00:00Live from Colorado Springs, I'm Diego Sanchez, president of HousingWire, and I'm joined today
00:13by Jennifer McGinnis, CEO of Pivot Financial and also sponsor of our Vanguard Forum yesterday.
00:19Very true.
00:19Amazing. Jennifer, thanks so much for joining me today.
00:22Absolutely. Happy to be here.
00:23So before we dive in, could you just briefly introduce Pivot Financial and what you do
00:29with lenders?
00:30Yeah, I mean, at the end of the day, Pivot should be thought about as a lifecycle platform.
00:34So we're very tech-driven, but where most lenders become disjointed or most investment management
00:39companies become disjointed, we have a full lifecycle platform.
00:43So what does that mean?
00:44We have an aggregation platform where we buy non-agency loans, and then we also are a due
00:49diligence company that also specializes in breach defense and litigation support and also
00:56default oversight.
00:57Right. So all the things that can go wrong, one side of our business, and we help you
01:01fix them. Things that go right, new origination, we have it on the other side. Full lifecycle.
01:05Full lifecycle. And so right now, it's a little bit of volatility, right?
01:11Just a little.
01:12A little bit of uncertainty. We have the tax bill that's going through Congress. We have
01:17GSEs potentially exiting conservatorship.
01:19We have mortgage rates staying higher for longer than I think anyone would like. How are you managing
01:26your business with all of this uncertainty and volatility?
01:30So I think that everybody's focusing on the uncertainty and volatility instead of what's
01:35the opportunity.
01:36Right. And I think if, especially on the lender side of things, if we could get the lender
01:41mindset shifted to what's my opportunity instead of am I going to have a midsize refi boom?
01:48Am I going to be able to pick up some more people?
01:50You know, educate your loan officers.
01:52Get them into diversified products.
01:54I think we are still too stuck in an agency world. And, you know, we really need to start
01:59peeling that onion back in order for the lenders to really succeed.
02:03It sounds like you're advising the lenders that you work with to flip the script, right? Like
02:08it's not volatility and uncertainty. It's an opportunity.
02:11No, it's an opportunity. But it's and the other thing is, is listen, everybody's talking about AI and
02:16everything else. But have your loan officers be the expert at your products when they're the expert
02:22at a product and the entire suite of your product. As soon as they hear a borrower buzzword, they're
02:27going to go, you're a perfect fit for this. You're a perfect fit for that. And I think that that
02:31makes your funnel speed up. And then it gives you more closed loans. I think that's what everybody
02:36should be striving for. A lot of our clients are closing record months right now, whereas a lot
02:41of people are saying this is a tough market. So how is that happening? What are specific strategies
02:46that they're deploying and that they've worked on with you to help them to record
02:52months when others are struggling? Well, some examples are really being able to do
02:56some predictive analytics on what borrowers would qualify for before people are on the
03:01phone. So being able to take, even if it's borrowers you've done loans for before or you're
03:06buying data, refreshing certain characteristics and putting credit overlays on top of that to
03:11say fail, fail, pass, pass, pass on products. And then look at what's the benefit to the borrower.
03:16Now you've got an empowered loan officer really making a call and saying, hey, I noticed this
03:22about where you are in your stage of life. This is what I'm seeing. The product you're
03:26in does this for you, but this is a product that can do that for you and it's a benefit
03:30to you. And I think that's really important before a loan officer picks up the phone.
03:35You brought it up once. It comes up in almost every session here at the gathering. Artificial
03:42intelligence, AI, it is here. Absolutely.
03:46But there are some lenders that maybe are scared of it, cautious about it, and for whatever
03:52reason have not dipped their toes into those waters. What are you advising those folks in
03:57terms of starting to play with AI?
04:00Well, I mean, anybody who says they haven't dipped their toe into AI is lying to you. And
04:04the reason for that is just put anything into Google in a search engine and AI is talking
04:08to you every day, right?
04:09Right. I don't think lenders should be afraid of AI. I think they should consider where they
04:14can deploy it and then how to control how it works within your organization. You don't
04:21necessarily, without sufficient testing, want to have that become your finite underwriting
04:25engine or be speaking to your borrower. I actually thought today, I saw it on the stage here, total
04:33experts' voice for their AI bot was pretty amazing. It actually sounded like a human. And I, I
04:39I thought that was really cool. But I think there's that too. I mean, who doesn't call
04:43their airline to change a flight and get annoyed with the AI? I think it's really getting it
04:47to be that interactive conversation if you're going to use it there. And in some cases, if
04:52everybody goes to that, the lender who's going to win is going to be the one with the real
04:55human on the phone as well.
04:56Right, right.
04:56So I think you need to really understand what business are you in, who's my client, are they
05:02going to benefit or not from us implementing AI? Is this or is this not going to become
05:07cost prohibitive, et cetera?
05:09So break that down by lender size, because there's a difference between what a big lender
05:14can do and how many tech people they can deploy on AI and what a small or mid-sized lender
05:20can do.
