WEBVTT - Why You Can't Get a One-Click Mortgage Refi 0:00:02.640 --> 0:00:16.640 Bloomberg Audio Studios, Podcasts, radio News. 0:00:18.680 --> 0:00:21.919 Hello and welcome to another episode of the All Thoughts podcast. 0:00:22.040 --> 0:00:23.480 I'm Tracy Alloway. 0:00:23.200 --> 0:00:24.360 And I'm Joe Wisenthal. 0:00:24.720 --> 0:00:28.280 Joe, do you remember a month or so ago we 0:00:28.320 --> 0:00:32.040 recorded an episode all about why mortgage rates were going 0:00:32.120 --> 0:00:35.240 up even though the FED has cut Yes. 0:00:35.200 --> 0:00:37.360 This was a big one at the time, and I 0:00:37.360 --> 0:00:42.080 think it still is really important. Basically, there's this intuition 0:00:42.320 --> 0:00:46.560 that people have that the FED effects policy by cutting rates, 0:00:46.600 --> 0:00:48.800 and one thing that happens when rate cuts is that 0:00:49.080 --> 0:00:52.120 borrowing costs go down. In one form of borrowing that's 0:00:52.240 --> 0:00:55.600 very popular is mortgage rates. But we're in the middle 0:00:55.640 --> 0:00:58.320 of a rate cut cycle. The FED cut fifty in September, 0:00:58.440 --> 0:01:01.200 then kind of another twenty five minutes sobsequent meeting, But 0:01:01.400 --> 0:01:04.319 mortgage rates have generally not moved down at all, and 0:01:04.319 --> 0:01:07.520 in fact moved up after that fifty basis point cut. 0:01:07.959 --> 0:01:10.920 By the way we're recording this November twenty fifth, we 0:01:10.959 --> 0:01:13.959 haven't seen much improvement at all, and so there is 0:01:14.000 --> 0:01:16.480 this I don't know if it's really a mystery, but 0:01:16.520 --> 0:01:19.280 there is certainly a story about the FED in the 0:01:19.319 --> 0:01:21.560 middle of a rate cut cycle, and yet it not 0:01:21.600 --> 0:01:23.160 really feeding through to a lot of. 0:01:23.200 --> 0:01:23.880 Kinds of borrowing. 0:01:24.000 --> 0:01:25.759 I don't think it's a mystery. We did a whole 0:01:25.760 --> 0:01:27.720 episode on it. You're explaining what's right. 0:01:27.720 --> 0:01:29.160 You're right, We explained it all. You're right. 0:01:29.200 --> 0:01:31.720 But what I was gonna say is, as part of 0:01:31.720 --> 0:01:37.360 that conversation, you asked a really interesting question, which for once, 0:01:37.480 --> 0:01:40.760 for once, which is why can't we have a one 0:01:40.880 --> 0:01:43.280 click mortgage REFI do you remember that? 0:01:43.440 --> 0:01:43.679 Yes? 0:01:44.000 --> 0:01:48.000 So you know, like I've refiled a mortgage in my life. 0:01:48.400 --> 0:01:50.760 It's kind of annoying. You know, if you're in the 0:01:50.840 --> 0:01:54.040 right situation, you can save money and it's probably worth it, 0:01:54.280 --> 0:01:56.720 but it involves a lot of paperwork, et cetera. And 0:01:56.760 --> 0:01:58.800 you know, I think we're so used to one click 0:01:58.880 --> 0:02:01.920 financial transaction, maybe two clicks or whatever. 0:02:02.560 --> 0:02:02.720 You know. 0:02:02.800 --> 0:02:05.360 One of the things that came up is that there 0:02:05.360 --> 0:02:08.720 are often a lot of mortgages out there that theoretically 0:02:08.800 --> 0:02:11.280 are sort of in the money where the borrower the 0:02:11.280 --> 0:02:15.040 homeowner could take advantage of lower rates, but they don't 0:02:15.080 --> 0:02:17.920 for whatever reason. Perhaps one reason is they don't know 0:02:17.960 --> 0:02:20.360 that rates have getting down. Perhaps another reason is they 0:02:20.440 --> 0:02:22.800 can't be bothered to do all the paperwork and stuff 0:02:23.120 --> 0:02:25.480 and so there are these lag effects, and so I've 0:02:25.480 --> 0:02:27.080 always sort of wondered, why can't you just have a 0:02:27.240 --> 0:02:29.639 one click, one click refive well. 0:02:29.520 --> 0:02:30.600 As a new lower rate. 0:02:30.760 --> 0:02:34.200 As someone who lives in fear of paperwork, I think 0:02:34.200 --> 0:02:37.480 this is an interesting question and we should talk about it. 0:02:37.560 --> 0:02:40.240 And it turns out we actually have the perfect guest. 