Transcription:
Dan Wallace (
Hello Everyone, Can you hear me? thank you for coming to the panel. My name is Dan Wallace. I'm the general manager of lending at Figure. I have the honor today of introducing this panel, how to balance FinTech, human advice and tight budgets in the 2022 and 2023 purchase market, which is a very, I think, important and timely panel, given what's happening in the market today and given the combination of FinTech and human, advice. I'm gonna introduce, the moderator, Shashank Shikhar is here. and then we're gonna have, two panelists speaking, Dan Green from home buyer.com, and Brian Zien from, CEO of Regor. So I think we're, a really in really good hands. I'm gonna pass it off to Shashank to start the panel. So thank you.
Shashank Shekhar (
Thanks Dan, So we are going to talk about FinTech and human advice and what's going to be approaches heavy market. And I'm sure most of you sitting here already realize that that's what's going to happen in the next 18 months, if not longer. And I have, the pleasure of having both Brian and Dan that I know from before and I know how much of an expertise they bring to this, this specific discussion. Now, before we start, getting their inputs on some of the questions here, let's just kind of lay the groundwork of what we are going to discuss. So, what we are seeing is the fact that we have, I mean, we are at additional mortgage conference, so we know that there are lots of technology and innovation and automation and digitization that the mortgage industry had seen over the last few years, but that hasn't really moved the needle on to a specific KPIs, one being the time to close. We know that the time to close has remained pretty much a static since 1990s, early 2000. We still see on an average the closing period between 34 to 52 days, depending on the market and where we are. Similarly, the cost to close the cost of production of loans have kind of stayed in the 8,000 to $10,000 range again over the last few years, even though we have made huge strides in terms of what the mortgage process should look like and the technology and automation and everything. And that's why I think it's very important to discuss this topic with the two gentlemen here about some of the things that could be a problem. So to begin with, really, Brian, to you is the fact that, why is that? Why do you think that has become a problem? Is that we have lots of solutions and offer for automating and digitizing mortgage experience, and yet we see that the two biggest KPIs that the lenders and loan officers and the consumers would want to see progress on has barely moved
Brian Zitin (
Testing. Hello everyone. Thank you for having us here. yeah, I think there's a, ton of reasons, but I think one of the big ones is really the human behavior element. so my company, we facilitate the automation of the appraisal process in terms of workflows. And a lot of the, friction that we run into is actually changed management with like loan officers who, aren't comfortable with, like, automating certain processes and wanna maintain micromanagement control over certain things. And although the, like SVP of ops, or whoever's the original buyer of the platform or solution has all these amazing visions for streamlining the process, it's lacking some of the internal buy-in to really get the adoption from A to Z and facilitate actual automation. So, I think it's a lot of it is around change management and managing the human psychology of, playing the long game. Instead of just kind of accommodating the loud noises in the room sometimes who, the superstars who you kind of give into at some points
Shashank Shekhar (
Dan.
Dan Green (
So it almost sounds like you're saying that people, So, the hard part about it can be people. There's so many different processes in, in doing alone, and there's so many people that are involved. When we look at a mortgage in particular, the saying that every mortgage is a snowflake, every loan is unique. I think that's something that we do to ourselves. If we look at an aggregate, if you look at maybe not your book of production individually, but as a, from a company standpoint, the many loans are actually very similar. And so finding a way to categorize your loans and start to bucket them you can move loans, loans through faster if you're able to identify the similarities and loans and stop thinking of every loan as being unique. They're not, it's a self-employed borrower or they're W2 borrower, or they pay child support and maintenance and alimony. Like every loans can be similar. And again, it's an aggregate. I think as individual loan officers, we struggle cuz we only deal with our own book or our processors, but when you look larger, there's a lot of similarities. and we're not leveraging them as loan officers.
