In this episode of Lykken on Lending, David Lykken welcomes back Pavan Agarwal, CEO of Sun West Mortgage and creator of Angel AI, for an exciting conversation about the future of mortgage servicing. They dive into how cutting-edge AI technology is dramatically lowering servicing costs — down to as little as $4 per loan — while restoring true borrower partnership and care. By combining a revolutionary AI-driven servicing platform with a deep-rooted culture of compassion, Sun West is not only slashing operational expenses but also redefining what it means to serve homeowners, especially during life’s toughest moments. Get ready to hear about a new era where technology and heart go hand in hand to transform the mortgage experience.
[David] Listeners, you hear me talk about Angel AI and Pavan, and what he’s doing there and there’s now another development that is a kid so exciting. I don’t understand how he could do all that he’s doing, but he’s accomplishing things that is just seems super human. So Pavan good to have you back on the podcast.
[Pavan] I wouldn’t say superhuman. I would call it super machine intelligence.
[David] Machine. Yeah, that’s a good way to put it. What’s the powerful about? Are using the tools you have, it makes us seem like we’re superhuman. It gives you this superhuman ability to perform. But you have been doing this for a long time, and is what is so powerful about this is all experience. So, I’m here to with Pavan today listeners, and we talk about originations. Angel l AI is mostly focused on the, let’s get a loan created and how the parts of the journey, it automates the entire process on that and then if you run into credit problems, you’ve heard us talk about that listeners, and we’ll put links to all those previous interviews in this interview. So, when you go to our website, you can see all if you haven’t heard those, you’re gonna be able to go back and listen to those. We talk about Angel Twin, we talked about that. Today we’re gonna talk about the most boring part of the industry. Servicing, the collecting and distribution of payments of the borrower’s payments and it is one of those things that has since typically been such a thin margin and Pavan, you’re here to talk about what you’ve done in servicing. Can’t cut off for us. It’s amazing.
[Pavan] Yeah. Super exciting. It’s been, actually, we rolled out our first servicing system back in 2004. That was the reverse servicing system, and so we built it from scratch for reverse mortgages. And then in 2006, 2007, we worked with Ginnie Mae and we defined the Ginnie Mae reverse servicing standard. And I think we were the first reverse servicing system Ginnie Mae approved and on that then we had hundreds of thousands of loans on our platform. We were the servicer or the master servicer for Bank of America, Wells Fargo, Generations, Financial Freedom so just across the board because the system was so fast and efficient. So, about two years ago, I think maybe three years ago, we started a project and we said, you know what? Let’s just finish off what we started 20 years ago and let’s roll in forward, let’s expand it for forward mortgage servicing.
[David] And when you say forward, you’re talking about Fannie, Freddie and the convention GSC type products.
[Pavan] Yeah, basically Fannie, Freddie, Ginnie, all the Non QM, Helocs, just every kind of product you could imagine, it can service now. So at this point and then as we built it, we also integrated it with Angel AI. So, now it’s a full AI servicing system. So we took the backbone that we had already built from our reverse days and expanded it and integrated with Angel AI. So, now it’s the full end-to-end AI system for loan servicing and so we’re probably the only servicer out there now that got the complete end-to-end servicing system and it is fully AI and it’s free of Black Knight. So, that means, we’re not paying these obnoxious fees. It runs on standard cloud services. Okay. So massively scalable and, it’s just and it does every product you can imagine and the best part about it is by writing our own servicing system, we can deliver our culture. Our culture of protecting borrowers, our culture of making sure that they’re helped and supported in the toughest times. Servicers are not there for the good time, and most servicers think that way. Most servicers think that, oh yeah, as long as the payments are coming in, I’m making my fee and I’m happy. No, that’s not what you’re paid for. You’re paid for the bad times, when customers run into trouble when they lose their job or have a medical problem and so forth. That’s what you’re paid for. So, all of those to work for them. All the good times where you make, where you get a fee for basically doing nothing other than depositing a check. That’s an advanced payment. So you’re there to help them. In, in the hard times. Like yesterday, I got off the call with a wonderful lady. A single mom who bought her first home with us, five years ago, six years ago. And her business ran in trouble. She’s interior designer. She ran into, it was a downturn. Recently she ran in trouble and our reps worked with her and help resolve it, and now she’s current again. Now she’s making money again, and her house is safe and she doesn’t have to move her kids again. That’s, that’s what it’s about. But it takes a lot of communication. A lot. She said that when she got a call from our rep, she wanted to answer that phone. She said she saw Sun West on the caller ID. She didn’t feel ashamed to answer the phone. She didn’t feel scared like they’re gonna beat me up on my payment. She said, okay, this is a helping voice that’s gonna that’s, here’s gonna…
