Lykken on Lending

[David] Allen, we’re talking about it constantly. Everything that we’re seeing about is what can we do from a technology standpoint? We’ve got to reduce costs and we keep coming back Allen, to a technology solution. We’ve got to automate more of the processes or we’re in trouble right now. The costs originate around $13,000 and a 60 percent of Mike Fratantoni says 60 percent of that goes to his originators. So that leaves about $5,000. Got to get that cost significantly down. Your thoughts?

[Allen]Yeah, completely true and Alice, thank you for the segue. It is true, it’s not on the table. driving the table. Oh man. I wish there was a silver bullet solution to reduce that price. And the challenge is our industry has so many technology vendors and the cost of doing business and mortgage is so extensive and as a technology vendor, and I want to 1st address what Alice said. So I’ll come back to this. David, maybe we chat about it for a moment, but Alice, you’re right. Everything is based on technology right now. Everything from vendors that handle warehouse line, risk mitigation and management vendors that manage, my risk mitigation to the pricing engine to how to stay in line with compliance, the analytics. It is everywhere. You can’t do business without a digital lending experience, a point of sale platform, you can’t do business without acquiring, third party technology, information, but that comes at a price and then just back office, right? How do you stay in with compliance? How do you as a loan officer understand the rules of engagement, meaning you may move around from different organizations? How did you know? what all the rules are where you work and then everybody has to go through technology and information security training. Every technology is a part of everything. So I’m happy you brought that up. Thank you and actually, Alice, I wrote down your quote. So if you need any copyright rights that let me know, because I’d like to reuse that quote, but David, it’s funny because some of the things I wanted to talk about today actually touch on exactly what we’ve been talking about. Great minds all think alike. Let me just roll right into it. If you think that’s okay. Now, I have 1 non mortgage topic I wanted to bring up just because tech is taking over our lives. And by the way, when you’re thinking of how to create a new business in our industry or any industry for that matter, you have to consider, what does that unicorn idea that Uberish type of idea, that’s a real word in the dictionary, by the way. So anyways get this returns feeling like a hassle. Skip the trips to the post office FedEx office or UPS store, because now you can get it done in a few taps. And I’m reading that verbatim from the news. So basically what it says is that now with Uber, you can hack your product for return and a delivery driver will pick up your sealed prepackaged package and drop it off at a local post office FedEx or UPS store for you. You can track it. Just consider it done. So we’re going to continue to see more things like this. I know in the mortgage industry, David, were mobile motorizations right before some of the digital technology we had came out. These are just such cool ideas and we’re going to continue to see more of these, Check that out. Pretty cool.

[David] That’s the only chance I get to go take a break , I need to get out, but it’s true because you get so busy sitting here, working virtually in our offices and in our homes that we don’t get a chance to even go to the UPS store to drop the things off. So it’s interesting that Uber is capitalizing on that.