0:02:40.560 --> 0:02:43.880 We're going to be speaking with someone who was involved 0:02:43.960 --> 0:02:47.639 in a one click mortgage lender. Mike You, co founder 0:02:47.680 --> 0:02:50.480 and CEO of Vesta. Mike, thank you so much for 0:02:50.520 --> 0:02:51.679 coming on all thoughts. 0:02:52.160 --> 0:02:53.240 Yeah, thanks for having me. 0:02:53.760 --> 0:02:57.880 So why don't you give us a very quick career summary? 0:02:57.960 --> 0:03:00.000 Why are we talking to you? 0:03:00.120 --> 0:03:02.960 Yeah, so I've spent my entire career in the mortgage 0:03:02.960 --> 0:03:05.359 industry on the tech side purely. I like to joke 0:03:05.400 --> 0:03:08.600 that everyone who ends up in mortgage origination stumbles into 0:03:08.639 --> 0:03:10.600 it by accident. So I worked at Blend. 0:03:11.000 --> 0:03:13.120 Kids don't dream of like one day I'm going to 0:03:13.120 --> 0:03:15.560 be a mortgage originator. You didn't dream of that when 0:03:15.560 --> 0:03:17.880 you were in a elementary school. Anyway, keep going. 0:03:17.919 --> 0:03:18.200 Sorry. 0:03:18.840 --> 0:03:22.080 I actually when I'm recruiting engineers here at Vesta, I 0:03:22.160 --> 0:03:23.960 tell them I'm like, you know, lots of founders will 0:03:24.000 --> 0:03:27.040 give you some weird story about how they've dreamed about 0:03:27.120 --> 0:03:29.120 doing this thing since they were twelve. I can tell 0:03:29.120 --> 0:03:31.040 you the story like that, and you wouldn't believe me anyways, 0:03:31.240 --> 0:03:34.840 So let's be honestly stumbled into it. I started at 0:03:35.040 --> 0:03:37.920 a mortgage tech startup, Blend in twenty sixteen, so the 0:03:37.920 --> 0:03:40.400 company was about fifty people back then, and we built 0:03:40.400 --> 0:03:43.400 a ton of the bar we're facing experience for big banks, 0:03:43.400 --> 0:03:45.840 big mortgage lenders, et cetera. But the goal really being 0:03:45.840 --> 0:03:47.880 how you make the process more digital, like it was 0:03:47.920 --> 0:03:49.920 all pay performs back then, even for the barer to 0:03:49.920 --> 0:03:52.920 fill out, and then how do you know, eventually consolidate 0:03:52.960 --> 0:03:54.920 that down into one click or one tap if you're 0:03:54.920 --> 0:03:58.040 on mobile. That company went public in twenty one, but 0:03:58.120 --> 0:04:00.120 I left in twenty twenty to go and build a 0:04:00.200 --> 0:04:02.680 different startup, Vesta, where I think a lot of what 0:04:02.680 --> 0:04:05.080 we struggled with that Blend was the core infrastructure in 0:04:05.120 --> 0:04:07.440 the back end of the system made it really hard 0:04:07.520 --> 0:04:10.520 to consolidate the mortgage process, accelerated, cut costs for lenders, 0:04:10.800 --> 0:04:13.480 save time, and make it easier for borrowers, and so 0:04:13.760 --> 0:04:15.600 kind of working on the back end system of record 0:04:15.600 --> 0:04:17.200 now where I think a lot of the other technology 0:04:17.200 --> 0:04:19.560 problems are and I think, as this is about one 0:04:19.600 --> 0:04:23.040 click mortgages, I think there are of course some technology limitations, 0:04:23.040 --> 0:04:24.880 which is why we started the whole company, But there's 0:04:24.920 --> 0:04:27.520 also a fun variety of regulatory implications that I'm sure 0:04:27.520 --> 0:04:29.039 we'll dive into today too. Great. 0:04:29.120 --> 0:04:31.599 You know what's funny is I think not only on 0:04:31.640 --> 0:04:34.560 the podcast did we talk about why were there no 0:04:34.680 --> 0:04:38.360 one click refise available? I think we specifically put out 0:04:38.400 --> 0:04:40.320 a call. We were like, have you've ever been in 0:04:40.360 --> 0:04:44.080 a startup, some y combinator thing which is attempted to 0:04:44.080 --> 0:04:46.600 do one click? Reach out to us? And you were 0:04:46.640 --> 0:04:48.320 one of the I don't know if Blend was ever 0:04:48.360 --> 0:04:50.919 a y combinator thing, but that's not really that important. 