Episode Transcript
[00:00:00] Speaker A: Hello and welcome to season four of the Mic'd Up Show. I am Mike List because I'm on the road here at the Mercedes Benz center, and we here on season four like to say Mic'd up show is where every mortgage has a story. So we are the ultimate hub where the hidden stories behind the mortgage industry come to life. I'm Michael Kelleher, and in every episode, we dive into the entrepreneurial spirit, strategic insights and breakthrough innovations that build the world's greatest mortgage companies. So whether you're advancing your career, scouting for industry leaders, can't make it to all the events or can't make it to any events, but you're still exploring those opportunities. And we always say, even in fintech and prop tech, and today it's going to be more relevant than most of our shows, you're in the right spot. So get ready to unlock the story behind every mortgage. Uh, let's dive in. Today we have CEO of Figure Michael Tannenbaum and he.
So do you want to tell us about Figure Michael? So I don't watch it.
[00:01:03] Speaker B: Sure. So figure. We are predominantly known for being in the HELOC space, certainly within the mortgage world. And we're unique in that we're both the largest non bank originator of HELOCs, but also we're one of the best examples in the broader private credit space of someone that uses blockchain technology to automate process and standardize process. So what we've done is we've actually built an integrated origination system and capital market that function together providing a lot of liquidity in what would otherwise be considered, you know, non agency space in the mortgage world. And we've built this integrated LOS and capital market that allows a lot of our origination partners, we've got about 150, to use our technology and capital markets to offer HELOCs to their customers, both first, second and third lean HELOCs. And now we're introducing other products into that marketplace. And sort of on the back end, you have a lot of blockchain technology that is standardizing everything and helping the capital markets move faster and more liquid.
[00:02:14] Speaker A: And speed. We'll hear a lot about speed going into this. But Eichel Tannenbaum's background is something I say similar to mine, but in just in the fact that when I created the mobile app, I was doing a lot of pitch decks and a lot of going around.
So you came almost from the.
[00:02:32] Speaker B: And we're both in Boston, right? We have that.
[00:02:34] Speaker A: Yeah. And we're from Boston or the Massachusetts area. And so you came from like the, the investor world. And then so you were looking at pitch decks or at least analyzing what. Then you're actually out there presenting pitch decks. After SoFi, you know, with Brex, which I postpartum as challenge. So I had my own little Brex card at just an unbelievable company. But there was one moment I heard on a past show where somebody kind of mumbled, you left Sofi for this.
What did they not understand about your vision?
And you're, you're betting on just these, a group of two people that made you believe so strongly that this was going to be something special. Meaning practice?
[00:03:16] Speaker B: Yeah, look, it's.
[00:03:17] Speaker A: No, totally.
[00:03:18] Speaker B: I think whenever you start something new, whether it be, you know, your own, your own business, join an early business, you have to have some, you know, the approach that I always take is, or that I end, that I recommend to take also and that I've done myself is assume it works and then sort of go from there. Right. If you fill yourself with doubt on this isn't going to work, this isn't going to work, it's really hard to get, to get anywhere. So once you've made that leap and basically believe in what you're doing, I think that you're going to face lots of skepticism.
And the, the thing is, is, you know, if it was easy and it was obvious, then everybody would do it and there would be no, there'd be no glory, there'd be no opportunity and, and making those kinds of moves. So for me, it was a lot about building conviction up front.
Right. And being really confident that I thought this was going to be the thing. And once you make the decision, there's sort of this phrase of, you know, commit. Right. And so once you've made that decision and commit and, and committed to it, then, then at that point you just have to believe that it's going to work and keep, and keep pursuing and not necessarily led folks saying things like, you know, why would you leave that great job for this? Because, you know, it doesn't really matter what they say. If you think it's, it's, it's going to work. I think if there's new information that they're bringing that says like, oh, by the way, did you consider this? Because this is a fatal, fatal error or flaw. Sure you can, you can address that. But if all people doing, all people are doing is sort of spreading doubt and fear, not, not worth your time.
