Episode Transcript
[00:00:00] Speaker A: Hello and welcome to the mic Dub show. This is season three, episode six. This one I am excited about. We've had a great lineup and we have another great two months coming. We have leadership, a lot of CEO's of imbs.
And then in September we have just for you, Michael Zao. We have it going to be secondary month because, and we'll get into it. But I actually predicted, and I'll tell you why later, that September was going to be the month of the cut. And it goes to show with no, you know, with throwing a dart at the wall, a little bit of gut is just as powerful as working for CNBC. But since that seems to be the month they are going to cut. And I said that back in December. And I'll tell why, remind me why later, because that seems to be the month we're going to have a lot of secondary people lined up. But we were fortunate enough and I am so excited for our guest today, Dane. But before we start, anybody who wants that's listening to us now on Live Nation, Spotify, Google Play, Apple Podcast, Amazon podcast, if you're listening to us on our YouTube station. We are one of the few shows that allows guests, longtime listeners, become first time callers and, and really comment on our live show, which is always, which it is now 02:00 p.m. eastern.
[00:01:21] Speaker B: And of course in 11:00 a.m. pacific in sunny San Diego.
[00:01:28] Speaker A: So there you go. So here we are live. You're welcome to comment. We'll be reading the comments, if any, if any come. We're always encouraging it. But today we have Dane Herring, who has one of the most fascinating backgrounds in mortgage, or we rarely actually say to a person on this show, which is very unique, like, tell us about yourself and what do you do where you come from? We usually just hit the ground running and get right into it, which is interesting. But Dane is, has an astrophysicist background, right? So I believe you're going to hear a lot of takes from somebody that very few people are. I think that's what stands out to me about that. You know, number two, he worked for Steve Jobs. So as people know, I created the mobile app space in mortgage and I worked from the borrower. Just like Steve Jobs watched all that. Right? Like borrow and work your way back to the technology.
Ended up not winning out because the real customer ended up being the loan officer, which makes this a wacky space we are in, but we're going to talk about it. He also created Dorado, which is technically at the time a fintech SaaS play one of the first of its kind, but we all know it now as really the acronym LOS. That was, if not 80%. All of the top ten lenders were on at one point. So a lot of background there that's relevant today because everybody wants to get off their los. Right? Loan officers.
Are they still the customer?
Could be, maybe not. And then just from having a unique background, is his ability to see dynamics and marketplaces.
We were having actually dinner two nights ago, and we were talking, we talked about on our show, Michael, but the nar settlement coming up here on August 17, nobody's talking about it. So I thought it would be kind of cool to ask you the question, Dane, and maybe you could take both sides, you know, the reveal what side you're on, but introduce yourself, say hello, but then clearly segue in our real how big of a thing is this nar settlement going to be to marketplaces and ecosystems?
[00:03:40] Speaker C: Yeah, and I won't talk too much about the nar settlement. I'll talk a little bit about the changes going on in the way in retail lending and even a third party lending. We'll talk about that.
[00:03:54] Speaker A: Robert. Yeah, how would I word that then? Because I guess coming up, that thing's already passed. I guess starting in August, there's certain rules that need to change. Is that a better way to say it?
[00:04:04] Speaker C: Well, I mean, the way you buy and sell things has always changed. It changes every day. The way I buy a book has changed and what forces that change are all kinds of things, right? So it could be just good luck. So. But it's, it is changing the way somebody buys a house right now and the way that is going to change. And I don't think that's probably done, but let me give you, let me give you a little bit of my background. You already kind of stole my thunder on that. But how I got it would be like, you know, sometimes I remember, you know, about five years ago, I was wondering how the heck I got here.
And I don't know. My background is astrophysics. I was working at PhD and did get the masters. And then somebody came into my office at school. I was up in the TCLA, which is in California, as you know, Michael. And this guy comes, I was just getting ready, just done and making nothing. Dollar 800 a month, I think.
This guy comes in my office. He looked like one of the Muppets with the guy. He plays with Beaker on the Muppets, and the scientist comes in with the glasses on. We talk a little about it. He says, would you like a job? I said, and he hands me a number. And I took the job. And without even, that was the only conversation I had. And then through a series of events, I ended up in Washington, DC and in the saving western civilization. I was in the spy satellite community, which back then I couldn't even tell my then wife the acronym of where I was, but it was, now you can buy a coffee mug there. It's called the NRO, national Reconnaissance Organization who supplies all the spy data spied. And now to be a spy, you want to go spaceborn to be a good spy. And back then, back then when I was doing it was tenement square. We were watching and I couldn't really talk about it, but seeing, you know, if you go, if you, you went in.