0:04:51.000 --> 0:04:53.920 But you answered the call literally and you heard it and. 0:04:53.880 --> 0:04:55.760 Sore the odd lots call. 0:04:55.760 --> 0:04:58.760 Answered the odd lots call to You're the perfect guest. Obviously, 0:04:58.839 --> 0:05:00.839 we want to get into what you're doing it investa 0:05:00.920 --> 0:05:02.600 and just how it all works. Talk to us a 0:05:02.600 --> 0:05:06.360 little bit more. What did Blend do to attempt to 0:05:06.480 --> 0:05:09.360 solve the problem of I don't know if it really 0:05:09.360 --> 0:05:13.080 gets to one click, but simplifying or streamlining the mortgage 0:05:13.120 --> 0:05:14.280 application process. 0:05:14.640 --> 0:05:17.280 Yeah, it's really funny because it's only been ten years, 0:05:17.440 --> 0:05:19.320 but ten years ago, actually, if you wanted to get 0:05:19.320 --> 0:05:22.080 a mortgage, you couldn't even go and apply on the internet. 0:05:22.080 --> 0:05:23.799 I would actually say in the early days of Blend, 0:05:24.040 --> 0:05:26.520 you know, twenty sixteen, seventeen, we'd talked to lenders and 0:05:26.520 --> 0:05:29.039 they would be like, you don't understand people applying for 0:05:29.040 --> 0:05:31.680 a mortgage. They don't want to do it online, which 0:05:31.720 --> 0:05:33.640 just blew our mind. And there are a lot of 0:05:33.640 --> 0:05:35.440 you know, old school loan officers who are like, I 0:05:35.520 --> 0:05:38.359 call my borrower and I interview them, and I literally 0:05:38.400 --> 0:05:41.200 take the paper it's called the ten oh three or 0:05:41.240 --> 0:05:44.440 the uniform Residential Loan Application. I take this paper form 0:05:44.480 --> 0:05:46.120 and I fill it out with a pencil. I pull 0:05:46.160 --> 0:05:47.840 over to the side of the road. My bar was 0:05:47.839 --> 0:05:49.440 talking to me on the phone. I take them through 0:05:49.760 --> 0:05:52.040 my process and I fill it out with pen and pencil. 0:05:52.240 --> 0:05:53.680 Then I give it to my assistant and they go 0:05:53.720 --> 0:05:55.840 like type it into the back end system. And we 0:05:55.839 --> 0:05:57.839 were getting this kind of pushback left, right and center 0:05:58.160 --> 0:06:00.839 in the early days, really just around the idea that 0:06:00.839 --> 0:06:03.360 people wouldn't want to apply online. And then rockets big 0:06:03.400 --> 0:06:05.800 Super Bowl, the ad came out push button Get Mortgage, 0:06:06.160 --> 0:06:07.880 and then all the banks are like, oh, well, if 0:06:07.960 --> 0:06:10.240 Rocket's going to do it, we'd probably need something competitive 0:06:10.240 --> 0:06:11.479 with this, And I would say that was really an 0:06:11.520 --> 0:06:14.320 inflection point for that company. But so much of it 0:06:14.360 --> 0:06:15.800 was like, if you want to get to a one 0:06:15.880 --> 0:06:17.920 click mortgage, well, first of all, you need people applying 0:06:17.920 --> 0:06:20.960 for the mortgage on the Internet, not via physical paper. 0:06:21.400 --> 0:06:23.000 And then it really becomes about how do you start 0:06:23.000 --> 0:06:24.800 to pull in the data from all these various sources. 0:06:24.839 --> 0:06:26.440 So Blend was one of the first to work with 0:06:27.000 --> 0:06:29.480 some of the GSS on getting asset data direct from 0:06:29.520 --> 0:06:32.000 the banks and pulling that into the mortgage application so 0:06:32.040 --> 0:06:34.120 you can get faster underwriting and not needing to upload 0:06:34.120 --> 0:06:36.839 a whole bunch of paperwork and bank statements. Similar things 0:06:36.839 --> 0:06:38.920 for like income data, and then people are making big 0:06:38.960 --> 0:06:41.679 pushes around property data and AVMs. It's a whole variety 0:06:41.680 --> 0:06:43.520 of data sources you've kind of got to stitch together 0:06:43.880 --> 0:06:46.240 in order to really save the barrow from sending in 0:06:46.279 --> 0:06:47.760 a whole bunch of