Shashank Shekhar (
Yeah. I also thinking of course, I would like to hear your inputs on this is that most of the technologies have not matured. I mean, you look at automation, you look at digitization and other than point of sale, which came into effect I think five or six years back, so you see players like simple and Blend and Cloud, and they have done a good job of point of sale, and we are at a point where that product is near perfect and borrowers are now kind of used to using online applications and uploading documents. But when it comes to loan production that day two today 30 kind of an experience, you're talking about the OCRs and the RPAs and the machine learnings and artificial intelligence. And of course there's no blockchain that exists in the mortgage industry, but all of that has not really matured, right? These are all relatively new technology, at least to the mortgage space. And in the last two years, nobody has had any bandwidth to work on the this space. Do you guys think in your experiences that these numbers, these KPIs will actually start showing some kind of movement over next two to three years when these technologies mature and we see a little bit more implementation and adoption?
Dan Green (
I'll start with that, how aggressive shall I be here? Is the audience, just show hands who's the loan officer and then I can see who is not a loan officer. I just want to kind of know any loan officers. Okay. Most anybody else like C level. Okay. All right, good. So, all right. The issue that, mortgage is not unlike real estate. None of us get paid until a transaction closes, right? We all work for free until there is a closing, at which point there is money that changes hands and everything's distributed. And so already today it's the 14th of the month. You're sitting here, you spend two days in Las Vegas, three days in Las Vegas, and you're already thinking about what's gonna close at the end of this month. You're already thinking about September 30th, and then October 1st comes around and you start again. And every month we're thinking about what are our commissions gonna be this month? It's always about what are we gonna do this month? and that's because we're all paid on transactions, but our companies are not right. It's more you. They can take a longer term view. And so there's a separation between how loan officers think and the need to get a loan done today than thinking long term to invest in a technology or in a process. And, so if we take a step back and we can look at our businesses and realize that you can have a really good month, or you can make a great year and an excellent career, if you take even farther back, you start to make your decisions differently and you start to think differently about where you're spending your money, where you're spending your time and it, and to slow down a little bit and stop pushing for this month and to think longer term. If I can go a step further, I think customer acquisition is one of the, is one of the big parts of this where, look there's no refis. We all have time. So why are we not going through our databases and calling and trying to hit up for as many purchase leads as we can? And it realize that home buyers aren't going to buy a home for six months, it might be nine months, and that's okay. Plant the seeds and water them to metaphor. And so that in nine months or a year from now when the market looks different, you have a steady stream of business. This sort of planting thinking long term, it drives down your acquisition cost and gets back to the idea of what does it cost to close the loan? You can also lower your costs for loan if you can take a longer view. I think it comes right to the subject of, why we're here. It's like, how do we do more with less? how do we make more of ourselves and of our companies? So I I can get aggressive. I can keep getting aggressive.
Shashank Shekhar (
No, you were fine. Right? brian you wanna add anything?
Brian Zitin (
And sorry, the theme was basically just like the forward progress on like the back end infrastructure Yeah, I mean, to play devil's advocate a little bit, I mean, I think that there actually has been a pretty decent amount of forward progress. Like let's just look at appraisal once again cuz that's all I know at this point.
Shashank Shekhar (
I Know you were queuing up to it.
Brian Zitin (
Like five years ago. Appraisal waivers did not exist to the extent that they are used now with the GSEs. And if you look at like the last two years, appraisal waivers got up to like 60% of refis. So, if that wasn't the ca right now it's back down to like 20%. So can you imagine the pipeline and the timeline of lenders trying to close loans if the GSEs didn't ramp up appraisal waivers and if they didn't come out with these new products, that they're planning to release, with the decline of the appraiser population. But it goes back to once again, like Freddie Mac put out PDRs, which is a new type of appraisal product, property data report, and it's not being heavily used yet. So there's this adoption curve around this new technology that takes some time to dance point around kind of like near term focus. I think there's another, example of a metaphor here in terms of, and I'll bring it to more of like a software company like us where we work with, and I think we actually talk about this in the podcast a little bit. our goal is to try to get as many customers as possible. And, so in the early days we were saying yes to that, yes to this, yes to that. And instead of staying ultimately very narrowly focused on our long term vision, which is to, bring down appraisal turn time as much as possible. And there's a similar thing for like mortgage lenders, I think, where you're looking at the next shiny object for technology versus just like, if you can close a loan in seven days, that is gonna be as good of customer acquisition as you can get, right? Like, if I see that a lender's gonna close alone in seven days versus 30 days, rates being similar, I'm gonna go with the one that closes seven days, I think. So I think it is that kinda long term focus around staying on the mission of how do we actually bring these down versus like how do we get a new shiny like CRM going to attract more leads versus like focusing on the actual outcome.