So you had to get all these clearances. It took about a year to get the clearances. And, and they have to take lie detector tests. And the lie detector test. They're looking for two different, there are two different types of lie detector tests. I'm getting off on a tangent here, so bring me back in. But one is what they call just, you know, are you a communist? Back then, light, et cetera, test. And one is what they call a lifestyle. And what they're doing on the lifestyle is looking for any way to that you could get blackmailed. So the idea is, so they ask you questions like, you know, have you ever stolen anything? You're hooked up to these wires right on the sky, and this is between you and your career. You waited all year to get this and said, well, no, I don't steal. Well, you've never taken a hanger out of the, or a towel out of a hotel? Well, you know, that's true. I have done that. You know, I took a couple hangers by mistake and I did take a towel. And he says, so you're telling me right now that you just lied to me, a government official? Well, I guess I just did. Well, you did. And then he goes, so you have to, you take, you eat. Oh, I still your hours on a little car in front of your door of your office. And he says he knows exactly what to ask. He says, have you ever put the wrong hours on? Have you ever left early from work? He says, no, I work a full 8 hours, if not more. I work a lot. And he says, you never left early, maybe to go to your daughters? Well, I did lean early to go to my daughters birthday party, but I came all the more early the next day was right down that day. I wrote down 8 hours. So you falsified a government contract? Is that what you did? And that's it. Just kept on going. Pretty soon you're crying, right, just to get into this thing and. And they keep on looking. You know, it's not like. Are you lying? They're looking for. Well they're trying to get you to. How can somebody, like I said, blackmail you? They're not looking for a friend of you. They're looking for an enemy. Somebody who can give you some room, somebody you can give them back. Then I think it might be still true that if you say you and your wife are going to marriage council, you're done. You're out of the picture on that. So it's very interesting then. And so I got into there and then we were building. There was 3000 people over there. The Internet was just getting out the web. And most people were just using their PCs on their desktops to do email back and forth. And they wanted to do something better. They wanted to share data all over the world. And so we put together the first, very first government Internet. It was a closed Internet. We went back and forth to DARPA. We went back and forth to MIT. And then you needed a Unix box. And the only Unix box out there were HP, Sun, Microsystem. We have those names.
And then Steve got kicked out of Apple. As you remember. He started a company called next Computers. And the operating system, which is on the current Mac now, came out of CMU and it was a Unix. And thats what she needed.
A user could actually, I mean you could actually use just like the Mac. You could use this machine where you couldn't use the HPS and the suns.
You had to know what you're doing. You had to be an engineer to do that. And these people were engineers. So we bought 40,000 of those things and deployed them all over the world over this Internet. You can walk anywhere you wanted to. And there's your desktop. It just blew everybody's mind. And we were very widely successful. Deployed it a stay around. And then Steve recruited me and I end up working for him. That took me to Seal Club Valley.
[00:09:40] Speaker A: Who was the target customer. If there's only 40,000 of them, is that government or is that just really wealthy or.
[00:09:48] Speaker C: No. So we. I wasn't, because I was in a. I was a lead architect on this thing. I was very young. I couldn't even. I was. I couldn't even shave really. And I think my suit cost me about $30. You know, at Sims and when I met Steve and, but at the same time I would get. So the way it works is you get a, there is a one page security report, one page that goes, which is that day security threats. And it would go to us first selected because we wanted to, we had to prepare. And then went to the vice president, then goes to the president. And you needed to anticipate what the president might say is I want you to, by looking over, for example, timid Schweq, what's going on? We're in China. So we had to start looking at that and prepare, start knowing because it take us two or 3 hours to get the satellite over there.
So it was really national security. So the customers were freedom, democracy, that was the customer.
But everybody, I mean, and then there's obviously treaties, stuff like that. And back then also it was an act of war to take down a satellite. It was an act of war because telemetry, you couldn't encrypt it fast enough because just you're taking beam up and down to a satellite. So it was just an act of war. If you manipulated through telemetry, your adversary satellite, anybody's satellite back then. Now there's satellites all over the place, but this is back in the day. And then, so Steve came out with this next computer and it was called, he called it interpersonal computing from personal computing. So he saw the power of the wide area network and kind of capitalized that, that back then people were really using the Internet as we are right now. Like I said, I really do think we were the first commercial Internet, not commercial government Internet. And I don't think there was a commercial Internet then. So I'm very proud of that. And then, so then I worked for Steve then had a software company that got up by Eric Schmidt over at Sun Microsoft. Eric was the, he was in charge, but they just came out with Java. So again, I'm continuing this Internet life. And I went from more the architect technology side, you know, science side. I went to sales and marketing side. And there I did market development, sales development for Java that we see all over the place. And there you were trying to get into the enterprises and we saw the value of it. And so it was our job to make it ubiquitous. So again we did. And my focus was on telco and financial services. And that's how I got here because our big customers then were customers on the trading floor, plus customers.
Fannie Mae was a customer. And so we went there if anybody was a big customer or rent next computers as well, that introduced me to the market, and I saw the opportunity for using the Internet of the web to distribute.
What I saw was that everybody was taking a file folder with a lot of post it notes and moving them from desk to desk to desk. So processor does one function. I always look at credit scores. I always do this. I always do that. They take this workflow. The workflow is just somebody walking from a desk and taking another folder, walking to the desk. Over Wells Fargo, there's boxes in all the folders. So I saw the opportunity. Preston, what year is this now?