paperwork. Because one thing that I 0:06:47.800 --> 0:06:49.880 think is a little less obvious when you send the 0:06:49.920 --> 0:06:52.200 lender your pay stub, you're not just proving that you 0:06:52.240 --> 0:06:54.160 have the income. They actually take a bunch of the 0:06:54.240 --> 0:06:56.640 numbers on that pay stub that they didn't ask you 0:06:56.680 --> 0:06:58.640 to fill out anywhere, and fill that out in a 0:06:58.640 --> 0:07:01.880 spreadsheet or something to calculate your income based on their 0:07:01.920 --> 0:07:03.719 models and what the GSS tell them to do and 0:07:03.760 --> 0:07:06.200 things like that, and so so much of it was 0:07:06.240 --> 0:07:08.000 just if you can digitize the process and get that 0:07:08.080 --> 0:07:10.400 data in a structured format from a whole bunch of sources. 0:07:10.400 --> 0:07:12.480 At the beginning, the belief was that's really going to 0:07:12.520 --> 0:07:14.760 drive you towards a faster and more efficient process and 0:07:14.840 --> 0:07:16.520 eventually one quick So you. 0:07:16.440 --> 0:07:19.680 Mentioned the GSS a couple times there. I imagine if 0:07:19.840 --> 0:07:22.760 you're doing a mortgage, at some point you're going to 0:07:22.800 --> 0:07:25.400 have to get the guarantee from Fanny and Freddy, and 0:07:25.440 --> 0:07:28.360 so you're going to have to go through them. What 0:07:28.400 --> 0:07:31.480 are their systems, Like you mentioned you worked with them, Like, 0:07:31.680 --> 0:07:34.960 how did you plug in to the GSE systems? 0:07:36.280 --> 0:07:39.440 Yeah, So, as you might expect from a couple of 0:07:39.560 --> 0:07:44.000 large financial institutions that are also now under conservatorship, their 0:07:44.040 --> 0:07:47.040 systems are definitely of varying degrees of maturity. One thing 0:07:47.120 --> 0:07:49.440 that I will say that I actually really appreciate about 0:07:49.480 --> 0:07:51.880 both Fanny and Freddy is they have invested a lot 0:07:51.920 --> 0:07:54.960 in technology over the last decade. I think when you 0:07:55.000 --> 0:07:57.640 get down to it, financial products are all The nice 0:07:57.640 --> 0:08:00.000 thing is there's no physical commodity, right, It's all money 0:08:00.440 --> 0:08:02.480 and numbers in a ledger, And so I think they've 0:08:02.480 --> 0:08:04.680 definitely started to embrace their role more as needing to 0:08:04.680 --> 0:08:07.800 provide technology to the ecosystem that is modern, that is effective, 0:08:08.280 --> 0:08:11.240 but very honestly like the core piece of technology they 0:08:11.240 --> 0:08:13.840 built that gives you guidance on whether your loan is 0:08:13.840 --> 0:08:16.360 going to qualify or not. For sell to Fanil Freddy. 0:08:16.720 --> 0:08:19.040 It's called Desktop Underwriter in the Fanny case and Loan 0:08:19.040 --> 0:08:21.520 Product Advisor in the Freddie case. The original versions were 0:08:21.520 --> 0:08:25.280 built in the nineties and so definitely some older systems 0:08:25.320 --> 0:08:28.680 it's all still you know, XML system to system conversation 0:08:28.760 --> 0:08:30.560 if you can integrate to them at all. Some of 0:08:30.560 --> 0:08:34.160 the systems don't have any capability for system to system integration, 0:08:34.520 --> 0:08:35.920 and so if you want to actually sell the loan 0:08:35.960 --> 0:08:38.080 to Fanil Freddy, someone has to go to their existing 0:08:38.120 --> 0:08:41.560 loan origination system, download an XML file, log into their 0:08:41.559 --> 0:08:44.280 website and upload it. So there's definitely, I would say 0:08:44.360 --> 0:08:48.480 varying degrees of modernization and capability across those technology systems. 