Shashank Shekhar (
No CRM vendors here, right? So let's, take on that topic of closing mortgage in seven days. And one of the things that we do at Insta Mortgage is our, we have a huge focus on speed. we actually create an industrial record of the fastest closing. But that was with for property inspection waiver, right? So if we want to close loans in seven days, 10, 12, whatever it is, appraisal seems to be the biggest bottleneck the way I see it as, as CEO and CTO of the company. And what are you doing, Brian? I mean by you, what is Regura doing and what do you think the industry can do to get that term time consistently down to say, two or three days? Because if that does not happen, then I mean, unless we have a property inspection waiver, forget about even 10 or 12 days closing, let alone a seven day closing.
Brian Zitin (
Yeah. People, I said this yesterday, but people love to call the appraisal the long poll and the 10th of mortgage. yeah, I mean part of it is you're beholden to the regulators, right? Cuz you have to accommodate the underwriting standards of who you're selling the loan to. And so I think that there's finally been forward progress there. But there's, there's a lot of fragmentation in the appraisal industry where there's hundreds of appraisal management companies, tens of thousands of individual appraisers. What we're working on is trying to verticalize that and deliver a more Uber style approach. Right now it's a lot of like plain telephone, whisper down the lane to find an appraiser to do a job at a particular time. And that requires like, like I said, a new mentality instead of, lenders or folks being like, Hey, no, this is how we manage the appraisal process. We want you to do the 2.0 version of that. You kind of need to rethink of how you're approaching it from the ground up in some ways. So, yeah, we're we're working on things that kind of address it from a more macro level, from a like a market supply demand standpoint. But yeah, I mean, to your point, if you're only as strong as the longest tail in the process, so, appraisalsl is usually one of the biggest pain points there.
Shashank Shekhar (
Let's, dig a little deeper into that. What do you mean uber style appraisal process? I mean do you have appraisals to stand by when appraisal comes in, then one of them picks up the order and then tries to deliver it faster? Like what's, what's your algorithm looks like in terms of deciding who gets to pick the order and how are they delivering faster than say, the industry average?
Brian Zitin (
Well, and this is another example of like lenders kind of, there's not a ton of cooperation here. Like, so if I'm a lender trying to get an appraisal in this neighborhood of Boston, there could be an appraiser for a different lender going to that neighborhood two days from now, but no one's talking. It's all in different systems. And so, what we do is we, we see that data across the entire market. So we do know that that appraiser's gonna be in this neighborhood on this day and so taking a little bit more of a zoomed out approach, we can use an algorithm that says, Okay, we know this appraiser's gonna be over there, send them the order. Instead of, what is some, some lenders approach, some lenders have the mentality of managing this for 30 years. I know these appraisers, I know this market, I know this guy. He'll help me out in a pinch. Versus taking an actual like, data oriented approach to saying, capacity metrics and things like that. So that's what I mean when I say it's mostly an adoption thing. Like this is not rocket science. We're not build like, this doesn't require PhD sort of caliber technical ability to deliver. It's like, it's not reinventing the wheel. It's mostly like an adoption and making it happen. Executionally
Shashank Shekhar (
Let's move from FinTech to, a little bit of human advice here. And that's something which is, Dan, you mentioned it before and how loan officers are kind of focused on what's closing right now and not focusing in nine months, which becomes critical in a purchase market because that was fine for the last two years if you had that kinda mindset, you can't run your business with that kinda mindset right now. what do you see in terms of human advice? Like we understand that mortgages industry, will have loan officers, PropTech, a lot of PropTech thought that real estate agents were super fluids to the process that they were not really important. What we have seen in the last 20 years, I mean in 1980s there were about 81% of transactions that real estate agents were involved in. That number had jumped to 87%. So, if anything, real estate agents are here to stay from a human advice perspective, What role do you see loan officers playing with the playoff technology, moving down the road?