93. I want to say, okay, because I.
[00:13:29] Speaker A: Heard a big innovation back then around this time, that you're talking transformational innovation, was credit reporting. Agencies would actually have a small slope, and I won't make any slope roof jokes right now, but had a small slope, and the, they would have men or women with roller skates on. And that's how they had, that's how they became more efficient. Cause they would roller skate around and grab these credit reports quickly and be able to mail it. So I think, you know, computer innovation wasn't, wasn't the big, wasn't the big piece right around the early nineties, but you needed credit to get a loan. So continue as Mike well, you need.
[00:14:12] Speaker C: To get credit, and the credit would sell you a document. They wouldn't sell you a credit score, if you remember that, too. So you had to get the document, and the document had to be be faxed to you. It could not be a credit score like you can get right now. And they refused to do that. They refused to do anything else but give you that document because they wanted to maintain, they thought that was risk of their business model. And so they had to get over that.
I think first american or corelogic buying credit code was a big deal on that. But anyhow, so there was a lot, it was a very lot of friction of the market. The friction is still here. And that friction was mostly just paper and brick and mortar frictions. It was your classic friction. And that's when the book customers.com came out and they tried to come up with banks that were going to be just web only, et cetera. Wingspan was a bank. The banks kind of failed on that, but we were going gangbusters and more customers. But back then it was about maybe 510 percent. Just started to get customers on the Internet, putting their application on the Internet. And also what was interesting that we found was customers are more willing to share information. They like the anonymity of not being there in person to talk to a loan officer, hey, what's wrong with your credit or where this number go? Look at your big statement there. You bought too much wine, you know what I'm saying? I don't know, but so they liked that. So they liked being online. But then that application just went to a loan officer. And so we had a workboard, we had about 40% because the market was very consolidated. We had about 40% of all the transactions.
It was us and LMA, and LMA came from the brokers top, bottoms up. And we were, we had, you know, all the big name brands, which I don't have their approval to say, but we had, we had ten of the top ten.
Wow. Thats how I got here.
I cant even balance my checkbook, but I got here.
[00:16:12] Speaker A: So last year my services really introducting or introducing different vendors, and I was working with SAP, who wants to get into the Los space. And what I noticed more than anything is people in this industry right now, in this moment, would love to move Los won't speak about from where or to where, even though on the show I have no problem doing it. But for the sake of maybe getting a better answer from you, I won't mention any names. What would you recommend to a leader that's thinking of changing an Los? And how would it be different now than back then on what they should be, the reason they should be doing it, their driver, their motivation? Are they doing it just to do it? Or do you see a change coming where they should be thinking differently about their los?
[00:17:03] Speaker C: Well, I mean, there's so many things to say and I don't know, I can't see my audience right. Their eyes, I don't know which is going to work.
[00:17:12] Speaker A: I'm going to clip it up. So some great sound bites that we could send off, the leaders.
[00:17:17] Speaker C: I will say a lot of things are still the same in our space.
It's not like you're going to buy a car, not like you're going to buy a tv, where the design pattern, that particular thing you're buying is well established in the market. The concept of a loan processing system does not exist. It's something different for every single person. And so to buy something, to think you're going to buy something that is tried and true and what they call hardened, you got to be very careful. And I know about ten new low companies are starting new loan processing systems. So you got to know really what you're trying to solve and just be careful. And if I had an existing loan processing system, the first thing I do is try to try to keep that there and carve as much as I could out into other things. For example, pricing is a clear opportunity for that because pricing should be single centralized, not into a loan processing system. There's other opportunities as well, obviously. For example, most people use a loan processing system and you had to use the direct to consumer interface of that loan process. You don't have to do that anymore.
So you can cleave that off and then you can cleave off your integration layer and you can cleave off your underwriting system, your automated underwriting system. And then other things are just web services. So you're going to go get your credit scores and you get this and pretty soon it's just a small case management. And it does. What does it do? It does compliance. Those are the two things it really does. But replacing your system of record is a big deal and so you need to plan around that and it's not for the faint of heart. So the best thing to do is try to avoid replacing your system of record or gently move from one system of record to another one. That's the key. You have a system of record. What the technology on top of it, whatever the software product you're using, doesn't really matter. And then you have all these key aspects, these key services that you need to drive in. And then when you're doing that, you also need to make sure and watch me and make sure I don't overstay a particular question, but you have to watch, you have to make sure you have guaranteed delivery on some of the services you provide. For example, what happens if the credit company that you're getting your credit scores from goes down for two, three days? You're host as a business, you have to think about where's my backup? What's my backup? What are the Sla's? You got to think about, you're thinking now in terms of what are my SLA's and what is my meantime of failure for all these services. And there's a lot of services that go into making a loan. It's a very distributed process that people have tried to do inside their own firewall and it didn't work. It was just a very natural transition into what they call back then web services. But it distributed, distributed manufacturing process is really what it is.