[00:04:47] Speaker A: Yeah. And I'm excited for that conviction or commitment of this next group of lenders we talk a lot about the show. A lot of that 2004 alumni class is now running the top mortgage companies. And that next wave usually comes when there's disruption and chaos. I, I liked how you, you were telling the background of Sofi and maybe you can just briefly talk about how when it first started with you, I don't think it was expected to be what it is today. Or maybe it was, but it had a lot of chaos along the way before investment. And once you had it, you just had that natural itch like, get me back in over to that chaos. That's where I thrive. Can you talk about. Because our industry right now is going through a little bit of chaos between the tweets and the rate market and just everything. Can you talk about chaos and how people can embrace it?
[00:05:37] Speaker B: Yeah, look, I mean, it's, I think when I showed up at SoFi, we were, you know, SoFi was the first company to refinance student loans. And you, and if you think about student loans, some of them are as big, if not bigger than mortgages.
And some of them are as long as, as mortgages, you know, they go out 20, 25, 30 years. So the fact that there was no opportunity to refinance these loans was just this huge deal.
And so it was chaos because there was tons of volume and it's really hard. You know, there's no Fannie Mae in that market, which is something that, you know, figure has also kind of evolved to worlds where there isn't this standardized capital markets and we provide that. But at SoFi, we didn't have that at all. And so we were doing 5,600 million a month of essentially non agency, you know, student product. And if you go back to 2010, nobody wanted to touch student loans, right? I mean, it was, it was not a, you say student loan as a word. It wasn't like people were like, oh, let me, you know, let me get closer. And even still, securitization was a bad word at that time, right? Because we were just coming out of the financial crisis where people associated securitizations with everything bad. So you had a. And we, and that was our primary outlet, securitization. So that, that had a lot of chaos.
But I think that, you know, within that chaos is really the opportunity to take the reins and provide sort of that consistency and clarity of execution.
And that's where there is opportunity. Right? If everything is, is super easy and there's guaranteed capital market and you're sort of competing, it's almost like Being in more commodity business, you know, when you're, you're opening a gas station across the street, they're offering the same gas with maybe a better sign. Right. That's, that's sort of one market. But then when things are volatile and things are hard and challenging, that's where there's opportunity and, and the people that are really focused and, and can execute, I think, thrive. And so that was definitely an environment where I felt like someone with my personality and sort of my, I guess, work ethic was able to really stand out. And that's why I've sought, you know, environments where you have a little bit of chaos, because I think that's where you can, we can generate the opportunities.
[00:07:48] Speaker A: What stands out to me and my research coming into this show is there's a perception in the industry been in a long time when you have somebody talking about blockchain, which figure is on. You assume they may know less about mortgage and they're coming in. But you have been such a sponge along the way around consumer KPI metrics. I've noticed from your early days that SoFi, you are looking at, and you kind of just mentioned it, but loan size, you were tracking how many people that were in homes that were getting these loans. I'm sure when it went to Brex, you were looking at a little bit of small business and who owns homes or loan size to me sounds like a really great advantage. But what are some of those advantages or, or what's in that sponge of yours that you're going to apply to Figure now with your HELOC and in the future with future programs?
[00:08:37] Speaker B: Yeah, I think one of the things about figure and blockchain, which is interesting is so we've got about 150 different part.
So those would be banks, traditional mortgage companies, you know, and IMBs, credit unions, fintechs that, that use our product. And most of them know that we use blockchain, but very few of them care about that. Right. And we've made it easy for them to not have to. Right. There's of course going to be people who are excited about blockchain, but most of the people are just excited about standardization, automation, speed, efficiency, costs. Right. And those are all byproducts of blockchain. So I kind of go back to cloud technology and going back to SoFi. You know, we were one of the first people SOFI was built on aws. Right. And that was, that allowed us to be nimble in our approach to consumers. But, and back in 2010, when SoFi got started 2011, that was pretty novel, right? Cloud was just getting started. But the borrowers at the time, they weren't like, oh, this is the cloud. Like, right. They were just using SoFi's products and they thought they were good. And I think that that's very similar to the approach we take to blockchain kind of being a new wave of technology specifically for financial services. And so getting to your question, right, we, we tend to focus on the same things and metrics and KPIs that are going to drive people in business, which tend to be velocity, you know, profitability. Right. All the standard metrics still apply. Nothing's changed about the business fundamentals. Blockchain is just delivering some of those KPIs to our partners, whether they are, you know, proactively opting in to that or they're just opting into our technology and as, as a result, getting the benefits without necessarily being a, you know, blockchain advocate or early, early adopter, then it initiates speed.