[David] Instead of a harassing voice. Pavan, can I just stop there for a minute because I wanna honor your dad. This culture that you talked about. Is something your dad brought from India in, when he started Sunwest Mortgage and he wanted to make sure that you did things in a way that was benefiting the consumer and like you said, consumers, it’s great when everything just works, but how many times in life does life show up? When you and I were recently together in Las Vegas and we were celebrating another one of your launches, which we’ll get at, we talked about in the past, but you brought in an individual, a doctor, a psychologist, if I recall correctly. Who had run into a problem and he had ran into a servicing problem and he was terrified to talk to you because his experience and previous experience has been just like anyone else. But when he talked, because of the culture and the training you put into your servicing agents, they said no, don’t worry. We’re here to help you and he almost couldn’t believe what he was hearing and it. It restored his faith in our financial, in your financial system. The way you go about it though, that’s a story listeners, I can’t wait to share with you. As soon as it’s edited and it’s one of those ones, it’ll bring you to tears and it should be the gold standard. This should set now the gold standard and I know you were, Hari is his dad’s name, Hari Agarwal. And I just loved the man. He was a great mentor to me and I applaud him. And I wanna put that word in here because it’s really your dad’s vision that you’ve picked up on and now you’re championing and it’s every much part of your DNA as it was your dad’s. And I just think it’s so important we celebrate that because we go what’s the origin of this? Who started this? Are you really serious? You really, and aren’t you here to make money? Yes, but it’s how we go about it.
[Pavan] Making money should have a purpose, if you make money just the sake of money you might make it, you might make a lot of it, but you won’t go to keep it.
[David] That’s really great point.
[Pavan] It’s gonna, it’s gonna go away, right? But if you make money to complete a loop, right? and that’s what capitalism is gonna be about, is to complete this, complete the cycle, right? and that means you make money and then you reinvest it back in your community and that completes the cycle and if you make money and you don’t reinvest it and you try to stockpile it away, it’s just, you’ll see the, it’s like trying to hold onto a, to a fist full of water, right?
[David] Yep. Yeah. Yep. How does that work? Yeah.
[Pavan] The tighter you grip your fist the more the water escapes. It’s the same thing with money.
[David] Yeah. So let’s get back to the servicing system, another great feature, and it’s been a very, it’s an arduous process, highly regulated. Very much of a fraught with problem, with human error can get involved in this. How someone’s talking to a consumer, how, and especially when they’re in a potential default situation, how you talk to someone and how you treat them can bring about 80% of all CFBs complaints are in the area of servicing. 80%. Talk about how you have addressed that. How is it that you’ve solved that?
[Pavan] I it’s all about culture and it’s all about approach, right? And if you treat your servicing fee as an investment, as a down payment for the relationship, ultimately, I don’t know of any person in my life, rich or poor or whatever, any across the spectrum who has not had. A major hit, major challenge in their life. That’s some form or the other. So it is just the way it is, right? So everybody’s gonna have a challenge one day and when you have that challenge, is your partner gonna be there to support you or is your partner gonna be pounding the table, pounding a fist on the table saying, where’s my money?
[David] I want to capitalize that. ’cause what you’re really talking about is partnership. There’s many partnerships in our lives. We have our life partner, your spouse, you have your financial partners. In this case, the most important investment most everyone has is their home and so it really matters to whom you get the loan from. And you have aggressive rates, great programs there at SunWest and by the way, this is not a SunWest product. This is a product that the loan servicing can be used. By anyone, whether they have their loan serviced at Sunwest or not. But what you do have is all these products and services and it’s a partner. It’s so important listener that you emphasize your unique difference about your company is how you partner. So listen to this whole discussion about partnership because it is such a key to Pavan’s success and where he is gotten to where he is at today. Continue on about the partnership. I just wanna underscore that and emphasize that Pavan.