[00:20:13] Speaker A: That's outstanding. I don't know, Mike, if you have a question.
[00:20:18] Speaker B: I did, actually. So as we're talking about the loan origination system and if the Los is the vehicle, then sometimes it's the parts that are the issues we talk about, like credit reporting or credit companies, whether it's, well, without leaving the names out, there's lots of vendors that are out there that are providing credit services to an LLS. So then does it make a difference on the vendors that you're using that are going through the Los so that maybe it's not the Los at all, maybe it's the vendors that you're using and the ancillary services that come in between. So is the problem the vendors, or is the problem the LLS the problem?
[00:21:01] Speaker C: There's a lot of problems. These lenders come from different backgrounds and some of them our dinosaurs, some of our new and up and coming right. And something that has, I'll give an example, that has nothing to do about the service they provide. But I had one very large customer that was losing, let's use the word, let's use the number, $20 million a year, just in the difference between trying to bill for that service and they couldn't get an accurate re accounting of how many services that my loan officers ask for and how many did I really order. And the number was always wrong and they couldnt reconcile that. So just even the order management of that vendor was very difficult for them and with huge business outcome independent of your manufacturing process, if that makes sense. So theres a lot of reasons to really look at your vendors. You get a vendor. I personally I would do, I would use my vendors based on what's called SLA service level agreement or really your expectation of them delivering service to you, much more than if I save $0.50 here or there. But that wouldn't matter to me. And so I lend service providers I can trust and then I have to think about where my backup, and then everything else would be a backup for that. Now, the loan processing system, where the loan processing system is going to go down is on the, the problem is going to be on scalability.
And it just bugs with a lot of these low processing systems are workflow systems that are rules driven. And those rules, I haven't seen a lot anything really new, but there is a couple new and I don't want, again, I'm not like call one app versus the other. You guys are being careful not to do the same thing. I'm not pitching anybody, but the, you know, you get to an end to your system key and then you try to look at those rules as you don't want to put too much interest, you don't want to put too much intelligence into the rules, because taking it back out when a rule changes is almost impossible. And as we know, in a highly, highly regulated market, those rules change all the time. And so you need to really think about the rules that's driving my workflow. That's, I need to go get one more document.
Conditions change all the time. So I'm looking at how those rules are maintained, and if they're maintained in just one table, it becomes very, very cumbersome. And so those are the things you look for in some of the new technology that's coming out.
[00:23:34] Speaker B: I want to reference something that you said at the beginning of the show, is that one of the, you said, what is your customer, your customers freedom?
And then a few minutes ago, you mentioned I, that maybe you're not looking at saving money, but basically, if you're an independent mortgage banker or even a mortgage broker, maybe you're not looking. Maybe you are. Especially right now, everybody's doing the best they can to reduce their expenses, but what is the freedom that they are losing when a company is willing to pay a little bit more? Maybe they don't take freedom into consideration. They're always looking at the bottom line, but not necessarily looking at the value of freedom that they're purchasing. So what do you think is the freedom that they would be looking for in security?
Not just in efficiency, but security and in the services that they have?
What are certain questions that owner of a broker or a banker should be asking themselves so they can buy that freedom for their company?
[00:24:43] Speaker C: Okay, well, I do have an answer to that.
We used to, when I entered this market a while ago, not to age me, but a while ago, we used to call them borrowers. Kind of like your brother in law who wanted a couple hundred bucks. Right? It was going to give you that money back.
Borrowers are very disparaging, and we treated them like borrowers now. And the huge thing, and anything you, anything that you're doing in business, I don't care what it is, anything now that focuses on the consumer. And if you're not consumer focused, if you're focused on your manufacturing costs, then you are 1980s dinosaur. You should not be doing this. You should not be doing business. You go to go work for government, go find a, I'm sure there's driver's license departments that could really use those type of people, but the people that are really customer focused, that want that customer to be the happiest, you cannot. There's a great vote by George Sewell. He was a Cadillac deal out here and he looked at that Cadillac, the person coming in for a $20,000 Cadillac and he looked at that customer as a million dollars over the lifespan of that customer. And he has this book called Customers to Life. Everybody should read that book because if you look at it not as a transaction, the customer, but as an annuity, no matter what, an annuity, then that's how you build your personal wealth. And it's not, it didn't matter. I'll give an example, one example from the book that I remember, and I read that book about 2030 years ago, you know, and I can still recite this story. I'm going to tell you that a customer came in, bought a Cadillac a couple, came back a couple months and said, hey, the trunk smells, open the truck. The guy, I went hunting and put some ducks in the trunk and forgot about him. So George Sewell, I mean Sewell gets his dealership, gets the things, gets new carpet in the trunk, gets the smell out of that, gives the guy back. Didnt charge him a cent. That guys buying catalogs for his mother, ships them over there, hes buying catalogs for the entire family. That guy, that 120 thousand dollars transaction and that free service that he wasnt thinking about whats the cost of the service? So it wasnt, and that turned into a million dollar annuity stream, just that one customer and that one act, not looking at the, not looking at the cost of a toothpick, but look at the profit of boxes and boxes and boxes of toothpicks I'm going to sell over time as an example.