[00:10:28] Speaker A: Right. And speed gets momentum. The amount of sales that I've heard lenders that really have nailed down using figure is a tremendous boost for these IMBs at a time when they need it. And what I do a lot in work is try to tell one lender what another one's doing. And it amazes me some are not using this. And hearing one example from Anthony at your company where a company put the QR code on the back of their, a business card that they could give out to people doing pools. And then there's your quote right here. There's so many ways from a referral partner standpoint that you can differentiate. And then I read this morning, $60 billion a year in expenses for a homeowner on emergency needs something now wasn't planning on it.
Can you talk about how you help lenders understand the power of this platform?
How you, Michael, get involved as a partner and your team with these lenders to, to realize what they have?
[00:11:26] Speaker B: Yeah, look, I mean, there's, there's trillions of home equity outstanding. I think it's something like 75.
So there's just this enormous opportunity. And if you go back to SoFi, which we've been talking about, you know, at the time we had. And they still do a very large personal loan business, and the majority of that was from people who were homeowners.
And so why are people who are homeowners borrowing on credit card? Why are they borrowing on personal loans? They're doing that because it's not that easy to get equity out of your Home because many of these people have lots of home equity but they're borrowing in other places. And that's because it's traditionally been difficult to get access to that home equity. And so what a lot of figure does using the pool example that you gave is ask its partners to think differently about home equity. Right. HELOCs don't have to be a bank product. That is for a rainy day. In fact, a ton of what we do is actually first lien heloc. Right. And so these are either people that own their homes free and clear or using a HELOC to pay off the existing first lien. Maybe that's a higher rate loan. And people are doing that because we have made the process so fast, simple and inexpensive that we are a great alternative to the conventional space there.
[00:12:52] Speaker A: Right.
[00:12:52] Speaker B: So any first lien he lock could be done as a conventional cash out for the most part.
So because of that we're really encouraging people to think differently about this product and home improvement. Use cases like the example you gave, but also debt consolidation use cases. Right. You can use the HELOC to pay off much higher rate, much higher interest rate debt, which makes a ton of sense for, for almost every homeowner with equity.
[00:13:19] Speaker A: Yeah. And a lot of these are emotional or they, they are more than just number crunching. It's something going on in their life that they're trying to fulfill with a better way to finance it. With that said emotion, there's obviously statistics on conversion rates with speed. I've heard you are actually able to get it to five days. I don't know if that includes rescission area or not. And then you average about 9.
Is there a magic number you have in your head that that works? Are those the numbers there? And can you speak more about that really fast velocity?
[00:13:54] Speaker B: Yeah. That those velocity metrics you, you quoted so as fast as 5 which is inclusive of recision meaning you know, if you're, that includes the, the period of time you're waiting on the rescission that's mandated and on average nine also inclusive of rescission.
You know, I think in some ways speed is, is super valuable. Lots of people just want to get it done. You, you brought up that pool example. And if you think about the home improvement space, you've got a lot of contractors who are typically used to selling financing in one close.
Right. And a lot of folks are in that space. They're not even necessarily doing income verification. It's all on stated right. With data in the background. And so to be competitive in that space. And going back to your earlier question about unlocking new opportunities where people may have not considered home equity and they may be doing other types of loans. It's important for us, speed is really an important value proposition.
