and tell us a little bit more about your company, your priorities, and, as you look forward, the kind of experiences that you're looking to create at each of your businesses. JJ, why don't I start with you given your leadership at Wells Fargo.
Jalaj "JJ" Jha: (
Great. So as you pointed out, Jeremy, Wells Fargo has been one of the top banks in the U.S. and the amount of scale they have is just enormous especially, but what makes it different from other banks is that the mortgage business is the primary business here in Wells Fargo. I was with Capital One before. There are other banks where mortgage is there as an offering, but in Wells Fargo mortgage drives the majority of the assets and everything else around it. So the thing is like, we are always trying to be on the cutting edge of technology, on the cutting edge of customer experiences, and knowing what goes on in the mortgage industry is on the top-most priority list of Wells Fargo now, as we all know. The reason that I joined Wells Fargo was because Wells Fargo is fully committed to be the brand that it has been for the last hundred years.
Jalaj "JJ" Jha: (
There were unfortunate situations that we all had to go through in the last couple of years, navigating past it, making sure that we are back, the most trusted lender in the mortgage industry, those things are the goal that I see the leadership team fully committed to, and then I can see that given the scale that we have right now, the innovations, the transformation, the whole focus on the customer experience is so large, so big that it was definitely a trend we all wanted to help.
Jeremy Sicklick: (
You guys are doing great work. Thank you, JJ, Nate, over to you, you've been part of really helping to build Opendoor. You guys have made just phenomenal progress over the last seven, eight years. And I know you've been there for a large part of the Opendoor story. So maybe it'd be great to hear a little bit more about yourself and Opendoor and the work you guys are are doing there.
Nate Harbacek: (
Thanks, Jeremy. It's a pleasure to be back. It's funny, this is my second time speaking at Digital Mortgage while at Opendoor and three years ago I asked the audience for a show of hands of who'd heard about Opendoor. My guess is today, despite this panel being virtual, is that we'd see quite a few more. It's been a privilege to work on the cutting edge of digital and virtual transformation of real estate over the past five years. What I would say is the mission of Opendoor and our goal hasn't really changed since the inception of the company, our goal is to continue building the largest, digital one-stop shop for real estate, like true one-click, and we're making it possible for people today to buy, sell and move at the tap of a button.
Nate Harbacek: (
The thesis is simple. There is a generational shift that's accelerating today in housing, from offline to online, and it's driven because consumers are demanding a fully digital experience. They want speed, simplicity and certainty and that's what's happening. So from my perspective, digitization in the real estate industry is just taking off. We have many chapters left and transforming the end-to-end homebuying and selling experience and empowering consumers, and also just across the industry, every real estate participant. So, at Opendoor I've been privileged to work in partnerships, in corporate development, thinking about how people sell to us and, buy from us, and at the core of that is that that one-click magical experience. So thanks for having me.
Jeremy Sicklick: (
Absolutely. So I'm, I'm excited to dive in with both of you and really talk through these, creating these phenomenal digital experiences, whether it's on the mortgage lending side, whether it's on the iBuying side, to sell your home or buy a home, or even get financing as you're now doing at Opendoor. And so, at HouseCanary, what we've really been focused on, I think we're all focused together around how do you use information to create these amazing and, over time, these one-click type experiences that we've all become so used to, whether it's on your phone or [whatever], every consumer now is used to really buying their groceries, used to doing buying a car in two minutes online, whatever it is, people have now become used to these phenomenal digital experiences; and when you look at, historically, the process of buying a home, getting a loan, selling a home, it's really been an analog process.
Jeremy Sicklick: (
So I know each of you have made phenomenal progress. So I thought what we would do is basically just as a preview to the conversation that we'll have, we'll first start off talking about how does the process work today at each of your organizations and how you use data and information to help create that better consumer experience. Next, we'll then go into what the future looks like and from your perspective, as you zoom out and look forward a couple years, what is that one-click experience and dive in a bit more detail of, sort of give us a preview to the future. Then finally, we'll come back and talk about given that view of the future, what is it really going to take between here, where we are today, and there to really make it happen? So, starting off with just today, JJ, maybe let's start with you and, I would love to hear just how the process works today at Wells Fargo and some of the progress that you all are making to create this great digital experience, especially as we're moving into an increasingly purchase market.
Jeremy Sicklick: (
We know that there's this massive group of millennials and millennial household formation that are looking for just phenomenal experiences, increasingly digital experiences. So I'd love to hear how you're looking at and innovating around mortgage today at Wells Fargo and using information to help streamline that process.