[00:27:22] Speaker A: That's a great example too, because the process of buying a car around here, they have the commercial shop us last. You'll love us. They even trademarked it because you really don't have many options once they leave that dealership, rarely do they come back.
[00:27:39] Speaker C: Right.
[00:27:39] Speaker A: So its a full scale sale process that takes about a day because even when you buy it, they keep you in there even if you want to get out of there. So thats it. Just like lending. You know, we have all these vendors out there, but the actual process is 30, 60, 90 days. But loan officers are constantly relying say, on their CRM to give monthly updates. Not very personalized usually, except, you know, your, your data field variables maybe. I know we're getting a little bit better with CRMs, but it used to be clean your gutters, which isn't very relevant to the personal touch like you're talking about here at the dealership.
[00:28:16] Speaker C: Yeah.
[00:28:17] Speaker A: How you doing? How your kids, how's college, how's your birthday.
Do you think that's all backwards now because it is a transactional business? Do you think the vendors that are nothing familiar with the mortgage industry come in with these solutions that just dont really match what the customer as a homeowner wants for interaction from their loan officer?
[00:28:38] Speaker C: Short term, its a complex transaction. There is a huge difference. And we think about this transaction as being just a financial transaction and its not. So theres a huge difference between getting a credit card and doing this. And youre talking about two, three orders of magnitude in terms of volume. So the CRM that you need, theres only how many million in this? So theres 300. I dont know how many households? I think theres 80 million households. And how many transactions this year will be about 6 million. Right. So its just 10% of those homeowners or no, lets type in that 5% of homeowners are changing hands at any time. You dont need a very sophisticated CRM for that. What you need to do is if I think that now this is, Dane thinks this, im not going to cite a book on this, that we're going to see a change, the same change that we saw in the travel industry, the same change we saw in the car industry, and the same change that is being forced on the real estate business, real estate brokerage. We're going to see that in the buying and selling of home residential loans as well.
That means that I think that that transaction mentality is going to change to a concierge mentality and that might even possibly or will affect the way we are thinking about that transaction. Do I think about motivating my loan officer as a transaction, as my transaction funnel? And I know a lot of lenders, a lot of CEO's, and they all look at, it's all 80 20, 20% of the loan officers are doing, 80% of the business. That's it. And if you want to hurt, they all compete. And if I can get two or three of those top 20 of loan officers from my competitor, I'll bring them over here and wine and dine them and I'll get them over to my company. That goes back and forth, 20% to 80%. That's the transaction. That means that other 80% of the business they're overpaying for.
[00:30:42] Speaker A: I think people like this topic and I think the travel agent is really, really relevant, not just for borrower experience, but there's only six airlines, let's say maybe seven. Two are budget southwest. You can't get on Google, so you have to actually search Southwest, but it doesn't take very long to know the landscape of how to know all the prices. And then you can go and try and get overlay vip experiences from Expedia, just like in lending.
And Jeremy Potter talked about it. Does it go to three layers? Jumbo Lending, Fannie Freddie, which is those airlines. Right. And do you necessarily need a person like a travel agent to do the airlines or do Fannie Freddie? And then down here, you have unique niche products.
Can you, can you talk about when this first happened back in the travel agent days and Expedia first came out? Do you think the travel agents could have done anything leading up to it to prevent people from shopping the way they do? Or do you think it was just an industry that was destined to be disrupted by what I just described?
[00:31:50] Speaker C: Well, and I want to make sure everybody knows as listening, I'm not that old that this happened in my lifetime, in my adult lifetime, when I can afford an airline ticket. And you did go through a travel agent, and you got a number, and that number was usually an even number or not an even number, but it was a round number. You didn't know what they airline ticket actually cost, and you certainly didn't know what that travel agent was getting making on that, and you didn't even know if it was the most efficient way to get there. All you know is you got a ticket, and if you lost that ticket, you, then you started to cry and get another ticket or whatever. It's all paper based. So that. And what happens is the travel agents understood their power on that, and they tried to come up with their own automated system that they would all reside on. The travel agent system was called tedx. I forgot the name of it. And I. So the travel agents were already intermediating the airlines, and the airlines saw the risk of them consolidating, unionizing, if you will, on the same platform that the airlines would be commoditized.
They came up with their own system, and the airlines put in hundreds and hundreds of millions of dollars each, and they all came up with saber. And sabre was that reservation system still in there today? And they call that a global distribution system, which is kind of what we use here. So you can get a ticket anywhere, and you could also, it also manages the compensation anywhere.