0:08:48.840 --> 0:08:51.880 And that is I would say, no more true at 0:08:51.880 --> 0:08:53.680 Fany and Freddi than it is that most of the 0:08:53.720 --> 0:08:56.280 major financial institutions you think about, even most of the 0:08:56.320 --> 0:08:58.679 smaller lenders you think about, it's all kind of on 0:08:58.720 --> 0:09:02.360 the spectrum of everything was built between one and thirty 0:09:02.440 --> 0:09:04.560 years ago, and everyone's got to kind of move. Thirty 0:09:04.640 --> 0:09:06.840 years is long left in technology. Everyone's got to kind 0:09:06.840 --> 0:09:08.800 of move and rebuild a new version of this, new 0:09:08.880 --> 0:09:09.320 version of that. 0:09:09.679 --> 0:09:12.440 Oh yeah, Joe, I remember you know those charts that 0:09:12.559 --> 0:09:16.120 show like all the acquisitions that a Jpmore oh yeah, 0:09:16.280 --> 0:09:18.360 or a Bank of America has done. It's sort of 0:09:18.400 --> 0:09:21.160 like a flow chart. Yeah, every single one of those 0:09:21.240 --> 0:09:24.400 probably has a different IT system, right, So I always 0:09:24.440 --> 0:09:28.200 hear that one of the big difficulties in building a 0:09:28.280 --> 0:09:31.280 giant bank is basically sorting out the. 0:09:31.280 --> 0:09:35.680 IT totally big institutions, you know, it's easy to sort 0:09:35.720 --> 0:09:39.720 of assume that sort of CLOSEI government institutions are going 0:09:39.760 --> 0:09:43.120 to be worse on so forth, and maybe sometimes that's 0:09:43.120 --> 0:09:47.880 correct and sometimes that's not. But big gigantic institutions, particularly 0:09:47.960 --> 0:09:50.400 ones that had all kinds of mergers and roll ups, 0:09:50.400 --> 0:09:53.040 et cetera. They all have this, and this has been 0:09:53.280 --> 0:09:56.200 something that's come up a little bit in the past. 0:09:56.679 --> 0:10:00.240 We've done some episodes on bank software in general, and 0:10:00.280 --> 0:10:03.280 so I'm not particularly surprised to hear that Fanny and 0:10:03.320 --> 0:10:05.520 Freddy have a lot of still work to do, even 0:10:05.559 --> 0:10:06.800 if they have invested. 0:10:07.240 --> 0:10:08.079 Why is it hard? 0:10:08.320 --> 0:10:11.840 Maybe from your perspective, from the perspective of either a 0:10:11.880 --> 0:10:15.880 Fany or Freddy or just any other gigantic financial institution, 0:10:16.320 --> 0:10:21.760 how would you describe why it's challenging to update these 0:10:21.800 --> 0:10:24.440 systems so that they resemble the type of software we're 0:10:24.520 --> 0:10:26.000 used to in twenty twenty four. 0:10:26.320 --> 0:10:30.720 Definitely, Maybe I'll start even way back, like fifty years ago. 0:10:30.840 --> 0:10:32.840 Are we going to talk about Kobyl? I hope, so 0:10:33.280 --> 0:10:33.920 we can. 0:10:33.960 --> 0:10:36.600 Talk about Cobyl if you'd like. But I think it 0:10:36.679 --> 0:10:38.880 actually when I was at Blend, I was fortunate enough 0:10:38.880 --> 0:10:40.960 to work with tim Myoppolis, who was before I Blend, 0:10:41.000 --> 0:10:43.040 the CEO at Fanny May and he has this line 0:10:43.040 --> 0:10:45.200 which really stuck with me, which is that everyone says 0:10:45.200 --> 0:10:47.920 that banks are like slow adopters of technology, but the 0:10:47.960 --> 0:10:50.520 problem with banks actually is that they were very early 0:10:50.520 --> 0:10:53.599 adopters of technology, right going back to everything really is 0:10:53.640 --> 0:10:55.640 just a number inside a spreadsheet at a bank. There's 0:10:55.679 --> 0:10:59.280 no corn that you're shipping or gold bars or whatnot. 0:11:00.000 --> 0:11:03.080 Anctial services industry was really an early adoperative technology. What 0:11:03.120 --> 0:11:06.120 that means is they installed a lot of technology very 0:11:06.200 --> 0:11:08.920 very early on that then became harder and harder to 0:11:08.960 --> 0:11:11.360 rip out. And one thing that we find, for example 0:11:11.480 --> 0:11:13.640 at BESTA where we're replacing one of these core systems, 0:11:13.960 --> 0:11:16.400 when I talk to other founders in the technology space, 0:11:16.559 --> 0:11:19.040 it's much easier to install a new system to replace 0:11:19.080 --> 0:11:22.000 a spreadsheet that just like so obviously doesn't work. The 0:11:22.120 --> 0:11:24.600 enterprise security is terrible, the controls are terrible, et cetera. 