Jalaj "JJ" Jha: (
So I think that's, that's a great question and I agree with everything that, Nate, you are saying about the digital experiences and the need for the customer. Incidentally, my partner in crime who runs transformation for mortgage in Wells Fargo. His name is also Nate, so I'm used to like talking, Nate, this Nate that, [and] it'll be a good conversation today. I mean, look, for, at a very high level, for a mortgage to be streamlined, the things that you'll need to know [are] about the creditworthiness of the customer, their assets, I mean basically their ability to pay and all that stuff, and the details about the collateral. This is where Wells Fargo is so fortunate, that we have almost one-third, like one-in-three of U.S. adult households has an account with Wells Fargo.
Jalaj "JJ" Jha: (
I mean, that gives us a tremendous advantage in knowing about the first two buckets I talked about, we know the creditworthiness of the customer, and we know about their assets. So mortgage is like the number one priority, and the focus is on meeting the mortgage needs of our own customers in the bank; and that's...such a huge population we work with. So we can get the creditworthiness and the asset spot covered, and there's a lot of efforts we are doing in Wells Fargo to kind of automate the information that we already have about the customer. It may be sitting in a different part of the business. Getting that information accessible to mortgage in that process will be like our primary focus. The part that we don't have is the collateral piece, like the house they have, they may have a mortgage with somebody else, or they might be a first time homebuyer trying to buy a house somewhere.
Jalaj "JJ" Jha: (
We don't have that information handy in order to kind of make the whole appraisal process, the valuation process and the details about the collateral aspect to be as streamlined as we can do the other two. This is where the automatic, more AI-based, more accurate home valuation will work perfect. Now, again, there is conforming and nonconforming issues like you have to stick with the agency guidelines on the conforming loans, but again, that's where Wells Fargo gives you the advantage. Like we have a such a good balance sheet that we have more leeeway in terms of how we want to give credibility to the automatic valuation models, but at the end of the day, it all comes down to how much automated we can make the collateral examination process and not rely on the standard process of finding the appraiser and they're going to their houses and then doing an appraisal for you. Like the more we get out of that, the more automated it'll be. So, as I said, three pillars, two of them, I think we are on our way to definitely, generally solve them in our path to have that one-click mortgage approval for our customers. The third piece is when we rely with our other other partners to solve the automatic valuation aspect.
Jeremy Sicklick: (
That's, that's fantastic to hear, JJ. And as we think about, you know, this move towards more automation, I think Nate, it would be great to hear from you, Opendoor was really one of those innovators and the innovator who started solving a real consumer problem that people silently suffered through, which is I want to sell my home and it's a long process, and I don't know what it's worth; and you guys came in and really put data, AI, a lot of investment, [and] a great experience together to ultimately solve a huge consumer need. So tell us, as a consumer comes, many people, as they're looking at selling their home, one of the first places they look to is Opendoor and what is my property worth, and should I sell it to Opendoor? Talk us through how it works today and how you use information to help create these great consumer experiences we hear about.
Nate Harbacek: (
I'm happy to, I think that's well said. Today's consumer, and we've touched on it a bit already, but they want choice. They want it as quickly as possible, and anybody that works in real estate knows the traditional process is 100-120 days. Certainty, and speed are not what we use. They want things self-service, on demand. Our goal in starting Opendoor was to listen and to build a better experience. At Opendoor, kind of North Star principles for the company are to provide sellers with speed, simplicity and certainty, and having an accurate valuation that's fair and fast is fundamental to that customer value proposition. More specifically, how we use our models and human pricing team to get to that valuation...
Nate Harbacek: (
...it's a function of the house. For example, a newer-build home, a tract house in an area that we know pretty well and we have higher confidence in the model, that'll have less human overlay than an older home in a more heterogeneous housing-stock area with foundation and or other potential condition risks. In that case, we'll rely really heavily on human pricing and inspector judgment. Taking a step back, Opendoor has almost eight years of experience deploying and calibrating its pricing algorithms and collecting data across a bunch of markets. Our system is pretty purpose-built for the principles of buying and selling homes and delivering that efficient, clear, fast cash-offer. But we get eyes on every property, whether that's in-person or digitally, and our goal in doing this is to give consumers confidence, and on our side to eliminate the tails.