And then, so then that's going on. But now Saber became itself that the, you know, the became the monster, because now they're getting dismediated, I should say, by saber itself. So Saber comes out with Orbitz, comes up with this. And I, theyre getting, once again, theyre at risk of getting commoditized. And so this just happened. And this was just the Wall Street Journal say in the last 510 years where they competed against. So Sabre was competing against American Airlines because they didnt like the ability for you to go directly to American Airlines and get a ticket, understand what the cost was. And so they were competing against each other. And American Airlines basically broke the union, if you will, and now you can go directly. Why did American Airlines really what they wanted to do that one, they wanted to have a better experience for the customer. Great. And they wanted not to get it intermediate, but they also wanted to have control of that consumer experience because they wanted to upsell other things, things like its going to cost you luggage or things will get you. Would you like a hotel? He wanted to go up market, and that's why they won.
And then the technology itself, with the Internet and your access to information, that changed at the same time. So now everybody goes online to these sites and best executes themselves for when do they want to get there, how many legs they're willing to do, and do they have violence, et cetera. So the airlines can go up, mark, in terms of the things they can provide or look at virgin airlines, say they can give you a better experience so they can give you better mileage, et cetera. Alaskan Airlines. And unless the travel agents, the one that the few travel agents that are making money went to that concierge service, they either do it for large enterprises. I got all your travel. Don't worry about it. I got it. It's a different number per transaction. But they're making money over the long haul, a lot more money. Or the concierge. Hey, I'm going on a wonderful vacation. I want to go take my wife to and my family down the nile. Okay, I got. That's not easy for everybody. I got this. I'll go through that. And they get, it's not necessarily commission based. It's like, it's the same problem you have when you get an interior designer. I don't know what the price of the furniture costs. The interior designer tells me something. I know they bought it wholesale.
That is a dinosaur model that's going away. And it's going away. It's got to go. It has to go away. In our market, there's too much. There has been an asymmetry of information, meaning the person buying the house has no idea about. They just want the house. It's an emotional deal for them. It's the only biggest purchase they'll ever make. It's how they're going to build their wealth, and they don't care about these things and they can't do it. You see the same thing in healthcare. Well, that asymmetry of information is going away. The consumer is getting much more information, and there's a lot of regulations even push more than information forward to the consumer. And so that's going to get very, very hard. So that transparency is going to create some changes in the way we buy it. We sell loans, and the way we sell and buy houses is changing as we look at it this summer. And so then the relationship between that loan officer and the buyer side realtor is certainly going to get stressed. I mean, that's not going to be a go to way to get your leads for your applications. You're going to have to assume that they're going to come online or the company you're working for is going to get leads some other way.
[00:37:00] Speaker A: Yeah. Your analogy the other night at dinner about healthcare was eye opening to me. Because nobody asks the MRI price or because once you just think about your deductible and if it's over, the deductible, don't even look at it. Mail me something later. Never ask. Sounds insane, but it's what all of us do. Same thing for buyers. They really didn't ask. Like, okay, as long as the seller's gonna. Everybody else that's bidding on it's doing this way. Sure, Tom, I'll sign it. Sure, Dane, I'll sign it. Now, I think what you're going to see is two things. One, I think consumers went to go see 15 homes because, and I didn't mean to interrupt you, Mike. One, I think what's not talked about enough, my take is you just got a raise, or you just got that new job where you went from making 80 grand to now you're making $140,000. You are so proud of that. You go down and you get qualified. You are actually going to in your. And your real estate agent doesn't charge you anything more to go see houses you want to show your wife, like or opposite wife shows the husband. You know, look, we're going to go see all 15 houses because I can. You're not saying it out loud, but it's like, because I can afford it now. I worked hard. I got that raise. Now something as little as. Oh, honey. Each showing $75. Plus we need babysitters.
Why don't we go on and then it's going to be, do we go on remax or do we go on Zillow, which is even more disruption. Why don't we go on there and just, why don't we see three today? Because if I'm paying, that's 150, especially if you can't roll it in. And they pull up in the car and they say, all right, do you want to go see five? And you're like, yeah. And they're like, okay, that'll be $425. And you're like, actually, why don't we start with two? Right. And so I think they're going to see a lot in the sales world, you know, this Michael Zao, I'll segue to you to ask a question to Dane on what I just said, but they're going to get ghosted, more like, yeah, sounds, I definitely want to work with you, Mike. I'll call you tomorrow because youre asking me, can you just write a check for, its usually eight grand, 2000 now. And if the seller doesnt pay it, you could pay me the six grand before closing. Yeah, sounds great. Just let me check with my wife and well definitely do it tomorrow. And then youll just never hear from me for a couple of weeks and ill say, oh, yeah, I got busy. That is going to happen in a month because that happens in every sale. That requires somebody to pull out an actual checkbook, I guess. What would your question to deign beyond what I just said?
[00:39:33] Speaker B: I was thinking more along the lines of, right now the mortgage industry has commoditized itself due to price. One thing I appreciate, I remember the sabre system actually in the late eighties. That age is me.
But I mean, in the airline industry, in the travel industry, you have first class, business class, and then coach. But the mortgage industry has commoditized itself to where everybody gets, where everybody's supposed to get first class service while paying for coach prices.