I'd actually say in certain cases, you know, the difference between nine days and six days or five days and 10. Right. Especially if there's a traditional loan officer involved. You know, people want to move fast, but especially at the higher loan amounts you are going to get people who don't necessarily want to make a $100,000 decision in five seconds. Right. And there are some people who have, you know, want to think about that. And there's a reason why some of this activity happens on desktop. Not everybody's, you know, taking out an $80,000 loan on their phone as they go to work. Some people really want to think about things and, and compare options. And so I think for us it's really about as fast as people want to go using speed as a weapon. Right. Where there are certain cases, like I mentioned in Home Improvement, where the sales cycle is such that instant and as fast as possible is valuable. And then there's also loan sizes that are being unlocked by figure, say historically, you know, and we know this today. And it's one of the reasons why we have so much growth in first lien. Loan officers are migrating traditionally to the larger loans because the cost to produce has gotten so high. It's the only way folks can make money. And figures coming in and saying, well, our low cost, high speed model makes more sense at some of these smaller loan amounts where the competition is actually non consumption or potentially not a mortgage loan. Right. It's maybe a personal loan or a credit card because you know, if you wanted to borrow $30,000, that may not be a cash out refinance that anybody else will do prior to figure.
[00:16:24] Speaker A: And that's what makes it unique is because there's different use cases for it where you can start to envision because they always say nobody wants a mortgage, they want a home. Right. So I'm sure you can apply it to people want a pool, people want to make it build an ADU unit for their, pay off their debts.
Pay off their debt.
You now and then the way you rolled it out, where these larger companies had access to it and then people wanted it. Brilliant. And so now you have, it seems like a cookie cutter model in your head of how you can expand product on it, which means you're going to start growing fast and scaling. Can you talk about Again, I, I, as I dive deeper, I was fascinated about, I didn't even know really about the Brex and I was, now that I have a card. So what you learned, scaling Brex from three people, how are you going to apply that to figure as the products start to expand and you're obviously going to be growing?
[00:17:19] Speaker B: Yeah, I think one of the interesting things about scaling a, a growing company that people don't appreciate is you go from a phase of, you know, how do I make this work? I'm so desperate to find product market fit. I'm so desperate to have a working business model to then once you do, there's just so much noise out there. Right. There's going to be all kinds of people that know, you know, your board, know someone that come up with ideas. There's all kinds of people that are offering to, for you to buy their company or they know a company you should buy or they know a business line you should get into. Like, the opportunity set expands massively. And so you actually go from being this, in this phase of like how do I win? To how do I prioritize? Because there's so many priorities that could emerge and being really diligent and determined about which priorities you're going to focus on becomes the winning strategy. And so we had to learn that at Brax because we were presented with so many opportunities, because we grew so quickly and we had this big profile in the credit card space with, you know, a product that people know they use every day. We got, we were, we were focused on the tech space, which was really hot and there was a lot of media and attention. And because of that, you know, we really had to learn to kind of focus on our core customer. What do they need and what are we seeing in the product and how are people using the product and how do we expand based on how people are using that product and follow them and follow what they're doing.
Right. And do more of that because there's just almost an unlimited set of things you can do once you're a working fast growing, high profile company. And so a lot of that focus is what I've taken to figure because we have a lot of opportunities as well. People say, oh, why don't you do this, why don't you do that? Look into this, look into that. You know, especially when you combine that with blockchain, which is a really dynamic space. And so we have to be really, really focused on our core customer and providing value every day for them, especially the 150 people that partner with us. It's a huge part of what we do. And you know, we have the QBR processes quarterly business reviews with folks. We gather feedback, we look at the CEO feedback channel that I, I directly get from the end borrowers. So there's lots of ways that we're looking at things to make sure we're continuing to innovate and support our core customer. Because ultimately you have to continue to do that and not get distracted as you're scaling the company.
[00:19:51] Speaker A: Yeah, I, it's, I'm thinking like Gap vers gain. There's so much you can gain. But our industry likes to compare and, and go back and like, am I better than this? Can I do it better than that? What, what is the difference? Brex? And so by consumer facing, your ability to maybe better hone in what your customers are doing versus this B to B to C where the B in the middle is pretty big. So you just said you're actually looking at end users and their experience, but how much do you have to cater as well to the lenders that are distributing it?
[00:20:24] Speaker B: Yeah, I mean, look, we think figure is sort of a marketplace, right? In the sense that you have your capital markets investors on one side of the marketplace and then you have your B2B originating partners on the other side.
And the way that we do it is we basically have a set of investments that we're willing to make across all of our Personas. So you have the borrower Persona, right? The end customer, you have the capital markets customer, the loan buyer, you have the loan officer Persona, right? That's the person at our partners.