[Pavan] Sure. My favorite saying is that a bank in need is a bank indeed. And everyone will have a time when they need support from the bank. And it’s always easy, the famous saying is, Hey, banks are always willing to lend you money when you don’t need it. So, that’s not a real bank and yes. You have to qualify to get a mortgage and we lend you money and now we’re with you for the next 30 years. Okay and there will, we know. I feel like it’s just a mindset, like when we know that, we’re servicing that loan for life. We know there’s gonna be a time when you’re gonna need help. It’s inevitable. Something or the other. It’s just life, like I said, I don’t know if anyone’s that had a flawless perfect life. No sustain, right? No sustain. Exactly. Her balls come at you, right?, so as a corporation when that’s part of your DNA and you understand that’s how life is and that’s why people pay you the fees, right? and most people don’t even understand that they’re paying a fee to the servicer, right? Because it’s kind embedded in the coupon and that’s the other challenge in this business is I think that should be made crystal clear upfront, right? That why don’t consumers know what they’re paying, that they’re paying this? I think it should be, I think if there’s any regulation that should come out that should be that, Hey, your server should not paid X, Y, Z, X amount this month.
[David] Yeah, I mean for full disclosure, so it has a chance to Yeah, that’s a great idea actually. Yeah. Consumers don’t know that. That will be met with resistance though. How many disclose that level of transparency, right? That’s what a real partner does. This is what I’m getting and this is why we are here and that, but if you frame it up in the concept of, in the, in on the culture, the concept of a culture where you are here to help them, no one has problem when you’re making money when you have my interest in at heart.
[Pavan] Exactly. Exactly right. So we can go down the rabbit hole of what those disclosures can look like, but I think we should be part of the monthly state, right? Yeah. This is what we got. This is what we paid. This is what we paid upfront. This is how it amortizing down and this is what essentially, you worth to, and that’s it and I think if that’s upfront, then people say, Hey, I’m paying money for the service. I expect I demand service. Yeah, exactly right. That’s probably the simplest, you could probably get rid of all the other regulations and on servicing and just simply put that, put transparency and then you’ll automatically get the behavior that, that the government wants from, its, from its private partners.
[David]Treat people how you wanna be treated. It’s like the golden rule. It is just so important. And all things roll into just one thing. How to treat people, respect them, care about them. It’s really a powerful tool. Let’s get to the cost because one of the big advantages you have is not only do you do it in excellence, you have a culture where you’re helping consumers and they value that and how you go about that and there’s some great stories we could go on and on about those stories that’ll literally bring out Kleenex boxes because. I love these stories of what you’ve done to help people. They have tears in their eyes because of as they tell the story because of that. So that’s what your dad instilled in you. You’ve instilled it in the entire company. Every customer service representative in your company is been trained with this culture, but then it comes down to we gotta run a business Pavan. So, you have done this and then the most important thing is it allows you to slash the cost of servicing. Are you bold enough to do the mic drop moment where you say what it costs to service?
[Pavan] Yeah. We’re relatively a small servicing portfolio. I think we have 70, 80,000 loans, something like that. And I wish we had, if I had, I sold two blocks a long time ago for misguided reasons and if there was ever trades that I could unwind. If I could unwind, I would unwind those two trades and if I hadn’t sold those, we’d be, a few hundred thousand month wow. We’d be servicing. But that’s okay. The past. But my the lesson there is the two things in life you should never sell if one is servicing and second is real estate. Which one is the derivative of the other. Because now we control the tech and the tech is so highly automated for a small servicer like us, we’re able to get the cost per loan down to $4 a loan per month. And I think when it’s, that’s like clearing.
[David] It’s you have to scratch your ears and clear that out and have you say that again because that’s unbelievable.
