Digital partnerships give all banks the power to compete in mortgage

The current mortgage market is incredibly turbulent. Both small and large companies have exited the business. Some financial institutions companies, however, have added a mortgage offering through partnerships. Rocket Mortgage, through tech provider Q2, is offering a digital mortgage to regional banks and credit unions directly in the financial institution's mobile app. Rocket Mortgage is also offering its mortgage experience through to banks and credit union through Salesforce directly to banks like Santander. Attend this session to learn how you can provide your clients a digital mortgage without the staff and capital needed to add mortgage to your business.

Transcription:

Announcer (00:06):

And now for our closing session, please welcome Tom Dempsey from Rocket Mortgage and Heidi, Editor in chief of National Mortgage News.

Heidi Patalano (00:27):

Tom, thank you so much for joining us here.

Tom Dempsey (00:30):

Thanks for having me.

Heidi Patalano (00:31):

Yeah. Yeah. Well, so Tom, Senior Vice President of Business Development at Rocket. We are here with you today because we wanted to talk about a program that you just launched last month. It offers regional banks and credit unions, the opportunity to, through Salesforce and q2, to offer mortgages through Rocket. So the first thing that struck me about that is, a comment I heard a couple months ago from JP Morgan's, Jamie Diamond, who is saying that more banks are getting out of the mortgage business. So I wondered if this was a move, kind of anticipating that, needing that moment, if you could talk about that

Tom Dempsey (01:18):

At all. I think so. It is a little too early to tell. When it comes to banks and the mortgage business, It is a love hate relationship, right? It is oftentimes, a loss leader and a product that they do not enjoy offering, but is sort of core emotionally to a client and their bank, right? so they struggle with this often. And It is an analogy that I use. I was actually working on it last night. I like different analogies, but I think of like banks are riding a rollercoaster at an amusement park and they just keep riding it up and down, up and down, and they keep getting back on, and you ask what they are doing and they tell you they do not even like roller coasters, right? They just keep getting on it. And so It is like, maybe find somebody else to ride the rollercoaster for you and you go somewhere else in the amusement park that you want to concentrate on, whether It is commercial lending, credit card, auto, whatever it may be. So I think they are looking for an avenue to strengthen their customer, customer's relationship through mortgage, and I think they are starting to get to a place where partnering makes more sense.

Heidi Patalano (02:24):

Right, right. Well, what is really interesting is that you announced this, right, when you, also announced the partnership with Santon Dare, which did that very thing. So could you talk a bit about how that all came together?

Tom Dempsey (02:38):

Yeah, I, again, It is, we are in a market we have never really seen before, right? Right. So, 25 plus years in this business, and we have really high inflation. We had crazy inventory challenges and real estate market, and now you have high interest rates. And so you mix all of that together and you start looking at your capital requirements and the things that are driving profits at a bank. And candidly, mortgage just is not one of , I think what San Dare said is, though we can not give up on it completely, we have to have some sort of outlet for our consumers. And It is not just an outsourcing outlet. They want, It is embedded finance. It is technology that can be offered through their authenticated space, through their banking, online banking platforms coming through them and not out to somebody else. And so I think that is really what a lot of our, our newer partnership model approaches take, is how do we embed this into banks and credit unions and let them have the interaction with their customers and actually provide this service for.

Heidi Patalano (03:44):

Right. Well, that is one thing that I wanted to talk about too, because, you know, regional banks and credit unions, the people that go to these depositories want that face to face interaction. They wanna know their, they wanna get advice from people that are in their neighborhood. Right. So I was wondering if you could talk about how this works in terms of the handoff of that person to rocket?

Tom Dempsey (04:11):

Yeah, there is a handful of models and a couple that we are using where they can still be the, the front and center face of the relationship control, the marketing control, the application taking but then really give up on some of the services that are underwriting processing closing, similar to what you would see maybe in a wholesale relationship. But I think the key is there is this pipeline management and, and customer communication that also they do not want to do. So if you can find a way, as a lender to support those services and then show that visibility back to the bank, I think you create this, amount of trust where they can depend on a partner because they can see everything. They know where their clients are at all times in the process, but they really do not have the responsibility to do the work.

(05:02)

And so it is somewhat of an admission of like, I am really good at X, Y, and Z, and somebody else is really good at A, B, and C. I am gonna let people do what they are best at doing. And I think that is sort of the, the dynamic we are seeing with partnerships just in the lending space together. And there is tons of companies that are here today that are showing lenders and banks and credit unions how their solution can do things better, right? Than the bank and ultimately that is what we are getting to. My fear is we need to have something that is probably more holistic in nature, sort of cradle to grave type solutions. We start getting into integration costs and timelines of banks are not the greatest, do not move so fast.