05:21Right.
05:22How do you think about that?
05:23So think about the fact just how different expenses are for different size lenders.
05:26You know, if you looked at, for example, even MBA research, right? They say that, you know,
05:31the really efficient lenders, it costs them a little less than $9,000 alone, right? And then
05:36they say the standard or smaller independent mortgage banker costs them upwards of $11,000
05:40alone.
05:41That's a big gap.
05:42This is huge, right? Very different on what you can spend. But when you boil it down to
05:46what is the actual profit they're making on a loan, if you look at what MBA put out this
05:51year, it was like $440 a loan. Do you get excited about $440? Can you spend or do a lot
05:58with that? The answer is how does it need to be deployed and is that truly your net and
06:03where can you cut your expenses? And I think that's interesting from a technology perspective.
06:08If I could make $800 a loan, if I could make $1,200 a loan with the tech spend, great.
06:16But do the life cycle analysis. You know, on the stage with Sarah yesterday, I said, guys,
06:20your LO may be screaming, I need this technology. But if you really did the downstream analysis
06:25and you found that it's now going to take you five more days to close the loan, if you
06:29implement this, that same LO is going to be screaming, get rid of it as soon as you implement
06:34it. So you've got to really look at what's that impact going to be all the way through your business.
06:38Let's stick with costs for a moment, because I think it's a really interesting topic.
06:43I came into housing in 2018. But you know, we've been digitizing mortgages for a long time.
06:50And the costs just keep going up. Right.
06:53What's going on? That should be a different relationship.
06:55So clearly we have not digitized mortgage yet. Yeah.
06:58Right. And look, I remember the rise of fintech, you know, it was call it 2015,
07:03everything's going to be disrupted, et cetera. And look, I think there is a place where, you know,
07:08technology has enhanced, you know, the manner in which mortgages are originated. But I also think
07:14that there are certain components of the origination that cost too much. You know, credit reports,
07:20great example, appraisals at times cost too much. So it cost and time, right? You have to remember
07:26when you're in a lender or you're in an aggregator, time is money and you're paying all your people.
07:32And if they're touching the exact same loan over and over again, nobody's making money.
07:36And that really tight margin on my $440 example, it's getting smaller and smaller by the second.
07:41Right. Right. All right. Let's pull out our crystal ball for this last question.
07:45What are you seeing? So uncertainty, volatility right now, we talked about that. What are you
07:50seeing as the issues that are going to be at the forefront over the next one to two years?
07:55So I think some of the issues that we're going to continue to deal with over the next one or two
08:00years are issues that have actually existed for a long time. For example, most of the independent
08:05mortgage banker universe is beholden to an aggregator or the GSEs, right? What I want to see
08:10happen in the next year or two is I want to see them get their own liquidity. And we're actually
08:15focusing on that at Pivot. And if we can start to give those independent mortgage bankers true
08:20liquidity through securitization as a great example, now you start to level the playing
08:25field of mortgage. And no matter what happens with the GSEs, which if you knew the answer today,
08:30great, because I don't. They can't make up their mind going on there. But that will actually start
08:36to level the playing field, make it a little bit more fair. You'll see the margins on the revenue
08:41come up, et cetera. Should the GSEs come out of conservatorship?
08:45It depends on the day. You know, I mean, no. And look, I think you have to be really
08:51careful when you answer that question. And the answer is they can come out of conservatorship
08:56as long as it's not done badly. Okay. What is doing it badly look like to you?
09:00Doing it badly is doing it too quickly without the right experts involved from the market.
09:08You know, not really communicating, you know, if there is an implicit guarantee or an explicit
09:14guarantee, not documenting it efficiently. And then everything gets a little haphazard.
09:20Do you think it can be done in a way that rates will either stay the same or go down or do you see
09:24rates going up? Well, I think it's a little ridiculous that rates are fully controlled,
09:27you know, called by the 10-year and certain things anyway, right? And how quickly tariffs
09:32could play with your rates, right? I think that either could happen, right? I find it humorous that
09:40people are saying, you know, oh, they're going to do an IPO for the GSEs. They're public companies
09:44already. They're just in conservatorship. So why are we talking about we're taking them public?
09:48They're already public, right? So I think, you know, we need to pay attention to the details,
09:53dig into them efficiently. And yes, then they could come out of conservatorship. But I do think
09:58that they also need to be regulated. And one thing I admire about you is you really do focus
10:01on those details. I've seen those posts where you're diving in deep. Yeah. And look, I think,
10:06I think the reason for that is, and somebody said it really well on the stage today. I think it was
10:11Jennifer from Raid, actually. She said, you know, everybody just focuses on, you know, the headline,
10:16right? And the headline is not actually what should be driving your business. What should be driving your
10:21business is the details behind the headline. And you know what, if the headline is impacting, you
10:25know, 20% of the market, that means you have 80% of the opportunity left. And I think that's key.
10:30Amazing. Jennifer, this is great. Thank you so much. Thank you so much. I appreciate the time.
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