0:11:25.120 --> 0:11:27.800 Then to get someone to upgrade a system that you 0:11:27.800 --> 0:11:30.080 know kind of works for them. It's clunky, it's inefficient, 0:11:30.080 --> 0:11:33.400 it's slow, but it isn't a burning pain where they like, oh, 0:11:33.400 --> 0:11:36.240 if I don't modernize, I'm going to lose the business 0:11:36.320 --> 0:11:38.640 or lose my job or something. On the other hand, 0:11:38.679 --> 0:11:40.559 I would say there's a very strong incentive in all 0:11:40.559 --> 0:11:42.840 these big institutions if you try and do like a 0:11:42.920 --> 0:11:46.320 huge modernization project of a big existing system of record 0:11:47.120 --> 0:11:49.640 and it doesn't work, you're basically putting your job on 0:11:49.679 --> 0:11:52.040 the line. And if it does work as a CIO 0:11:52.160 --> 0:11:55.000 or a line level CIO at a bank, you're getting 0:11:55.000 --> 0:11:57.040 a small promotion. I was just that the trade off 0:11:57.040 --> 0:11:57.600 is pretty bad. 0:11:57.760 --> 0:11:59.520 I was just going to ask, like, how much is 0:11:59.559 --> 0:12:05.920 it tech qua tech versus institutional inertia and incentives that 0:12:06.000 --> 0:12:09.120 really create that problem of why it's harder to upgrade. 0:12:09.240 --> 0:12:12.840 I think it's mostly institutional inertial incentives. There certainly is 0:12:12.960 --> 0:12:14.679 a lot of work that actually goes into it, right, 0:12:14.679 --> 0:12:16.440 and so you've got to get budget, et cetera. Yeah, 0:12:16.480 --> 0:12:19.520 but it's all very tractable. I will say in financial 0:12:19.520 --> 0:12:22.040 services there are relatively few technology problems that are like 0:12:22.160 --> 0:12:25.960 fundamentally hard technology problems, like we're not launching rockets over here. 0:12:26.120 --> 0:12:29.040 They all tend to be people problems. Organizational problems are 0:12:29.080 --> 0:12:44.079 problems that get in the way. 0:12:45.720 --> 0:12:48.120 Can you talk to us about the sort of life 0:12:48.200 --> 0:12:51.920 cycle of a mortgage in terms of technology, so like 0:12:52.080 --> 0:12:54.920 what's the first thing that happens, what system is it 0:12:55.000 --> 0:12:57.040 put into, and then where does it go next? 0:12:57.480 --> 0:12:59.880 Sure, so we're talking one click refive today, So we'll 0:12:59.880 --> 0:13:02.680 start with a refive in let's call it a relatively 0:13:02.679 --> 0:13:05.679 idealized case. Let let's stop the real ideal, which is 0:13:05.679 --> 0:13:06.960 like the bar is going to get an email from 0:13:07.000 --> 0:13:10.000 their servicer right which says, hey, you're in the money, Like, 0:13:10.080 --> 0:13:11.920 we service your loan, we know what you pay, we 0:13:12.000 --> 0:13:14.560 know what rates are, we know you know roughly our 0:13:14.559 --> 0:13:16.920 credit profile. We can tell you that you probably want 0:13:16.960 --> 0:13:19.280 to refinance. So the consumer is going to click on 0:13:19.320 --> 0:13:21.319 that link and they're normally going to go and fill 0:13:21.360 --> 0:13:23.600 out an online application. Today they're going to go type 0:13:23.640 --> 0:13:25.480 in a whole bunch of their data. Again, I think 0:13:25.760 --> 0:13:27.680 you probably know your servicer has a ton of data 0:13:27.679 --> 0:13:29.320 on you. Do you really need to type it in? 0:13:29.360 --> 0:13:31.320 And this varies kind of depending on how tech forward 0:13:31.360 --> 0:13:33.520 your servicer is, but often people are still typing in 0:13:33.559 --> 0:13:36.640 their whole application. Again, they're uploading a whole bunch of documents. 