But yet there's originators out there. Hey, maybe one originator knows more about taxes and financial services and they're better and they're more of a concierge originator. And maybe you can do it through an LLS. Maybe you're not able to do it through an LLS. I don't know. But I think that we really, as an industry, shot ourselves in the foot, right? It really should be, hey, if you want to close a loan in seven days, you should pay more for that. And you get all this concierge service and you do this, but it's more of like, hey, I'll get you the lowest price and I'll close in seven days. And we, it's like, that's right.
[00:40:42] Speaker C: You kind of screwed up.
[00:40:43] Speaker B: Yeah. I was like, wait a second. I mean, why, why are we doing this to ourselves? We're, you know, we're sending our processors and our doctors and our underwriters to rush, rush, rush, rush, rush.
And we're taxing our systems more and more and more. Dane, I mean, you're getting a PhD in philosophy, and I know that, or at least I think that you're able to see what the force through the trees. I mean, is there something we can do as an industry? Instead of reducing our profitability and providing better services? Why aren't we able to, and this is more philosophical question, why are we actually able to charge for the time and the energy and that service instead of just saying we're going to get it done and lose money at the same time? It's just so weird to me. Um, but, yeah, you know, if the airline system is able to do that, why isn't the mortgage industry able to do that? I'm, that, that's kind of rhetorical, but yet asking you at the same time, no, it's good.
[00:41:44] Speaker C: It's good. And you said philosophy. I'm going to bring up a, he's kind of a philosopher. He said he studied a lot of philosophy and also psychology. And his name was Joseph Campbell. And he said, and he said that all the religions, he was a PhD in this stuff. And Joseph Campbell said, he said, it's not about finding the meaning of life, it's about finding life with meaning.
And that is what I'm saying is, what is your reason to be there and doing what you're doing? If you're just a transaction cog, then, yeah, you should be.
If you're just a voice, then you should be worried about, aih, if you're just doing the manufacturing process. Yeah, I guess the steam engine should have, that would have been very worrisome. And now we're going on, it's going to be the customers and customers with a very short, with a lot of opportunities to go elsewhere and a very short attention span. And these are the same customers that buy McDonald's through Uber eats. Right. Because they don't want to even leave the living room. So these customers don't want to even deal with the transaction. They don't even want to go to the restaurant. They want it to come to them. And so these customers are really learned on customer service and will pay for that. A burger, getting it over Uber Eats is a lot more expensive than going out to mcdonalds. Right. And youve got to use that model to say okay, what is my meaning? What am I doing? What value do I provide and then go from there?
Yeah, it's not just problem loan, it's just as, oh, here's a problem. A borrower or a consumer that maybe has bad credit score and I'm very good at that. I mean look at the success of the hispanic real NHR epic. Excuse me, it was on my tongue. And because they provide a value, they provide a different value. They provide a value that you and I can't touch. I don't speak fluent in Spanish and even then, and im not saying thats just the one way to go, but what am I doing here? They dont just speak the language but theyre building a trust with somebody who maybe doesnt trust the businesses that theyd have to do business with. Theyre probably underbanked. Theyre probably caught a lot of reasons why theyre not trusting this transaction yet. If we get them into a home, so many great things are going to happen. Theyd be better citizens, all this stuff. So these guys provide real value and that's just on the real estate side. Okay, so now we talk about the lenders. Well it is commoditized as we spend but it's been, the distribution is very hard. I used to go to a credit union to get a home loan. Right. Yet you didn't even care. It's just there's u loaded credit union and not that many people at house. It was this is all post World War Two stuff. Fannie Mae, Ferdie Beck came up and so now it did become for a very good reason, it became commoditized because this is the number one mechanism for people to build wealth. Unless you can play the market, just put your money in there and get Internet fund, you're going to make five, 7%. You can buy a house, buy property and that's going to appreciate, you might have bad times, you might have good times, but over general your property is going to appreciate five to 7% a year on year, just your property. And if you buy it low, then you're very, what do you call it?
You're very leveraged on your investment on the property. So it's a great opportunity for people to build wealth and it's a great opportunity for communities because people own their little more responsible than I was when I was 20 years old.
[00:45:27] Speaker B: And so yeah, I'm asking you a chicken and the egg question. Joseph Campbell was a direct influence to George Lucas when he was getting ready to produce Star wars. And so using a chicken and the egg question here, who's the good guy? Who's the bad guy? Is it the customer that's the bad guy? Or is the customer the good guy? Or is perception the reality? In other words, the perception of the banker broker or the consumer borrower?
Which one is which? Using that as chicken and the egg scenario, in your opinion?