And you also have the processing Persona, right? So you have four different people that are involved. And what we do is we set a prioritization queue for the engineering products that projects that we'll do in each, in each quarter. And we will make sure each one of those end customers gets something that they want and gets actually 10 things that they want. Because the problem is it's a little bit like if you don't sort of distinguish between each of these, you may always focus on the squeaky wheel or you may always focus on what you think is the most important at that time. But I kind of. But if you don't allocate a dedicate amount of resources to keeping the lights on for each of these Personas, I think you can lose your way. And another way to phrase it is like, you know, if you are thinking about surviving, right, you are always going to need, you're always going to be saying, well, you know, I, I, I don't, I need to focus on eating right. And you, you may focus on that a lot and you take breathing for granted, but at the end of the day, you know, oh, I can always take a breath, I can always take another breath. I need to go focus on this. Right. But at some point you also need to breathe, even though that's the basics. Right. Or you will also die.
So it's kind of, I know that it's a bit extreme, but the point is, is like if you only focus on the shiny new thing and not all of these Personas, you will also die.
[00:22:31] Speaker A: Yeah, I mean, when I had my mobile app, we got into this like centrifugal force that if we didn't sell enough this month, you know, we couldn't breathe. And so never really had a chance to invest time into doing a proper capital raise because we had started the engine and now sort of what you're, you're saying it was moving and we didn't really take care of the, the house or we, we started it too fast. I have a question about a quote you have about that, but we're gonna go to a commercial break.
This is by our sponsors. We're always looking for sponsors on the show to keep it alive and so it can thrive. And on the other end again we have Michael Tenenbaum who was actually before CEO of Figure, COO of Brex, CRO of sofi, comes in early, watches it fly. We'll hear more about that. But obviously we're mortgage enthusiasts and we're very excited to hear more about Figure. On the other side.
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[00:24:52] Speaker A: All right. And it might sound like I am trying to sell figure, but I'm just very excited about this. I think the mortgage industry and if you listen, if this is a podcast, you've been listening to our station. We appreciate all of you listeners out there. You'll understand that I get jazzed up about the mortgage industry and figure to me is needed right now for an industry that seems to be very reliant on a 30 year fixed. And they need to go to the toolbox in many ways and figures standing right there in front of them as a way to help so many consumers with I believe $36 trillion of equity on tap. That could really help them.
Here's your quote, Michael. You talked about in the beginning. You have nothing.
And so if you spend your time protecting everything that doesn't exist yet, you won't get anywhere. You can sort of say what it means along your journey. But how do you deal with protecting the vision versus executing when you have something going great with urgency.
[00:25:54] Speaker B: Yeah, no, I think that's a, that's a great, it's a great point. I mean, I guess you're quoting me, so I shouldn't say that, but. No, I think it's, it's, but it's, it's an interesting point to, to, to highlight especially when you think about people that join a new company, right? Because you always have to think about when you're joining a, a, a smaller startup company, it's like, well, you know, what's different about this versus the circumstance of maybe where I was before? And the larger companies, they have more to protect, right? They have existing businesses and relationships and franchises and regulators and all these things that you are focused on protecting. And so downside becomes often more relevant than upside.
And when you are small and you don't have a business yet, you don't have, there's nothing to protect, right. And so you're willing to take a lot more risks to find that business that, that, that could exist. And that can be in the context of, you know, customer risk, it can be regulatory risk, it can be, you know, product risk, it can be in a lot of versions, right? Financial risk and there's some element of, of having to swing for the fences to, to make things happen. And I think the best people going back to that scaling, they understand the trade offs that you're making and where they are on that spectrum. Because as the company grows, you then have to think through. Well, you know, actually now we have a little bit of a business, so we have some things to protect. And as you get more and more customers, you know, and then you're thinking more and more of those lines, you don't want to lose that innovative spirit. But the trade offs around how much risk you're willing to take and how fast you want to work and do things, you know, those become manifest at that point. And so that's a big part of how I try to think about things. And you know, because I've worked with companies in a variety of phases of scale and I started my career actually at JP Morgan Chase, which, you know, there's probably no larger financial company that exists. And so seeing that versus say a two person company out of a kitchen. Right. Obviously there's a huge, huge amount of, of spectrum in between those two.