[Allen] It’s a treat, right? To get outta the house to Yeah. Sometimes you just think, I think I need gas in my car, and you just leave for 30 minutes. You go add five yard, you haven’t driven anywhere. Yeah. Gotta top that off. Anyways let’s move on. And oh, and I wanted to start off, by the way, congratulations to anyone who’s children graduated or nieces or nephews or grandkids that graduated last week, was a huge graduation week. I had a daughter that graduated high school, I’m sure many of you had some relatives or friends that did. So congrats to all those graduates the next generation of unbelievable mortgage executives and mortgage everything are up and coming. So let’s give them opportunities. Let’s open up internships. Let’s find ways to open doors and help them out as they continue. So now let’s get into some mortgage stuff, David. I thought this was really cool. Polly which as we know is a PPE. They now have integrated with Encino’s mortgage suite which I thought was really cool. In addition, downpayment resources, which I mentioned a little bit earlier, just integrated with Ice Mortgage. So now their options or solutions that they have are now embedded into Ice and get this, David, a brand new topic. So this is a press release again about Ice. And it’s on the topic of product and pricing engine. So PPE. Now, many people know in the very early days, there weren’t a lot of pricing engines out there. There were some custom made underwriting engines solid and commerce velocity. Anyways, there was a couple out there, right? But then it was Nilex, which I was a co founder of and Optimal Blue. And there weren’t a lot at that time. There were some, anyways Ice was one of them and ice when they created their pricing engine had acquired a technology and then expanded upon it. That was called EPPS. ICE has now, this is their press release announced investments focused on growing its mortgage, secondary market offerings, and enhancing the Encompass digital lending platform’s, native product and pricing engine. Now I know that’s a jumbled soup of words. Let me just get down to the nitty gritty details. In their press release, they basically said that they talk with mortgage industry professionals every day and one thing they’ve made crystal clear is a pressing, growing need for a stable, accurate, and well capitalized loan product and pricing engine. What they basically were trying to say is that all the systems that are out there are not meeting everyone’s needs and they’re extremely expensive. And they’re not nimble enough, they’re not customizable enough. Now, I’m not saying I agree. This is what ICE put in their press release, and they say that they can do it at a lower cost and they can offer it better. So what they’re saying is to meet the need, ICE is investing a significant amount to dramatically enhance their current PP&E within the Encompass lending platform, and they’re actively engaging with a select group of industry leaders. Wink, they didn’t, or hint, they didn’t call me. But, I’m extremely interested in looking forward and hearing more about this. Hats off to Encompass. Innovation, is on the birth, on the growth. Now, David, let’s talk about Finlocker and other press release and I love the guys over at Finlocker. I’ve known them for a very long time. They just closed their Series B funding round. They secured 17 million in investment. And what they’ve said is it’s obviously going to bolster business development. Strengthen their existing partnerships and fuel the development of their Finlocker app. If you don’t know about Finlocker, go check it out. I think they’re just absolutely opportunistic for financial institutions to leverage their technology as a personal opinion. But get out there and check it out. All right, David, this one, and then I have one more topic after this, and I know you want to ask me a question, so after this item, if you’d like to, I can hold off on my last item. Mortgage brokers sent people’s estimated credit address and veteran status to Facebook. And this is what we all fear. So there’s a company, it’s actually a publication, called The Markup. And what they do is they do investigative reporting, data analysis, and they challenge technology to serve the public good. So they went out and tested more than 700 websites that offer loans for people looking to purchase or refinance. They looked at major online brokers to lesser regional lenders and what they found in more than 200 of them. Is that data was shared with Facebook. Here’s how they found it. These companies embed what’s called a metapixel. So we all know how like Google analytic tracks, it creates a little fake image. Sometimes it’s in your email. It was a Facebook pixel and it shares the visitors information that they’re filling out online. And I know you probably don’t even want to listen to the rest of this. So if a user fills out a mortgage application or request quotes for mortgage rates, that pixel track took all that information about credit, veteran status, occupation, the type of homes they wanted. It took co borrower names, bankruptcy status, home ownership status, citizen status, specific homes, and the addresses of those homes. You believe that? Yeah, so we’ve got to be careful. We’ve got to do better. Hire consultants, advisors, ask for opinions. That little extra bit of money you’re going to spend is going to save you lawsuits and issues, et cetera. They didn’t name anybody yet, but there’s over 200 of them. So yes, a very interesting information. Now before I move on to my last item here, David I know you said you wanted to chat about something. So why don’t I just toss it back over to you for a quick moment?

[David] One of the things that we’re talking about, we know there’s Lender Toolkit we have friends over any one of the services that are trying to automate the underwriting process, most expensive part of the, Process what’s going on. Love to get your thoughts. Are you hearing of any new lenders? New vendors coming to market offering basically any type of automated underwriting solution.