Dan Green (
So the mortgage industry is kind of interesting when we look at other FinTech or other financial businesses now kind of set the table here. it used to be you had a stock broker. Your stock broker bought your stocks for you, They handled your money, they did whatever. And then Fidelity and Schwab come around and Fidelity and Schwab, make that transaction free cuz it's a basic transaction. And we don't have stock brokers anymore. We have wealth managers, which is really what that person wanted, what that professional wanted anyway, they wanted to manage all of your money. Fidelity and Schwab have roughly 35 to 40% of the market right now strictly doing basics, Okay? In insurance. nobody wants to write the $15,000 car policy. Your independent insurance broker wants the million dollar policies for commercial property, et cetera. They don't wanna write for your junky car. And so Geico has come up and taken that in State Farm, and again, they've got 40 plus percent market share. And we see this, this pattern, these basic transactions in every other industry, where everyone says like, Oh, everyone will always use a pro. Like no one will ever do that on their own. But they, but, Fidelity and Schwab we see with, with Geico State Farm, we see it in Capital One's done it in banking, we see it all over the place. And mortgage is the only industry where this hasn't happened and there's no reason why it shouldn't. Many transactions are pretty basic. If you are a W two employee with good income and you pay your bills on time, you are probably gonna be a day one certainty customer. And it is straightforward and it's easy. And so what's the role the loan officer in that transaction?
(
Probably nothing. It's just like Fidelity has people on call to help you walk through your transaction and many people are taking the third year fixed rate mortgage, they're using a Fanning Freddy product, they're making a small down payment as they possibly can. That market exists. It doesn't exist for an individual loan officer who, who sphere as small. But again, on the company level that exists, probably not much advice that's needed there. But structuring loans, right? How do you structure a complicated deal? How do you handle somebody who's got five to 10 properties? and that's where we think of ourselves as being professionals, as being, we are the ones who can structure the deal and get it done. We've all competed against other lenders that don't know how to structure a deal. And you're like, I got this. Like, there's, that's great, but that's the thing that you need to market for if that's gonna be what you're doing. And you've gotta identify that this is gonna be my segment. All of us, I believe will be, replaced in somewhere fashion on the simple transactions the same way that your independent broker wants nobody wants to work for the tiny commission. That's just the fact of this business. So focus on the things that add value and that's the complex transactions.
Shashank Shekhar (
So, talking of adding value, one of the things you can add value is by education, right? That's something that loan officers can do, lenders can do, does not have to be at the, at the loan officer level. We know that, I mean, websites like Nerd Wallet and bank rate have practically built billion dollar businesses just by giving online advice, right? You have done very well with, with content creation, with blogging in the past and everything that you're doing @homebuyer.com. The challenge with giving advice online is how do you amplify that message, right? That's a big problem, right? Because people are like, Yeah, I can write blogs to people who read it and nobody will. Is it worth my time to be doing something like this? so when it comes to customer acquisition, and when you hear about companies who claim themselves to be consumer direct companies because they don't have distributed retail it's consumer direct is basically paid advertising, right? That's all it is. Either I'll pay during Super Bowl or will have super expensive TV ads, or I'll advertise on bank rate and Lending Tree. And that's somehow is a fancy word for consumer direct when all it is is that you're using mass media to pay millions of dollars to acquire clients, which doesn't work very well in a market like this. When you have to season them for nine, 12 months, how do you think the lenders can have a lower cost of acquisition by amplifying, their messages online through content creation, which will lower their cost of acquisition?
Dan Green (
I turn that back to you. You've built an entire business on for real. You've done a really good job in doing that for your company. I know that's not what you expected me to do, but I'd love to hear how you do it.