[Pavan] Yeah. Yeah. $4 a loan per month and I think when it’s all said and done and as we get our customers integrated into the AI and the app, we get a lot of demand from our customers who want to use the app. We’re insisting on the app and insisting on interact, getting everything done through, through Angel AI and as we roll that out and make that ubiquitous in our portfolio, I think we’re gonna get down in the three year sub three because we’re steadily seeing the inbound, the influx the biggest cost of servicing is other than, than loss mitigation and home retention because cost is customer service. So if people can self fulfill customer service by chatting with the AI Okay and get immediate answers to everything that they need. Then your cost dramatically dropped. So we’re at $4 today and so I’ll tell you a little history about this, about the system. The system was actually finished a year ago. It’s been over years since it was the coding and completed. So, for the past 12 months, we’ve been running it parallel with our old system and running parallel month end and double checking everything and also it’s taken. And then we submitted, seven months ago, eight months ago, we submitted to the agency’s approval to change systems. It’s taken that long to go through the Agency of review process. They have to do their testing and verification.
[David] That’s arduous process. Yes.
[Pavan] Yeah. So it’s taken a year to, to get to the point of where we can actually switch over. We switched over all the private investors and Freddie Mac this month in May. We’re switching over Fanny and June, we’re switching over Ginnie. So by June 1st, the whole portfolio was just over to ai entire portfolio the AI system. And then I and I and we’re already seeing the effects of lower cost on the on the portfolios that we have switched and I believe once this all switched over and we’re able to train, educate our customers on using the AI and I believe we’ll be down in the three, maybe sub three by the end of the year.
[David] Wow. Extraordinary. Because there’s no one else even close to that, right? Yeah. Multiple’s higher. Multiple’s higher, yeah. Know. So that be, yeah.
[Pavan] If you think about the, the technology cost black Knight Advisor, I the cost, I think their cost a loan. I’m not expert on this. You probably know what than I do, but I think their cost alone is like three bucks a month, something like that. Yeah. And in our case, our technology cost is that, it’s just, it’s on the Amazon cloud along with the rest of our servers and it’s so inexpensive to have big systems on, on, on the cloud and like cost is pennies per load. And then our engineering team is, I don’t see, I could even if I factor the cost from engineering team in. It would be probably add another 50 cents to loan, something like that. It’s even that much. But you can’t because that’s a capital investment. It’s not a cost because the in because engineering team creates intellectual property that you own for forever and that you can leverage and make more money with. So, owning your own intellectual property is a huge asset.
[David] I wanna get this to the lenders that are out there, to those that are mortgage bankers that have a servicing portfolio, they say, oh, that’s all good for them. Why are you bringing this to our attention Lykken? It’s just to torture us that, Sunwest has a huge advantage. But this goes to another principle that you operate by Pavan. You’re not just doing this for yourself and for your own company. Angel AI, the origination system is made available to the industry for free. Now you can’t make service this servicing system available for free. However you can make it available to other mortgage lenders and how do people reach out to you to start saying, I’m not believing what you’re saying, but it’s compelling enough for me to at least have a conversation with you, Pavan is this number one, can this be done used by lenders who are servicing their own portfolio on their, on behalf of Fannie, Freddie, and Ginnie and the others and the other investors? Can they do that with you?
[Pavan] Yeah, so we do offer subs servicing.
[David] So, that’s a subs serviceing role which appropriate, right?
[Pavan] Yeah. We do offer subs servicing, and we have a couple of small banks, couple hundred million dollars that we’re subs servicing for other banks right now. And after the system rollout is complete, then we are looking to do both number one of servicing by servicing. And number two to offer sub servicing.
[David] Yeah. Good. Good. So this is gonna be available to the industry? For them to use it just like they were using, working with one of the many other sub servicers that are out there, now they can work with your company and subservice it. Outstanding. Amazing. $4 per loan servicing costs. That is extraordinary.