[Allen] So the short answer is yes. I don’t know if I can disclose, but what I can say is there’s a lot of things with AI coming out. Everybody that is interested in building something for automated and underwriting or putting all their money into that investment. And they’re getting small groups to test it. Everybody believes that they’re going to make a move on that. There’s people trying to build new types of LOS

Systems and different ways to look at data. I think our market is overcrowded with people and I mentioned this last week, David, with people saying they’re an AI platform, but they’re just leveraging a little bit of AI to do one thing. We’ve got to be careful about what AI means and we do have to think different and we do have to find ways, as Alice mentioned, tech is small and everything. How do we lower those costs? By the way, last topic I was going to mention today, David and let me continue with this was a website for automation called Browse. ai. And if you go there their pricing is very reasonable. They already have, so that it goes on the internet and it scrapes data. So if you wanted to quickly go build a mortgage industry job board right now, you can build automated bots with no coding and browse it’s browse. ai. And you can also take that data, tell how often to create these searches, tell it what to scrape, and then tell it to go stick it in air table as an example, air table is a free online database, and then you can build a free chatbot that connects to that. And now you can serve off chatting for jobs, or you can automate broker registration. You can automate all types of things, right? Automate components that you want to send to the CRM because there are lenders out there, some of you listen to our podcast that actually. Sit in the middle of your own vendors. You control some of your own destiny. So check out Browse.AI completely automated scraping and workflow management, and they have prebuilt robots. If you want, they’re integrated. And I just mentioned that on the heels of your question, David, we’re going to continue to see tech companies that are leveraging tech like this or building their own and are doing all different types of things. What’s unique about our industry, I’ll just leave it on this last point, David, is we’ve got the most amount of PII data than any other industry. And we’ve got to be extremely careful about what we’re sending, where, what servers it sits on. Again, it doesn’t mean we can’t do this stuff. We just have to be very careful about what we’re doing and there’s a way to architect these solutions so that data is preserved and protected. But outside of that, David, where, the amount of AI tech we’re going to continue to see over the next 24 months is going to be huge. Is it going to lower our costs right now? No. Not many people. I know angel AI is giving it out for free but not everyone can leverage that tech. I think we’re not going to see the cost drop so quickly. That’s the difficult or the bad news about all of this. A lot of money flowing into it.

[David] I had that privilege of meeting with John Guzzo over the week this last week and of Keefe Brewett and woods KVW and I’m getting some analysis that they’re sending reports of where they’re seeing opportunities where they have vested. Follow the smart money folks. If you want to see where you should be looking as far as technology, follow the smart folks like KBW, see what they’re investing in. And also like Rice Park Capital. Listen to that interview that we’ve got coming up this week. Alan, thanks so much for being here. Appreciate it. You can reach out to Allen@tms-advisors.com and a good report.

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Allen Pollack, Chief Operating Officer, Tech Consultant

Allen Pollack, a Mortgage & Financial Services Technology Advisor, is a subject matter expert in the mortgage origination process along with software product management and software development.

In today’s financial services push to all things Digital, Allen has been helping lenders and financial services solution providers align their digital transformation and technology strategies by removing the human element of risk, and automating processes that drive efficiencies and margins into profits.

Over the course of his career, Allen has co-created and developed technology business models that have birthed highly successful, innovative solutions and companies.

Allen co-founded and served as CTO of New York Loan Exchange (NYLX), a loan product eligibility and pricing engine (PPE) that made an immediate impact on the industry, scaling the company quickly and forming partnerships with multiple mortgage and financial lending companies. In 2012, Allen was a co-founder of a merger between NYLX and Aklero Risk Analytics that created LoanLogics, A Mortgage Loan Quality and Performance Analytics company. Allen served as CTO where he continued to bring new and innovative product solutions to the market that made a significant impact to mortgage lenders that reduced risk, scaled business channels, and grew profits in a very competitive and highly regulated market.

Allen is also is mortgage and finance technology contributor on a weekly live industry podcast, Lykken on Lending, and is launching a new podcast soon to be released, TechStack Radio, dedicated to technology and innovation in Financial Services.