[00:28:00] Speaker A: Yeah, everybody I know that has come from Chase to a different part of the mortgage industry misses the budgets they had at Chase when they could build the things versus what they, they have to do out after Chase. But Chase is a big part of our industry and they're jumping back in. And when it comes to that, I guess startup mentality or scaling, do you, what do you think is more important? Is it the spreadsheets and the operational P and L forecasting or do you think it's the motivation and the vision boarding and the ability to get people behind it and momentum going?
Or is it different at different phases?
[00:28:38] Speaker B: Yeah, I mean, I think that to start a company I think there's three things that you typically need.
So you need the ability to see things differently versus the status quo. Because if you don't do that, then why are you even starting a company?
Right. You need to work extremely hard.
And then to your, to your final point, you need to sell the dream, right? Because you're asking people to be a part of this mission and it's not yet working. And so there's some element of if you're trying to hire anybody quality, right. They presumably have other places they could work that are certainly more scaled and more successful than where you're working.
And so there has to be that element of selling the dream.
And I think that, you know, the P, the P and L, the Spreadsheets, that sort of thing that you mentioned.
That comes later, right? That comes when you have scale, when you have a product, when, when things are working. But up until then, I think you have to sort of live a little bit in the future and live in a world going back to kind of what I said, assume it's going to work. You kind of have to assume a certain amount of scale to get there. And that's frankly why venture capital exists, right? That's why there is this, this concept of a company investing and burning some money and losing some money up front to get to that end state. Because if everybody had to show a clear ROI upfront day one, well then there would be no need for venture capital, right? You could just fund it all yourself. And so I think clearly there are certain examples of businesses where you have an opportunity to burn money up front in order to build something really lasting. I think what often gets confused and you know, where I try to focus is making sure the core, what they call unit economics or the actual economics behind delivering the product or service that those are positive. So using a perfect example, you know, for mortgage, right, there's not much to lending loans that you lose money on on a gain on sale basis, you know, after credit losses, right. If you, if you do a bunch of that like that's not a business, you shouldn't raise money to go do that. But if you need to raise money to build scale and into a profit, into a unit profitable activity, I think that can make a lot of sense.
[00:31:03] Speaker A: Makes sense like so start with the dream and be different, work really hard, right? It's definitely was easier for I got married and had a kid because then you can just keep keep going and, and get it going. But doesn't mean you can't, you can't do it the other way.
Market validation. I do a lot of this in my consulting. I try to bring, I guess I'm giving myself a flag. I'll. I try to help lenders see what other lenders are using that they're successful with. So I, that's kind of another name for market validation. What, when you talk about figure, what was that market validation moment? Or maybe that was before because it was before you arrived. What is a market validation you're looking forward to in the future? Use this question to tell us a little bit more about figure in the market.
[00:31:49] Speaker B: Yeah, for me it was arriving when I got to figure and I started to notice this large amount of first lien heloc that we were doing right. And I Talked a little bit about this before, but a lot of people think about the HELOC space as second lean and on top of a low rate first. And I think there's a lot of that, right? That is a huge part of why people get a heloc. But what I started to notice is a really meaningful and growing amount of first lean heloc. So business that could be a cash out refi, but wasn't. And that was because, well, why, right? So I wanted to look into that. And actually initially a lot of the people that were buying loans from figure, the investors, they didn't like that first lane he locked. They were like, oh well, you know, those people must be stupid. Why are they getting a HELOC when they could get a first lien agency mortgage that's got a price way better? And I think what they missed was, well, at the loan balances we're talking about, nobody will do that loan. Right?
We talked about this already. But it's such an important point because we're doing a, we're processing a mortgage in a thousand dollars. Industry average is 12,000.
So if you take $12,000 on a hundred thousand, it's 12 points, right? And compare that to a thousand, I mean it's a huge, it may not make a difference on a million dollar, you know, jumbo, but on a hundred thousand dollar mortgage of which there's cut, right? Think about all the people that own their home free and clear. So think about all the people that are on their way to own their home free and clear that might want to take cash out, right? So there's just an enormous 40% of homeowners on their home free and clear. So there's just an enormous market here that's been totally ignored because post crisis as and post Covid, you know, with inflation and data costs rising and all the challenges to originate mortgages, it's just gotten so expensive.