[Pavan] Yeah and the thing is that, the way the tech works, it creates a high degree of comfort with the customer and attachment and engagement. So I’ll give you because especially now with this new tech that we rolled out, probably Angel Twin. So I’ll give you an example. Literally this happened day before yesterday for one of our loan originators. His customer was a home buyer. She’s 70-year-old. She’s 70 years old grandmother, and he sent her his link, his angel AI, Angel Twin link, and she talked to his twin, photorealistic twin and his voice and everything and she completed the loan application process in a few minutes. She herself on her phone, took pictures of her documents, uploaded it and mind you, that she could barely know, she barely was, had to turn on her pc. and so she, she did all of that and then she had her loan approve, approval pretty much on the spot. Right? And so she was and she was so thrilled by being able to talk to Salvador’s Twin, AI twin, right? Because she knows and trust Salvador. And then she’s talking to Salvador Twin, and it just made her so happy and engaged in the process that it didn’t feel like for her, it didn’t feel like she was doing any work. Didn’t feel like a complex, loan application process. So the conversation that Angel had that, that the conversation that Salvador’s AI Twin had with her was a brief conversation, a brief interview, about 20, 25 questions. Then asked her for some of her documents. That was it. She got a loan approval. It was that simple and then she was so excited because…
[David] 78-year-old grandma. I’m 74, so she’s got me by a few years. I just accept the fact that that so many do not have this. But it’s, you’ve made it that easy to use.
[Pavan] That’s right. Actually, correction 70, not 74.
[David] Oh, she’s not 74. She’s 70. Okay. She’s younger, right?
[Pavan] Yeah. She’s a little younger than you. The point is that she’s never, she’s heard of AI. She’s scared of AI, doesn’t even know how to turn a hundred pc, right? And she jumped on the app and got going. Salvador gave her a little initial encouragement. It’s okay. It’s gonna be right. Try it out. When she got there, she saw the amazing part was she got there. She saw Salvador’s twin talking to her, and that warmed her up right away and it became, she connected, right? It felt human and it felt easy. So, that’s the key, right? Is technology is ready for mainstream. There’s two tests for technology for, number one, can grandma use it?
[David] That’s good. Yeah. That is good.
[Pavan] And we passed that test. And second our kids, enchanted by it, right? Yes. And we passed that test because my Anthony, Anthony, he’s my partner and like his kids are the most popular in, in their school, in their junior high school because they’re the only ones that can get Angel, angel AI swag. Everybody’s chasing them. For Angel AI swag. So if the kids are engaged with it and grandma can use it, you cover the full spectrum and so what does that mean for loan servicing? So your borrowers, your customer, your loan servicing customers will be doing all of their interface with you by talking to the twin of your agent. So, they will develop a relationship with your agent’s AI twin. So stop and think about that for.
[David] And by the way, I wanna clarify for our listeners, when we’re talking about Angel AI twin, we’re talking about an avatar. But if you haven’t seen what’s going on, you need to go to Angel AI and log in and start you again. You askangel.ai and you could get your own Twin Listeners. You could get your own twin. You could start using this yourself. And so you, it’s amazing how fast it can happen. So you have your image which that’s speaking like you hear me doing, and I’ve been doing this now, I’ve been playing around with this, and it’s absolutely stunning how amazing the accurate it is. And the fact that you’re talking to a AI Avatar twin of me, is it almost drops away because the conversation is so natural.
[Pavan] Yeah, that’s right. Yeah. So, the current production release of the Angel Twin. Is a limited release, and it doesn’t it, like right now, your twin can answer some questions, but it doesn’t answer all questions. It doesn’t get into the, it doesn’t yet answer the personal questions about David Lykken. And obviously it’s careful about answering personal questions that only answer based on the data that you load, that you give it. So, the next 30 days we’ll have the full twin where. When you’re talking to David Lykken’s twin, it’s David Lykken. You won’t be able to tell the difference. The most famous twin that we’ve done so far is for mindset coach and Guru Deepak Chopra, So if you go to digitaldeepak.ai that’s one of ours and the beauty of Angel twins and as opposed to other platforms out there. And Mark Zuckerberg yesterday actually made a big statement. He said that in 2025, Facebook will have or Meta will have the technology or personalized AI for everyone. But the difference there. But the difference there between what Meta and Google and GPT are doing and what we’re doing is that yes, you also get a personal AI and number one, the difference if you got it today and you can start using it today and your customers can start engaging with you 24/7, that’s number one. It’s already here today. Now you have to wait another year or two years. But number two is that personal data that you load into Angel Twin so that it knows you and knows your personality and talks like you, that data gets stored, not in our database, but in your wallet. So, part of what comes, part of what comes with Angel Twin is the Angel Wallet. And it’s decentralized blockchain wallet. That’s where your data is stored, and it’s yours. So, data is the new gold folks. I keep, people don’t really get it. But it is more valuable than gold, oil and all the other railroad out there. And there’s a mad rush for tech companies to get that from you. Our approach is, again, also about empowering communities and giving back and ensuring longevity. Our approach is that, hey, we’re not taking your goal. We want you to hold onto your goal. We’re just gonna provide you an easy on-ramp, easy technology so you can keep your goal secure and you know it’s secure because it’s on blockchain, Blockchain already secures trillions of dollars of assets for both individuals and governments across the world. So, I think you’re gonna be safe.