Heidi Patalano (05:44):

Right. Well, you mentioned that this functionality will kind of work through the regional bank or credit union's own, interface their own apps. Could you talk about that a little bit more about how, how that works?

Tom Dempsey (05:57):

Yeah. I think that powering in partnering with the Salesforce and the Q2 s and the digital bank that the amount of sort of wallet share that they have in the market especially when you think about banks and a company like Salesforce, that Salesforce layer is one degree from core banking data, right? Which is like the most impressive amount of data sets that a bank has. And you start thinking about then this 360 degree view of your customer. So if you are a bank, you want to know when should I talk to about wealth and credit card and auto, and all these different things. And right now, most of that mortgage data is not in that crm. It is in a disparate system somewhere else, maybe piped in through integrations, but putting it right in the data model that a bank uses, now you get a 360 degree view of this customer. And so you have got this distribution outlet to meet banks where they are in their technology development. When you look at a Salesforce or a Q2 or another digital banking company, and it makes those integrations a lot easier does not cost a lot of money. It is all API based and I do not wanna say plug and play, but it creates a way for bank to open up their authenticated space and serve their clients behind the firewall of who they are.

Heidi Patalano (07:19):

Right. Well that is one thing that came up many times throughout the conference is being able to use that data to tell a borrower like, hey, did you know that you can get this kind of loan? Can you get this? And so I would imagine that is probably what you are presenting as the value proposition here as well.

Tom Dempsey (07:40):

Yeah, there is so much that can be done with data for banks and credit union, and they are admittedly quite a ways behind how they use that. Right. I think of regional banks, community banks, would not it be nice if your consumers could log in to their account and they just have a preapproved, a preapproval for a mortgage sitting in their profile, Right. Because their income, their assets, you can run their soft credit behind the scenes. You just have this whenever you need it, It is there. Right. And so you start to create confidence in certainty that the bank can deliver on what the needs of the consumers are in today's market. And they are just, they are a ways behind. And I think you have seen it from the conference here. There is so much digital innovation that banks are not in and now was a good time in this market to maybe think about should I invest and take the time to build? And they are having those conversations, but I think they are going to, I think we should partner, We get there faster. Right.

Heidi Patalano (08:40):

Right. Right. One of the things you said about this being both like an on and an off ramp for these lenders is that it helps to augment their current offerings if they want to keep going. So I was just curious to hear about like what the desires are. Like what are the things that these entities wanna add on that they do not currently have? What are they trying to bring to Market?

Tom Dempsey (09:03):

Yeah. And I do not know if It is as much add-on as it is to strengthen and deepen that relationship, Right? So when you think about a banker credit union, It is really the primacy of account or primacy of household. And years ago it used to be sort of the checking account, right? If we could keep the checking account then we are gonna be able to protect our deposit base. Now, I think It is maybe moving to credit card, right? I think people are interacting more with their credit card maybe than they are with their debit card. But that is what holds consumers. I mean, if you are wanted to leave your bank, right? I mean, think about all of the things that you would have to do where your direct deposits and where you have set up bill pay and ACH payments and It is really a pain to do that.

(09:46)

But there are strategies out there that other banks are taking to pull that primacy of account. So we think It is allowing banks to focus on those things that they are really good at, which is providing that online digital banking experience, that bill pay experience, how you can, offer features that allow them to stay at the bank. And sometimes It is car lending, sometimes It is auto lending. Very rarely do you have banks ra raising their hand and go, It is mortgage. we are really good at mortgage and that is what is gonna keep all our clients.

Heidi Patalano (10:17):

Well, that leads into my next question. Rocket acquired true Bill and you, rebranded it recently relaunched it at as a personal finance app. So that seems to also be a play at that kind of experience for that.

Tom Dempsey (10:33):

Yeah, I think so. It is really gonna be bank driven though, right? Because being real, right? we are still a competitor with some of these banks, right? And so in order to partner with us, we have to give some assurances and some protections of their client data. Yeah. That is walled off, if you will from the retail business that is rocket and, and not solicited to unless approved by the bank. Right. But certainly we are having banks say on top of us not being able to handle sort of the business we have in front of us, we do not do a really good job nurturing our clients either , right? We do not know when somebody wants to purchase a house. And so there is this idea that if you can create subscriptions, budgeting, education tools and you can nurture that, then you can, you can start to use that data to predict when you think your consumers are gonna purchase a home or say refinance a home, but not now, but it will happen.

Heidi Patalano (11:28):

Right? Right. Yeah. I mean, that is another thing that we, that I found was very interesting in our conversations over the past couple days, that particularly, millennials and younger folks are happy to give up some information if they get personalized, information as a result of that some. And I think that is what that is all about. you are more apt to trust it and more apt to work with the person who gave you that information. Right.