And so here's figure with this thousand dollars cost to produce and that's just starting to gain market share in the first lien space in a way that makes absolute sense if you understand the levers of how things are working. But perhaps from, you know, an investor stand standpoint, they're like, well, why would anyone do this? And so I think seeing that was a really big moment for me and realizing that figure was much more than just, you know, capturing the rate environment of today, but actually bringing a really differentiated cost to produce coupled with a very liquid and deep capital market in a way that was actually quite competitive with the fanny May and Freddy Mac entities which would previously be considered almost unassailable. Right. Nobody's going to compete with them and I think we're doing that and I think that's very big.
[00:34:38] Speaker A: Yeah, it's huge. I'll give you a quote I heard today at this event that I found very interesting somebody, a former Rocket now in retail, but just talked about how Rocket has that system where they're calling retail loan officers get in their own way by making assumptions of what the consumer wants and doesn't want when making the call, letting them decide. And this product here is what he was hinting at and perfect example of just assuming a 30 year fixed is better. Let the. Maybe the consumer needs cash out for reasons you don't have to guess. Looking at an old Encompass file. Right. So you, my takeaway here is you have a tremendous gut instinct and the mortgage industry should be riding this gut instinct that came in and said these first clean helocs stand out to me. My alarms are going off. But just so everybody else understands, when you were at Sofi, that was before Softbank gave, I think it was billion dollars with a B to it. So you, you had a gut instinct to go there. I think you were at a really nice place before too. So. And then you went over to Brex while you were at a company with momentum, you had this prestige, right? I mean, of running the company.
[00:35:54] Speaker B: Yeah, I was chief revenue officer a big company, pretty young. So yeah, yeah, it was a big deal to leave it for sure.
[00:36:00] Speaker A: And now, you know, again, you're making this, this move, but within this move you're saying that your gut is saying that, that this stood out to you. So can you just talk about gut instincts and maybe what your lessons would be so we can learn from somebody that seems to be on fire with gut instinct lately?
[00:36:17] Speaker B: Yeah, well, knock on wood there.
So, you know, I don't want to jinx anything. I think, I think it's, there's this phrase about kind of evaluating things from first principles which know, it's a popular phrase that people say, but it's, it's, it's kind of trying to think logically about what you see and not necessarily assuming, you know, conventional wisdom is accurate. And I think just going back to even my decision to, to go to Sofi, I remember thinking, well, you know, why, why, why can't you refinance student loans? And if they're going to focus on this, you know, so far I was focusing on this attractive customer with, you know, that was early career professionals early in their career, you know, making decent money, graduating from school. It just seemed to me, I'm like, look, this makes a lot of sense. There was a lot of noise, a lot of fintechs at that time were trying to focus on subprime, you know, like, oh, let's do these personal loans, high rate and all this. And, and I got, I thought very simply at the time, well, you know, why not focus on a, a customer that's young, going to grow and get more affluent over time like that. That seems to make a lot of sense to me. And so I've really tried to underwrite opportunities by just looking at, at the facts that are, that are on the table and as they make sense to me, rather than saying, you know, looking and saying, well, you know, what is everybody else saying about this? You know, going back to kind of my decisions to, to leave places and do things, you know, earlier and return to chaos. You know, I think you got to do what works for you. But for me what's worked is really assessing things from, you know, my own logical standpoint and trying to understand them myself versus maybe following, yeah, the conventional wisdom.
[00:38:04] Speaker A: And you have these gut instincts on new product. You're, you're at a conference right now. Is, is there anything exciting going on there with figure?
[00:38:14] Speaker B: Yeah, I'm sure, yeah, we're, I'm at the non QM conference and which is interesting because someone just, I thought this was an interesting phrase. They said, well, non QM starts by defining itself what it's not. Right. And it's like, oh, that's kind of an interesting. Exactly. Like I thought that was a very interesting point. And it's like non QM is not a great, it's not a good phrase. Right. Why would you want to start by saying, oh, well, we're not that, but we're, we're over here. Right?