[David] That is so exciting. What this Hindu, Yvonne. And we’re gonna get into that more. We’ve covered the servicing today. We’ve gotten back onto the Angel Twin. We’ve gotta really continue to make, educate our audience on this because it’s so powerful. Pavan, thanks so much for coming in today. Appreciate it
[Pavan]. Thank you, David.
[David] It’s an honor to have you and honor to be in a relationship with, I am so excited about what this is doing for our industry, but more importantly for the consumers we serve.
[Pavan] Yeah. One, if I could add one last thing. Yes. If anybody wants to try out and just see what a twin is you can talk to my own twin. I’ve got my twin out there, and you just, all you do is go to ask angel.ai/pavan. P-A-V-A-N, right? So that’s my custom link. And then you’ll be talking to my twin, right? and recently, I think last week. T imes where I can keep track. LA Last week I was in El Salvador, and I met with I met with a bank that was very interested in this technology because they’re a commercial bank and they’re about to go big in, into mortgages across El Salvador and obviously as El Salvador is a leader in blockchain and technology and banking. And in many ways they’re way ahead of the US and the rest of the world. So the bank. They’re like, Hey, we want in on this AI tech. So, I met with the board and I did, I brought up my custom link live, on their computer, on their screen. And we took a loan application. We spoke to my Twin and took a loan application in 10 minutes. And, they were like, okay, where do we sign? Let’s get this going. And if you have a few more minutes, and that reflects on what you said earlier is how are we moving so fast? How are we rolling out new products, new capabilities so quickly and also expanding to new countries and new markets, because it’s AI, right? what that means is once the model is solved, right? We’ve built the model and it’s been built and tested and completed, for years, right? So, new technology that we are, we’re adding onto this, we have AI creating AI at this point. So it’s really fast built, still new features and new tab on onto this platform, right? And so rolling out a new jurisdiction, right? It’s just loading up with new rules now, it’s just dropping in new data.
[David] The rollout gets to be so much easier when you’re just loading in new rules.
[Pavan] Yeah, exactly.
[David] Rather than having to recreating. You lead the foundation, you got the foundation built.
[Pavan] Yeah, exactly. So when you have this solid tech foundation and then things like changing like having your own service system from ground up, when, from the time we made the decision to build it, to the time it was complete and we started full. Running it parallel. It was like 12, 14 months. and it was a team of, I don’t know, six people or 14 months, completed it.
[David] Six people to build up a service from the ground.
[Pavan] Yeah. Like everything. Interface with credit reports, all the agencies and everything, has an influence. Everything Could imagine all that like because it’s all such well organized and structured. Plan out data science. So then you, when you create interfaces, you just let the AI just generate the interchange.
[David] Yeah. So what you’ve built is nothing less than amazing. Yeah. It’s revolutionizing our industry and has a potential of just changing the world.
[Pavan] And you change the world by, if you really look at human history past 2000 years, the big changes in the world has always been tied to tech. I guess all the good things, the bad things are tied to the bad. Things are tied towards, the good things are tied to tech.
[David] Yeah, that’s a great point. Yvonne, thanks so much for taking time to be with us today. I love the vision. I love what you’re doing. Keep going. So excited to be walking this journey with you, friend.
[Pavan] Thank you, David.
[David] You bet.
[Pavan] Yes. Bye-bye.