Nate Harbacek: (
What I would say is models are really good for the median, and a lot of our human processes and checks are around catching the tails, both to the positive and to the negative. What I would say is, in summary, our models, help anchor us, and then we run business processes and human evaluations around the models to account for uncertainty and other conditions like weird layouts, street noise,...odors and things that models may not catch. The mirroring of the two is a really efficient process on our side, and then this beautiful, elegant one-click, here's an offer for my home, answer a couple of questions, do an inspection, like get to a certain offer as quickly as possible and take that a hundred to 120 day process down to as fast as the consumer wants it to be. Does that make sense?
Jeremy Sicklick: (
That makes sense, and as we think forward from today's experience and we start to look toward the future, maybe, Nate, I'll continue with you. Let's talk about the future a little bit. You now can see what a great experience today in 2021 looks like for consumers, and now you've built all this massive data; and you mentioned this sort of idea toward a one-click experience. Talk us through your view of the future for creating these phenomenal consumer experiences that ultimately give consumers the speed and certainty that you talked about in the process of selling their home or buying a home and getting financing
Nate Harbacek: (
Happy to, listen, I think the goal is to try to bring in the future today. I said it earlier, I think it bears repeating that we are seeing a generational shift from offline to online and if you take that as a fundamental...that, everything needs to be able to be done online, ideally off the phone, and, given the overlay of the past couple of years, the need for that is accelerated. I think we're trying to position ourself at the forefront of a changing and, in many cases, it's pretty antiquated process. Like when we started Opendoor, there were a bunch of us that had to wet sign. What I would say is the most novel thing that we'd seen in the last 15-20 years was an adoption and syndication and in virtual...map format of the MLS. What I would say is whether selling, owning, shopping, an owner thinking about potentially even renting or leasing or doing novel financing products themselves, there's a lot more credibility in having real-time self-service products and real-time kind of refresh values.
Nate Harbacek: (
What I would say has been really interesting for us is we see consumers come back to our website and our app again and again and again to get a refreshed view of value, to get a refreshed view of products when they're shoppers or when they're sellers; and what's been great for us as we've built this dataset of homes and consumer engagement is once we've underwritten a home, it's really easy for us to help a customer refresh and understand an updated view of their home, and what product might be relevant for the phase of life that they're in. That, to me, and I think to the business, helps empower consumer choice and lowers the barriers and frictions and uncertainty around moving. It also enhances accessibility to the real estate transaction for a broader array of consumers. So whether it's the transaction itself for any of the adjacencies around the transaction, and I think having something that's more digital and approachable is going to increase accessibility.
Jeremy Sicklick: (
That's fantastic to hear Nate JJ, you know, as we look at Wells Fargo,...with such scale in mortgage and focus in mortgage,...the transformation that I think Wells Fargo and mortgage [are] going through with a lot of the leadership that you and the team have brought to think through this digital transformation [of] the business, I'm curious, as you think about a view of the future that helps ultimately at massive scale, create these great experiences to be able to buy a home and get a mortgage, [I] would love to hear a little bit more about how you view the next couple years and your view of the future around how to use information to create these better mortgage experiences.
Jalaj "JJ" Jha: (
So I think...of this as two aspects. One is obviously, buying your house or your first house, or generally a purchase transaction; and then there is this journey of the ownership of the house itself until you sell it. So a house starts when you buy or when you start shopping for a house, and then there is this entire journey of enhancing valuations, adding new features. This is almost like an asset, which you keep on growing on an ongoing basis in order to have some sort of a higher fulfillment, whether it's like your kids are born here, and so you have got the house for rest of your life, or you sell it for a higher price. Ultimately, this is not just a place where you sleep. This is like your biggest financial asset that you nurture and grow and eventually monetize it one way or the other.
Jalaj "JJ" Jha: (
So from a purchase standpoint, I thinkI agree fully that there [are] a lot of these things that are coming digital and having the ability to shop for a house within the comfort of my house from a digital source, virtual tours, finding the neighborhood, the commute, the schools and the house that I can afford. I think all of these things are critical in the customer's mind, and I think we can provide that to that one and three because of the information we have we have on those customers. The part that we didn't have is that whole listing, house details, neighborhood details; and those we will bring based on our [partnerships] with companies like yours, or, for that matter, Opendoor, Zillow, like all of these companies bring that kind of knowledge and information to the forefront.
Jalaj "JJ" Jha: (
Then the question comes that, okay, you will help them based on their creditworthiness and their assets, and, to purchase the right house, but then what about [on an] ongoing [basis]? Like, my house was X dollars three years ago, I'm in Dallas and now it's like 1.3X...does that. I mean, it's sort of a vanity associated with it. Like, I don't intend to sell my house, right, but I still go and check my valuation of the house every now and then. So I see that the value of the house is increasing. It means I made the right choice by investing in this house. I have been in like kind [of] a good location, the city is improving. So just like, as a customer, I feel that just like, I know my BMI, I know my bank balance.