That's not a great positioning. And we don't really refer to, I mean, figure is technically non agency. Right. But we don't, we don't necessarily lead with that. I think what I'm noticing here gets to kind of this concept of, of the standardization of the capital markets, which is, you know, the whole existence of, of the non agency space or the non QM space, which they're not exactly the same, but they're closely correlated, is that you have a, a world that's had to emerge where Fannie Mae and Freddie Mac have left, left off.
And at the same time though, that world is very fragmented. There's all kinds of, of manual Process. There's all kinds of third party reviews and exceptions and delegations and non delegated underwriting. And there's just like a lot of back and forth and process that because you don't have the standardization of say a du, right, A desktop underwriter or an LP loan prospector that is going to help standardize the underwriting. And you also don't have that very liquid standardized capital market on the back end. You have this kind of like complex web of activity and that generates a lot of cost.
[00:39:56] Speaker A: Right?
[00:39:57] Speaker B: There's a reason why the rates are higher for these products than, than they are in the, in the, in the conventional space. And I think that's the opportunity for Figure, right? It's to standardize and it's to bring the liquidity on the back end to this standardization which works across originators, right? All 150 of our partners and that that number is growing are doing the same process and they're originating the same collateral such that the buyers don't care, you know, which originator did that. Very similar to the liquidity and the homogeneity that you'd get with the agency process. And so I think our opportunity is to bring a lot of the positives about the agency process into this non agency world without necessarily some of the bad and the kind of older, more antiquated technologies and some of frankly the regulatory capture that you see with the agency process around things like appraisal and title.
[00:40:54] Speaker A: So let's end with. So I don't come away confused, dumbing it down for Mike Kelleher here. So figure is the marketplace and is the future where figure is competing in some ways to some of these correspondence or is the marketplace created where they should be going out and finding investors and coming into the marketplace and then figure will help distribute what their guidelines are? Is that I think it's, it's sort.
[00:41:23] Speaker B: Of in between, I guess we'd say is the existing players in the space could leverage FIGURES automation and they can use our technology as well as our capital markets on the back end to originate a more standardized say DSCR product in the non QM space or bank statement product where they'd get the same benefits of adopting a DU technology where you get that approved, eligible upfront, right? You get the will this, will this be approved or not? And then you get all the tools to make that happen and then you get the liquidity on the back end. But you own the process, you own the customer. It's your, it's sort of your, it's your Loan, it's correspondent style. We're not competing. Right. But we are providing the rails both from a origination technology perspective, but also from a secondary market perspective. And it's that integration and that you almost by definition today don't have in the non agency space because it's non agency. We're bringing that same thing just like we did in heloc, bringing that into, into non ql.
[00:42:29] Speaker A: With heloc, you had the honey and so the bees came in and you had a really interesting as, as I've said way of rolling it out so much. I said can I please can. When you go down a level, can I help or introduce it to some people?
When more of figure comes into the market, have those people grandfathered them in or will each new product be released? I don't know if you can say this, but if you, if you need a swerve, swerve. But. Or will each new product be released in that same genius marketing plan?
[00:43:01] Speaker B: Yeah, I think it's going to be similar in that, you know, whenever you're doing a marketplace, which we are, you know, building, you've got to seed at least one side of the market. You can't just declare something a marketplace and hope people show up.
So, you know, we do take that same approach to every, every product that we, that we offer.
[00:43:19] Speaker A: So thank you for coming on the show. If listeners want to hear more about you, they, they can YouTube. I mean you, you give away a lot of great secrets in your podcast over the years, but what's the best way to contact you or to absorb some of your content? Where would you like people to go listening? Sure.
[00:43:36] Speaker B: I mean, I'm pretty active on LinkedIn, so that's a good, that's a good spot or I think that's probably makes the most sense. And obviously if folks are interested in partnering with Figure, you know, we do on our website have a good opportunity to do that and I do join a lot of our sales calls to make sure I really understand the customer and, you know, get a feel for what people are looking to do.
[00:43:56] Speaker C: Thank you for joining us on this journey into the heart of mortgage innovation.
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