Tom Dempsey (11:59):

Without a doubt. And It is very simple to do, and It is almost past table stakes of having to do it right? And It is somewhat shocking how that does not happen. And that is why when we start to think about these experiences existing behind an authenticated space, I mean, that is really where you can create magic, right? Because yeah. You have so much of this information and, I think It is beneficial to the industry to be able to do that. It sort of helps all of us, right? I remember just a handful of years back when we could pre-fill a loan application with some data, we knew, okay, well, that if you can not do that now, you are gonna struggle. I mean, I was telling some folks here that, that I know, I still get emails from my bank telling me they gimme $200 if I open a checking account with them, and I have three checking accounts, , and there is an asterisk that says you can not have any checking accounts with us to take this offer. Like, how do they not know that? Right. And so It is just, It is mind boggling. And I am of an older generation, I would say, but It is certainly expected at the younger generation.

Heidi Patalano (12:58):

Yeah, absolutely. We had some research presented earlier in the program, in the conference where users actually get irritated if It is like, I gave this to you already. You should know this about me. They want and if you do not, that is a real detriment to the lender if they,

Tom Dempsey (13:19):

You said It is a trust thing, right? It is a, Yeah. It can really sting your reputation that like you should know this about me.

Heidi Patalano (13:27):

Right.

Tom Dempsey (13:28):

Because, and you should action on what right. As long as I consent, you should be able to action on the things that you know about me. And there is room for improvement there.

Heidi Patalano (13:39):

Yeah. Definitely. Well, I guess I am curious also, you have rolled this program out just last month. So can you comment at all on where you are seeing adoption of it? regionally?

Tom Dempsey (13:55):

Yeah, It is starting regionally. It is starting in, let us call banks with 20 asset, 20 billion in assets are below those that are really struggling to compete with some of the big banks. and I think the decision is you spoke about on ramps and off-ramps. Yeah. And It is like, do you wanna stay in the origination business to some degree because you can and It is still economically viable for you and you can still partake in unit economics, if you will. Or do you want to completely exit the business san there and get into to some other type of relationship that can still leverage, experiences that are authenticated, but revenues may not be the same. And so there is this, I think internal discussions happening at banks are like, how involved do we want to be? And the last 10 years have been great in this business, but now I think you are seeing really, I do not wanna say normalization but rates are at a place now where, there are no refis out there. Right. And I think I read this morning that, race just went over 6%. Yeah. On the,

Heidi Patalano (15:07):

I read that on National Mortgage News. I did. Cuz we did, we did report that out.

Tom Dempsey (15:10):

You did and I did read that. And that is the highest in 14 years. And so what was 14 years ago? 14 years ago was the recession in 2000, 7, 8, 9. So, we are getting to a place now where, you have gotta be able to withstand, I think the rough waters that are ahead and Yeah. And know that on the other side will be these opportunities to serve your customers. You know, do you have the bandwidth to wanna stick it out?

Heidi Patalano (15:43):

Yeah. I think It is pretty remarkable that you are bringing this to market right at this moment because it seems like It is kind of perfectly anticipates that struggle. so it makes me think,

Tom Dempsey (15:54):

I would like to say we planned that, but we did not really, this worked out really.

Heidi Patalano (15:57):

Oh, okay. Well, you could have taken credit for that, but that is okay. That was my next question.

Tom Dempsey (16:01):

We did not want the market to do what it is doing right now. Right. But I think we saw that some things are common. Yeah.

Heidi Patalano (16:06):

Yeah. So naturally that makes me wanna ask, what you are thinking of now for tomorrow, what are you thinking of in the next year? Can you give us a forward looking perspective of what you are expecting to see.

Tom Dempsey (16:19):

Yeah. Gosh, I, over the years I have always been asked this question and I just wish I could have nailed it. Like we all would be independently wealthy. Like, I do not know. Yeah. It,

Heidi Patalano (16:29):

Trying to actualize

Tom Dempsey (16:30):

That. I think It is still gonna be a little rough for a while. Yeah. and I think more so than interest rate, I mean, look, we have, I think It is a hundred percent given now that we are gonna see a 75 basis point Yeah. Increase next week. I think It is more inflation, then maybe it is real estate and interest rates right now. And you start to put into the pecking order of I have only got so much money to spend on a month, I have gotta buy these things. Right. And maybe moving to that next level house is not as prominent as it was a year ago. And so,although we still have, you know, record amounts of equity in home. Right. I think that you will see I do not know about loan products but certainly features of loans you will see a lot more cash out, a lot more home equity, a lot more sort of helping to brace the finances that you need to get through. Yeah. I do not see a lot of refis coming. Right.