[00:46:02] Speaker C: Well, my personal opinion then maybe. I don't know if I'm answering your question, but I think that if I had, you know, as a family of four and, and you know, my kids, I had to put food on the table for my kids and, and only sitting on a little track house and I had to go make money. And so the person who had that money that I need to go make it from is the hero to me because I can provide some value to that person who has money and I can take that money and then buy some food for my kids. That's what I look at personally. So now I cant. You're talking about what is the. Right now. I think you were talking about a multi trillion. I mean I just saw that Mister Cooper has $1.5 trillion on the books right now. Yeah. So thats a lot of money. Theres not enough money. If we just had to lend from banks, theres not enough money in those banks to actually do that. Right. So the fact that we can go buy houses and have trillions of dollars in liquidity, those people who are providing liquidity are not the boogeyman. They're not the bad guys. They're providing liquidity. Right. And the consumers are not the bad guys. The friction, the problem is there's a lot of friction in the market. And I think the people who are getting paid and want to keep that friction there are probably the boogeyman. Are probably the ones that are the, if there has to be a white hat and a black hat, well that's probably the black hat or the bad guys. You know that I use this western movie analogy, but you know what I'm saying, that it's those people that are holding on to what they've done and they're going to prevent market transformation.
That is the big sucking noise for that market transformation is coming from the consumers and from those folks who want to provide the liquidity. Then I think those are the ones I would target and say you got to change. Thats not the way its going to be. And its getting, it had to get forced in the real estate market. When I say real estate market, real estate brokerage market, it had to get forced and hopefully it doesnt have to get forced in our market. We can change ourselves. This market is a great market.
Its providing a real. Theres Rick Graham. I know Rick, excuse me.
And you're right. New tools came out but they went away because the new tools were built by the airline industry. And here's what you see that we talked about healthcare. I think Michael brought it up well. The insurance company did exactly what the travel agents were trying to do. They intermediated between the healthcare providers and the consumer. Back when I went to the doctors when I was a kid, my mom just paid the doctor out of pocket. That was cash. You don't do that anymore. You pay the insurance company. I wonder if you added all the money you paid for insurance or your company you paid for insurance money could go to you as compensation over a lifespan and how much money that the medical service provider got, all of them combined. I think obviously there'd be a big gap between that and that gap is the money wasted because they got intermediated.
Michael and I over dinner thought about how many people are getting a commission on just the sell of a house real estate realtor of course, and that the loan broker. But those are the person who sells title. The person who sells mortgage insurance keeps on going. The person who's trading makes a commission on that loan pool. It just keeps on going. There's a lot of commissions being based on.
[00:49:50] Speaker A: There is. And that bubble I think somebody looked at and said just as the price of homes keep rising. We got one final question with a nice segue for you dane, to thank you for coming on here.
Rick Grant wrote travel agents disappeared because new tools did a better job of serving buyers halfway or more through the buyers journey. Agents and brokers work at the end of their typical consumers home buying journey. Risky. How can they move their efforts to earlier in the journey?
[00:50:23] Speaker C: Can they?
[00:50:24] Speaker A: And while you're thinking of this answer, I just came from the AI summit and the biggest takeaway, one of the biggest takeaways I heard from the UWM CIO, Jason, who was unbelievable, is now is the time to start over with your data. You have just bad data in, bad data out years of data. Clean it up like now is the time to clean up the a. There's AI out there. I say that because it's very consumer journey top of funnel relevant.
Can you answer this question while saying why bringing in a group like you and other CIO's might be a better way to tackle these big elephants. Just picking a vendor and hoping they will solve something that hasn't been solved yet.
[00:51:05] Speaker C: Yeah. If I had a little boutique store in a strip mall, and I was selling baby clothes, infant clothes, and I was selling those clothes, baby clothes and making whatever $200,000 a year in my hole, and I had employees, I would sell construction loans or residential construction loans or even mortgages. And the reason I would do that is because that's a life event change and because somebody is coming in because they're having a baby and they're trying to, or somebody that they know is going to have a baby. Usually those people have to buy a new wholesale or home or put a, do a remodel for another room on there. And I would look at that transaction just like George Sewell would, and I would find opportunities to concierge around those big lifestyle events, life changing events, those life events. That's where all the marketing is going right now. And you can do that yourself. So I think brokers, again, what are you doing here? If you're helping these consumers out, then you're helping them out with what is that consumer buying baby clothes. Want. They want to have a baby. They just need more room. They just need all, they need formula, they need all these other things. All they really care about is the loving, the loving and care for this child that's coming into their life. That's all they care about. Help them with that. Help them with that. That's what I say.
[00:52:24] Speaker A: Evan, thank you, Dane, we appreciate you coming on. Any final thoughts? Mike?
[00:52:29] Speaker B: I actually have other questions, but we can go on an hour if I start asking because they're going to go deep.
Maybe another time.
[00:52:36] Speaker C: We'll do another time.
[00:52:37] Speaker A: Www. Mic upshow.com to send this to your friends to listen. If you're watching on video, forward it to somebody. It's definitely great. And if you follow us on anything that sounds like Spotify or Google YouTube, please subscribe. Really helps us get more sponsors so we can bring on more amazing guests and show them why this is the number one weekly show where the audience can participate. And with that said, thank you, Rick Grant, for that question. And see you guys next Sunday on the podcast drop. And for those live Thursday at 02:00.
[00:53:13] Speaker B: P.M. eastern and of course at 11:00 a.m. pacific. Thank you, Danehorn.