Shashank Shekhar (
Yeah, so I mean when it comes to, first of all, thank you. Taking the tough question and then moving back to the moderator, that's, but really, I mean, amplifying a message takes a long period of time and Dan will agree to it because I've seen Dan in action as well doing this thing, but one of the biggest challenges with creating something like this is that you can go to a bank rate, can target a certain customer who is shopping for the rate, your rate is probably the lowest that customer will apply with you. And you get that ROI almost instantly. I mean, you'll have to go through, of course, a hundred leads to convert one, but at least you see some things moving. The problem with content creation is that you don't see that moving instantly. Like when I started blogging, I remember that I used to write two or three Blogs every week, and it took almost six months before I got my first call saying someone actually read that blog post. And then few weeks later, I had an editor from Yahoo News reaching out saying, Hey, I saw your blog post. I want to coach you in the media. And I think that's a problem is that, and that's where the opportunity lies as well for smaller lenders, smaller loan officers, is that that's where you can compete with the big boys and the girls is because that's a space that content creation anyone can do. It's just that it takes discipline, some talent. And of course, you need to understand what space you are playing in. Where is your audience, where is your audience at? And what kind of platform you want to play with. S,o maybe they don't treat blogs, they're on TikTok, and you can, there're tons of TikTok influencers who are doing well on the mortgage space, which we thought is not a platform for, for really providing serious advice. So, you need to understand where your consumers are and what are they consuming and really be patient and disciplined about is is what I have learned as does that kind of tie in with, with your experience then? And then I'll have Brian's take on that.
Dan Green (
So, I think it's important to recognize my bias here. We work with first time home buyers. And so the the point is meeting them very early before, they've spoken to other lenders and we've chosen as our meeting as our source is Google. we know that our customers and they sit at home at night and when they're renters and long before they, if you ask them if they're gonna buy a house, they say no, I'm not a home buyer. But they're scrolling Zillow because that those are the actions of somebody who is a home buyer and then they see a house that they love and they want to know how, what kind of down payment do I need to afford this home? I've heard something about a first time home buyer tax credit. How much, what credit score do I need to buy a house is now a good time to buy and it's late at night. So, they type that question into Google and they get a series of results that's from Google and from YouTube And our strategy has been to meet that customer at that point and to validate their questions and to validate their fears. And because we're I'm alone officer by trade and I understand the language and I understand their fears and concerns and to help them move forward. So that, TikTok can work like any, any strategy can work. My chosen strategy has been, articles on a website complimented by videos on YouTube and it's been a tremendously effective way. And to your point like that it took you six months was awesome. It took me two years before I got my first lead many, many years ago. Glad I stuck with it.
Shashank Shekhar (
I got better watching you, Brian?
Brian Zitin (
I just wanna try to tie, tie together the last two questions in terms of like the role of the loan officer and how that plays into FinTech and then like education. And that's kinda my answer where, I would think in a purchase market where, like you said, the real estate agent is involved so much we're in an, an industry that is relationship oriented and my thought is that the loan officer should be the mortgage educator, the mortgage guide who's out there just getting leads in the market, building relationships and educating the person and then the rest is a factory widget line. You know that you're and I see some lenders where like the loan officers actually more involved operationally. Like why are they placing an or why are they, why would a loan, why should a loan officer be placing an appraisal order? Why should a loan officer be collecting a credit card authorization form? You should, I think the thought process is let the loan officers do what they do best, which is building relationships, education guiding, being the mortgage therapist while the factory line is, automating on the widgets behind the scenes. So, I think that's where, the human element will still always be involved is cuz it is a stress, this is the first time home or most stressful financial situation of their entire lives, right? So, they need that shoulder to lean on. But with the support of automation behind that.
Shashank Shekhar (
No, absolutely makes sense. I think Mackenzie did a research two years back. We said the consumers or the borrowers in this case are home buyers who engage with a lender early in the process, stay with that lender 82% of the time. So that shows that you need to be top of the funnel. You need to be top of the mind when they're just about thinking that even they don't know that they want to buy a home. They're just kind of a start thinking at 11:00 PM Hey, we should be buying a home. And then the first thing they start searching is, how much do I qualify? What kind of homes? So, that's a great point. Now moving to the Sure, of course.
Dan Green (
Just to add a stat, to back that up. So the traffic on our, on our website is, predominantly begins at seven o'clock at night and runs through roughly one in the morning eastern, just to give you an idea, this is what people do at night. They shop and they ask questions and that's when they, that's when they reach out.