0:13:36.679 --> 0:13:39.680 And this is kind of sitting in the consumer facing system, 0:13:39.840 --> 0:13:41.440 which today is you know, they call it a point 0:13:41.480 --> 0:13:43.719 of sale. This is the space where really Blend is 0:13:43.760 --> 0:13:46.440 the category leader now. And so the bar is going 0:13:46.440 --> 0:13:48.080 to kind of type all that information in, They're going 0:13:48.120 --> 0:13:50.240 to hit submit. That's going to push it to what's 0:13:50.280 --> 0:13:52.800 called the loan origination system on the back end, and 0:13:52.920 --> 0:13:54.560 you can think of that as both the system of 0:13:54.600 --> 0:13:56.679 record and it's going to do all the compliance checks. 0:13:56.920 --> 0:13:58.319 It's where the people are going to do all the 0:13:58.360 --> 0:14:01.839 processing and the underwriting or any automated underwriting might happen. 0:14:02.080 --> 0:14:03.800 And it's also the system that's going to be integrated 0:14:03.840 --> 0:14:07.240 to like fifteen other systems. So one really annoying thing 0:14:07.280 --> 0:14:09.920 about the mortgage ecosystem is to produce your loan from 0:14:09.920 --> 0:14:12.680 front to back, you're probably hitting at least fifteen different 0:14:12.720 --> 0:14:13.520 technology vendors. 0:14:14.000 --> 0:14:16.199 Can you run some what are some of these in? 0:14:16.240 --> 0:14:18.360 What different parts of the stack are they serving? You 0:14:18.360 --> 0:14:20.480 don't have to list all at fifteen, but give us 0:14:20.520 --> 0:14:23.440 an example of like the various things that need to 0:14:23.440 --> 0:14:24.680 be hit and who's doing them. 0:14:25.000 --> 0:14:27.280 Yeah, so I think of it as there's a whole 0:14:27.280 --> 0:14:29.240 bunch of stuff around the property, right, so you've got 0:14:29.240 --> 0:14:30.680 to go to a title company, you've got to go 0:14:30.680 --> 0:14:33.240 to an appraisal management company kind of get the appraisal. 0:14:33.280 --> 0:14:34.840 So there's a whole bunch of stuff around the property. 0:14:35.000 --> 0:14:37.160 Someone's got to check what flood zone it's in. And 0:14:37.200 --> 0:14:39.360 we'll get into why some of the rules are really 0:14:39.400 --> 0:14:41.000 hard to change. But if you want to know what 0:14:41.000 --> 0:14:43.240 flood zone a property is in. I mean you can 0:14:43.240 --> 0:14:45.280 go on house Canary or Zillow and kind of figure 0:14:45.280 --> 0:14:46.920 that out pretty quickly. If you want to sell a 0:14:46.920 --> 0:14:48.920 mortgage to the GSS, you've actually got to hit one 0:14:48.920 --> 0:14:52.240 of their four or five designated flood certificate providers for 0:14:52.280 --> 0:14:55.360 an official flood certificate quote unquote, which is really just 0:14:55.760 --> 0:14:58.240 you know, those are the providers that signed a deal 0:14:58.280 --> 0:15:00.320 with the gs S where they get the FEMA maps 0:15:00.320 --> 0:15:02.160 that everyone else gets and they produce a piece of 0:15:02.160 --> 0:15:04.760 paper that's official enough and the GSS trust them. So 0:15:04.800 --> 0:15:07.200 that's a provider you basically have to hit. And so 0:15:07.240 --> 0:15:09.480 there's a whole variety of property you know, vendors you've 0:15:09.480 --> 0:15:11.600 got to hit around those categories. There's a bunch of 0:15:11.680 --> 0:15:13.560 bar er vendors you've got to hit around. The pulling 0:15:13.600 --> 0:15:15.520 credit is the obvious one, but you're going to want 0:15:15.520 --> 0:15:17.240 to verify their income. You're going to want to look 0:15:17.280 --> 0:15:19.840 them up in fraud databases. So there's a whole set 0:15:19.880 --> 0:15:22.240 of those, and then there's a bunch of compliance stuff 0:15:22.280 --> 0:15:24.960 to do. So generally, you know, there are entire companies 0:15:24.960 --> 0:15:27.000 that are dedicated to I have all the data in 0:15:27.000 --> 0:15:29.040 the mortgage, and I'm going to prepare the disclosures for you. 0:15:29.360 --> 0:15:32.240 Like the disclosures are so complicated, that's less a technology problem. 