Jalaj "JJ" Jha: (
I know my salary similarly. Knowing the value of your house is something that I think that in [the] future customers will always want to be like, if somebody asks you, what is the valuation of our house or what value [their] house will sell a they're not going to run to an appraiser or a website. They will know that. That's the value you want to give them . Ten years ago, no one knew what their credit score was. [If] you asked me, I'd be like, I don't know, I'll have to apply for a credit card to get it. Now you ask it, all of us know our credit scores. Similarly, today, [if] you ask for [a] valuation, like, how much is your home worth? A lot of people won't know that. I think two, three years from now, they will know it and they will also know how can they increase or keep it stable, depending...on the features they can add to their house. That is where I think the future [will] be, you know exactly what kind of house you're eligible [for], and you buy your first house. Then you knowthe details of the investments you can put in in order to grow that asset too, so that you can monetize it at a later time. All of these things can only be possible in a digital environment where all of these things are done more based on machine learning and AI based models, rather than sending appraisers to your houses.
Jeremy Sicklick: (
It's a great point, JJ, and, you know, the reality is the residential real estate market is now something like $36 trillion. You know, the house is most people's largest asset. That's their nest day and knowing what that property is worth, but also how much equity they have, and trying to make smart decisions as opposed to passive decisions around what they can do with that home and their asset to continue to grow it I think is phenomenal and will help drive great experiences. Maybe we'll transition now to, I think you each laid out this fantastic view of the future. What is the hard problem to solve that's going to allow for this kind of digital and iBuyer experience that you've laid out, maybe JJ, let's start with you. You laid out a fantastic future. What's the hardest problem to solve? Then Nate, we'll come to you.
Jalaj "JJ" Jha: (
There are many. So if you think of mortgage, mortgage is a business that works on scale because companies that have scale, they struggle with the mammoth nature of data that is lying everywhere, and the whole notion of, "Hey, let's bring all this data together" becomes so overwhelming that the very scale that made you visible in the business becomes an impediment to [giving] that grand experience that we are talking about and the smaller scale people in mortgage, they are always struggling with where is the next day's salary coming in? That's where they can't invest too much on transformation. So that's why I feel that it's almost the onus of the industry and as well as the big banks like us to lead the way in terms of how we will transform the way this...digital experience will be set up for our customers.
Jalaj "JJ" Jha: (
So that's why, regardless of what the industry is, like last two years were great for mortgage industry, and all the indications are that next couple of years will not be that great with the rates going up, regardless of that, Wells Fargo is committed to investing in our data infrastructure and giving the personalized experience to our customers. I think that's, that's [the] first embedded impediment, which I'll say is this whole commitment as a bank, as an industry, the level of three, five years of commitment is what we don't see enough. We will make it like a bullet point in our [priorities] and then we start looking at the ROI immediately in the three months after starting it, and then we don't find it. Then, programs got decommissioned. That, we have gotten past...We have said that this is something which is fundamental to the industry and the company; and...this is an ongoing journey for us. We are committed to it. So that's the first impediment, which I think we have at least taken care of. The second is like this.
Jalaj "JJ" Jha: (
If you only look at the North Star in the mortgage industry, you will not...find a lot of beacons in that place. Like if you really want to see the transformation that is happening, you have to look at other industries, you start with other aspects of financial services, then you go beyond financial services and you will see that the technology has moved so much beyond what has come to mortgage, that learning and that acceptance, that, hey, we could still be a $36 trillion house asset set, or...market, but the innovations may be happening outside the industry. How can we bring them into mortgage? Here, I often see or hear that, okay, even if you take care of the first two, the whole regulations and regulatory environment around it will prohibit us from using technology and automatic, model-based stuff in our customer experience. I don't think that is true, though. The innovations are happening within the agencies as well, quite a lot, and then again, like for banks, like with the whole balance sheet aspect of mortgage, there is definitely no excuse for us to be not adopting the new technology. So once we take care of these three, I think, in my opinion, those roadblocks, which we are committed to, I think that's, that will lead the way.
Jeremy Sicklick: (
That's a great answer. Thanks, JJ. Nate, same question for you. What's the hardest problem to solve that's going to allow for this one-click experience?