Shashank Shekhar (
Explains less kids. Let's move on to the tighter budget part is, so this is, the mortgage industry is kind of, I should not say unique, but in a way that last two years we were super busy. The entire focus was how do you move the pipeline through right? Property inspection waivers held right, 60%. That was huge. But we were completely focused on that technology probably did not as advanced. I mean, Freddie Mac did a great job. In fact, they are probably the greatest FinTech right now in the country. But, they don't, they don't get the compliment that they should for doing everything that they have. I mean, they had the automated underwriting 20 years back or 15 years back when the U N L P came. We were still struggling to find one. Anyway, moving on. So we were completely busy doing pipeline, I mean moving pipeline last year and did not have much focus on trying to implement and move along with technology. Now this year and the next is going to be extremely tight in terms of budget, right? I mean, cash flow is, has been extremely tight. We all know about all the layoffs and shutting down and everything else that has happened. And, so now this could be a difficulty year to adopt technology again. Now the focus is on how do we get our production numbers up so that we don't have to lay off more people and let, let more people go. So, Brian this is a question to you and then Dan I'll come to you is that, what do you see from an executive perspective, if I was an executive running technology or I was an executive running a mortgage company, how should I be looking at a year like this and next when it comes to technology adoption?
Brian Zitin (
Yeah, I mean, I think what we've seen so far a little bit is, reactivity in that, obviously the loan officers being the lifeblood of a lot of these like mortgage lenders, they want to keep the loan officers and retain them and recruit as much as possible. And, so it's reactive in terms of like, if you're top loan officers are complaining about XYZ problem, all right, we're gonna go start a project and work on that. Instead of taking a little bit more of a proactive roadmap approach of like hey, this is what our plan is and this is the ROI that we think this will net us because of automating XYZ or doing this sort of thing and so I think it, the thought process from the executive standpoint, while tough because it is scary right now and you do should try to make that investment in the future for the next go around instead of just, like I said, kind listening to, the loudest voice in the room necessarily right now. And, cuz cause I think that's where a lot of people get caught chasing shiny objects and then just adding text acts without actually cutting cost necessarily. So that's what I would to sum it up, I'd say being a little bit more proactive instead of reactive there.
Shashank Shekhar (
Makes sense. We done to the last two minutes, Dan, your comment,
Dan Green (
On the human side, it's a great exercise. It's something that a lot of loan officers will do anyway. You go back and you look through your database and you look to see which customers have been easy or good for you, in which customers who you closed begrudgingly, but you did the loan to do the loan. You start to look at your, at your customer base and you realize, what you think you're selling is not necessarily what people are buying. you need to understand what your customers are buying from you and who you want your customer to be and to your point about doing fewer things, right, working with fewer people, picking the ones, essentially setting yourself up for more success. You can talk to a hundred customers in a day and if your success rate is 10%, okay, so you got 10 loans out of a hundred, but wouldn't it be better to talk to 20 customers and get the same 10? Which is doable, impossible chasing every customer, every loan is, is a wasted effort and this is an excellent time to reflect back and say, where, where am I getting the highest value? Where am I giving the highest value? and then to step forward and make better use of your time. Use your downtime for something productive, like finding more customers like the ones who always say yes to you. That that's a great use of time and it's human.
Shashank Shekhar (
Thank you. So I mean just to summarize some of the key highlights of what, Brian and Dan talked about is one, of course keep your focused narrow. This is especially not the market to be there everywhere. The narrow your focus is, the more focused you're on the niche, the chances are that your cost of doing something will be lower and you will have more success doing it. The other thing we talked about is really the acquisition. Is that how you can scale and amplify your message using different platforms, understanding your consumers, what is it that they're looking for, what platform they're spending their time on. And, for executives and leaders in the room, really understanding the technology is a long game. Some of the technologies that we have just started using will take a little bit of time to mature, but you will see significant gain once you have been able to go through it for a year two. And, if you fall behind in terms of implementing technologies, then some of the other players will be far ahead of you when the market does turn in the next few months or in a couple of years. So the time to start innovation or technology adoption was yesterday. If you didn't do it then you should start it today. Thank you so much Brian and Dan, that is for a really useful conversation.