Heidi Patalano (17:33):

Right. That I think we can stay safely if,

Tom Dempsey (17:35):

If you still need to refinance your house after the last 10 years, I do not know where you have been living. Right,

Heidi Patalano (17:40):

Right, right.

Tom Dempsey (17:41):

Some people have done it five, six times. Yeah. but it will be interesting, I think we will start to see adjustable rate mortgages, we are already starting to see that come back into play. Yeah. temporary buy downs, buy downs on loans, paying points to buy that interest rate down. I think you are gonna see a lot of that. Yeah. but interestingly enough, I am, I am starting to wonder how much we are gonna see in the consumable mortgage market. Right. So a lot of notes out there can be assumed, if you sell your house. So I kind of keep an eye on that. Yeah. Not great for originators, but

Heidi Patalano (18:17):

Right, right. Yeah, absolutely. well, I think It is going to be a really interesting time, a challenging time. One of the things you mentioned was that the inventory being so tight and we are covering this all the time, It is an interesting struggle. I do not know, do you have any comment on how this will evolve? How this is gonna impact the first time home buyers, for example?

Tom Dempsey (18:47):

Yeah, that is an interesting question. First time home buyers, in my opinion, really lack a lot of resources out there. Right. To know, again, was just having this conversation earlier, like when the first of the year rolls around and you decide you want to work out, Right. You take some sort of action. Yeah. You join a gym whether you never go to it, you join it or you put on your shoes and you go run, you do something. Right. What do you do if you are a first time home buyer? what is that first action that you take? I do not know that there really is that definit and again, whether or not they follow through and keep doing that, but they sort of just fall into the mortgage process. So I think you will see the industry do a lot more targeted messaging and education towards first time home buyers and giving them sort of tha place to start. I do think you will see inventory open up a little bit again when I think in the priority order though, It is like buying and selling the house is secondary to the gas and the cost of this and the cost of that all going up. So I do think we need to trust the Fed Right. That we are gonna get inflation under control and sort of bring that back down. Absent of that, I think we got a little bit of a rough stretch ahead of us.

Heidi Patalano (20:09):

Right, right. Yeah. Well, we are all preparing for that one thing that is really interesting and when we are talking about being proactive in terms of data and things like that, one thing you just said reminded me of how, we were talking about like first steps you can take to get into something to get into social media,as a lender, as an originator. and I guess I was curious to hear about that. I mean, I do not know, could you say anything about like your advice for lenders out there, the first steps that you would give to originators today and in this environment as

Tom Dempsey (20:51):

It is absolutely. We in this industry, think of mortgage originations through a financial lens, Right? Right. Interest rates and down payments and credit scores. And clients do not think about it like that. It is a very emotional relationship for a client to buy a house or to move their family. It is not a 30 year fixed mortgage. It is the walls and the roof and the shelter and what they are providing for their families. And so I think we often get caught up thinking about, mortgage originations to literally financially and could probably lean in a little more emotionally on what it means. And I think when you start to connect with clients and consumers, I think you can grow your business a whole lot, because It is about, yes, It is a transaction and yes, there is only so much land and until there is only so many houses. And so until we start paying cash for houses, you are gonna need a mortgage. But I think you have to think about what a mortgage means to clients than what it means to originators. Right.

Heidi Patalano (21:57):

Absolutely. Well, thank you so much for your time. Absolutely. It is really great to have you on this stage and have you be a part of digital,

Tom Dempsey (22:03):

Good to see people back out. I have seen some friends here and they still do have legs and just see all again wearing Right. Everything from Zoom up Right. For the last couple of years. So,

Heidi Patalano (22:18):

Yeah. Really. I know. It is been really wonderful to be able to talk to people face to face. Yeah. Well, thank you again. I do wanna also just mention some things about National Mortgage News. We rolled out a premium subscription option just this week and I just wanted to alert people to that. We presented a lot of great data over this conference about the emerging trends in digital usage. And so you can get all of that information from these premium subscriptions. We have a couple of our people here, our chief commercial officer, Josh Ucci is here, Co menahan Zachary Bins. Hey, I am just doing the shout out there. but anyway, I,

Tom Dempsey (23:04):

Everybody is getting ready right now for like the demo award winner. Right.

Heidi Patalano (23:07):

I know, I know Exactly. Exactly.

Tom Dempsey (23:09):

One, like, I get into my flight, I gotta get to my flight. Right one.

Heidi Patalano (23:13):

Right. So yeah. Yeah. I won't make anyone wait any longer. I with that, I guess we will end our session and I am gonna welcome to the stage Julian Hevron of the Basis Point. Julian, are you ready for us?

Tom Dempsey (23:26):

Awesome.

Heidi Patalano (23:27):

Thank you.