Nate Harbacek: (
Got all day?
Jeremy Sicklick: (
It's the hardest one.
Jalaj "JJ" Jha: (
Yeah.
Nate Harbacek: (
I think it kind of comes down to three pretty interconnected things. Rhe first is just accuracy, consistency, and reliability of data. We have teams of people, as I'm certain you guys do, Jeremy, aggregating, cleaning, and standardizing both public and proprietary data to make models more accurate and eliminate outliers. [You can have] the greatest models, technologies [and] processes on earth, but if the data that you're relying on [to] make decisions, isn't accurate you're going to have limitations, in what you're going to be able to scale digitally. I'd say the second thing is end-to-end consumer and third party processes. At Opendoor, we spent millions of engineering hours building a digital self-service, on-demand, consumer and kind of internal employee and operator platform that allows us to operate at scale across 44 markets.
Nate Harbacek: (
That isn't enough, and we're also working daily to make that process more efficient and to bring and propagate our technology to more vendors, third parties, and other industry participants to make the transaction seamless and truly digital. I mean, it touches on JJ's point. Like we can do it ourselves, but until we've integrated with and propagated some of that technology, there are always going to be points where, whether it's a signature, an approval, a step, a check, or otherwise like the real estate process isn't limited to single entities. You have to deal with assessors' offices, title, all of these different pieces need to be made digital, and we've made substantial efforts in trying to bring some of that technology forward; but collectively we need to keep moving the ball forward. I'd say the last thing, and it's paired with that, is trust.
Nate Harbacek: (
We need to collectively continue to build trust in consumers, industry participants, lenders, and other stakeholders that this wave of digital transformation is accelerating and that they should get on it, like, versus where this industry was seven or eight years ago when we started Opendoor, it feels like a world of difference, at least to me; but when you take a step back, it's still pretty amazing to see how much further we can go. There are a bunch of technologies and things that don't feel like they've been touched yet, or even considered that I think will bring evolution and growth to the industry.
Jeremy Sicklick: (
Nate, I agree with you. We've all come a long way over the last several years and just [in terms of] the experiences and the speed of transactions. You can see it, but there's a long ways to go. Well, we're coming to the end here m aybe [in] the next two or three minutes. So I'll hit you with a couple rapid-fire questions, sort of one word, one sentence max answers. We'll hit a couple and then, then we'll close it out. First off, will we get to a fully digital, click-of-a-button experience to buy a home, get a mortgage in the next three years? JJ, Nate?
Jalaj "JJ" Jha: (
No, not in the next three years, next five years. Yes.
Nate Harbacek: (
My view is don't we already have it?
Jeremy Sicklick: (
There you go. Okay. Will the majority of deals still face bidding wars in 2022?
Jalaj "JJ" Jha: (
Yes.
Nate Harbacek: (
I'd say sellers want. Yes. My in-laws in Santa Monica are begging no.
Jeremy Sicklick: (
Do you see a strong market in '22 or choppy waters ahead?
Nate Harbacek: (
I hope.
Jalaj "JJ" Jha: (
For purchase, strong market. Refi, choppy waters.
Nate Harbacek: (
I think that's right.
Jeremy Sicklick: (
Can we close a transaction in one week or less consistently in the next three years
Jalaj "JJ" Jha: (
Again, purchase, yes. Even HFI yes. Agency HFS loans, refis, maybe we need five years.
Nate Harbacek: (
My view is whatever consumers want. I think a lot of consumers don't want to move that fast.
Jalaj "JJ" Jha: (
That's actually a great answer. You're right. Sometimes speed is not [a] friend in case of purchase because they have plans to make with moving and all that stuff.
Jeremy Sicklick: (
So often [there's] uncertainty, right?
Nate Harbacek: (
Yeah.
Jeremy Sicklick: (
...Will blockchain, crypto find its way into real estate in a scalable way. By '22-'23.
Jalaj "JJ" Jha: (
2023 is a little aggressive. It is already starting to permeate the space...In next five years we will see a sizable portion of permeability of blockchain.
Nate Harbacek: (
Yeah. I agree with that. I'd say...It's already happening. Scalable, no, it's just that the time table's too long.
Jeremy Sicklick: (
Well, JJ and Nate, it's been great speaking with you today and I hope everyone has a great digital mortgage conference and appreciate the insights. I wish you all a great holiday and a happy new year.
Jalaj "JJ" Jha: (
Thank you, Jeremy. Thanks for having us.
Nate Harbacek: (
Likewise. Thank you.