0:15:32.320 --> 0:15:34.480 That's like that those companies have an army of lawyers 0:15:34.760 --> 0:15:37.760 who basically read all the regulatory updates, all the updates 0:15:37.800 --> 0:15:39.960 in each of the thirty eight hundred counties in the US, 0:15:40.280 --> 0:15:43.400 any state updates, any investor updates around exactly what you 0:15:43.440 --> 0:15:45.440 have to tell the consumer before they can kind of 0:15:45.440 --> 0:15:47.560 sign a lian on their property, which, as you know, 0:15:47.600 --> 0:15:50.680 like some states are very onerous about that. And so 0:15:50.840 --> 0:15:54.120 between compliance and property and kind of checking the borrower, 0:15:54.440 --> 0:15:56.680 there's just this whole constellation of stuff that has to 0:15:56.680 --> 0:15:58.600 be done, a lot of data sources and a lot 0:15:58.640 --> 0:15:59.120 of rules. 0:16:00.120 --> 0:16:02.280 Talk to us a bit more about the rules then, 0:16:02.440 --> 0:16:06.880 Like I'm curious how these rules come into place, what 0:16:07.120 --> 0:16:09.600 sort of factors they're being based on, and then how 0:16:09.640 --> 0:16:11.360 often they actually change. 0:16:11.680 --> 0:16:13.400 Yeah, I kind of think of rules in two buckets. There. 0:16:13.400 --> 0:16:15.640 Of course, the regulatory rules, so you can imagine a 0:16:15.640 --> 0:16:18.800 ton of those regulatory rules were driven by seven eight 0:16:19.240 --> 0:16:21.400 and a lot of the things that we saw during 0:16:21.440 --> 0:16:23.120 the Great Financial Crisis or that kind of led up 0:16:23.120 --> 0:16:25.600 to the Great financial crisis, so a lot of regulatory 0:16:25.600 --> 0:16:28.320 stuff around what you disclose the consumers around you know, 0:16:28.360 --> 0:16:31.120 you have to qualify their ability to repay in order 0:16:31.200 --> 0:16:34.320 to have a compliant loan. So there's lots of regulatory stuff. 0:16:34.320 --> 0:16:36.960 And then there's investor rules, which overwhelmingly you know, come 0:16:36.960 --> 0:16:39.520 from Fanny er Freddy. There is a small private label 0:16:39.520 --> 0:16:42.360 market and some other stuff. One thing that is true 0:16:42.440 --> 0:16:44.800 about all of these rules, right the investor rules and 0:16:44.840 --> 0:16:47.440 the regulatory rules, is they're both kind of set again 0:16:47.800 --> 0:16:51.560 talking about organizational inertia by pseudo government institutions that have 0:16:51.640 --> 0:16:54.120 really been burned by mortgages in the last two decades, 0:16:54.160 --> 0:16:57.320 and so they're pretty you know, nervous about that, and 0:16:57.760 --> 0:17:00.960 there's very little incentive to simplify the process to remove rules, 0:17:01.280 --> 0:17:03.480 and so the rules change. I would say every month 0:17:03.560 --> 0:17:06.119 or two you get a few new rules from the investors, 0:17:06.400 --> 0:17:09.119 but they very rarely subtract rules, which tends to be 0:17:09.160 --> 0:17:10.840 a reason that you end up with. I want to say, 0:17:10.840 --> 0:17:13.640 the fan selling Guide is now twelve hundred pages basically 0:17:13.640 --> 0:17:15.880 of rules that the loan has to satisfy. And these 0:17:15.960 --> 0:17:18.600 rules can vary from you know, relatively straightforward things like 0:17:18.640 --> 0:17:21.960 you can't refinance an FAJ loan within a certain amount 0:17:22.000 --> 0:17:25.080 of time after the loan was originally originated, so there's 0:17:25.080 --> 0:17:27.280 like a seasoning requirement. You know, there's a lot of 0:17:27.280 --> 0:17:29.719 documentation rules, like if you're going to provide an income 0:17:29.760 --> 0:17:31.840 to Fanny May, you normally have to have a pasteb 0:17:31.880 --> 0:17:33.719 and in W two attached to it to kind of 0:17:34.200 --> 0:17:36.879 verify that income. And you get into like really complex 0:17:36.920 --> 0:17:38.760 and arcane rules as well, once you get into twelve 0:17:38.800 --> 0:17:41.200 hundred pages, like are you allowed to have a ten 0:17:41.240 --> 0:17:43.840 percent increase in income year over year and use that 0:17:43.880 --> 0:17:46.479 new income, Well, you have to document that a certain way. 0:17:46.520 --> 0:17:48.199