Modern Lending Podcast | Tammy Richards

Alec has Tammy Richards, COO of Loan Depot on the podcast to talk about the technological advances and the future set in automation for the the meticulous things in the industry and how you just have take it one step at a time.

Your snippet of this episode of Modern Lending Podcast:

  • Technology is change but it also helps  find a way to get the deal done
  • Problem solving is the ultimate goal
  • What LoanDepot is doing to make things move smoother and quicker
  • Automation is a one step at a time process

Episode Transcribe

Alec:
What's up Modern Lending podcasters.

Welcome back for episode four. 

I know I just called you Modern Lending podcasters, I love it, you're in the club.

All right, this is going to be incredible. I'm very excited to bring on Tammy Richards, our Chief Operations Officer here at Loan Depot. She's going to blow your mind. No joke, no exaggeration, there's crazy stuff happening here and you're going to experience it live with us on this podcast.
I'm really excited to bring a behind scenes look and feel to what's going on in technology across the mortgage ecosystem and here at Loan Depot. So stay tuned, you're in for a wild ride with Tammy Richards, let's go.
All right everybody, here we are, Tammy Richards in the house. I am so excited to talk to you today because every time we get to hang out, I learn so many new things. And I'm trying to be a student of the game and the game's changing and you're leading a lot of the change. And so before we dive into it, I have so many fun questions and this is going to be a really cool 45 minutes to an hour, let me give you a chance to introduce yourself.

Tammy:
Okay.

Alec:
So for those of you listening and watching on YouTube, hello. So, Tammy is the Chief Operations Officer for Loan Depot, but share a little bit about your past, we worked together before.

Tammy:
We have.

Alec:
Which is just Twilight Zone for me because this is like we're all back. Look, everyone out there listening knows the mortgage industry is small and it's getting smaller, so Tammy give a little bit of your background, how'd you get sucked into the crazy mortgage world?

Tammy:
I think that we all get here somehow by accident.

Alec:
That's probably true, everybody's just are like, "I guess I'm here now forever."

Tammy:
Yeah, you don't grow up. At least back in the day you didn't think about what am I going to be when I grow up, I want to be a mortgage banker. But I got in the business back in 1983 and my first position was being a loan secretary.

Alec:
That's incredible. I don't even know what that means.

Tammy:
I know, well it was before fax machines, before cellphones, we were like hand typing everything, mailing out verifications, credit reports had to be requested through messenger.

Alec:
So do you ever take a minute because if you look at what, and we'll get into the future tech that you're working on now, but do you ever like, I mean that's crazy. Pre-fax machine into what you're working on today, right? Like that's two different worlds.

Tammy:
It is, it's analog to digital.

Alec:
Analog to digital, that's so cool. Okay, so you fell into the business, loan secretary which is amazing.

Tammy:
Loan secretary.

Alec:
What else have you done?

Tammy:
I've done everything. Processing, underwriting, closing, originating and even servicing, so all the way through. And it's been fun, my favorite part is underwriting, I really like digging into loans.

Alec:
Really just problem solving?

Tammy:
I love it.

Alec:
Just figuring it out, yeah. Everything is unique and different.

Tammy:
Finding a way to get the deal done.

Alec:
Which is great, by the way thank you because it's good for an operation to say that, find a way to get the deal done. Every salesperson is like, "Oh I like that, I like that a lot, tell me more of that." Okay, so share with everybody, you're coming up on your two year anniversary with Loan Depot, what are you overseeing, managing, handling at Loan Depot.

Tammy:
I have processing, underwriting and closing for all channels. I also have credit policy, credit risk and then appraisal, co-op, any back office staff function or any support staff functions. And then I've got the prototyping lab over at the Mello building, I've got enterprise innovation and the product team over in the tech building as well where I can help automate the process.

Alec:
So you have no shortage of responsibilities? There's a lot on your plate.

Tammy:
I actually think it's really fun. I walk around every day thinking that I somehow have the luckiest job in the United States of America. I really am grateful for my job, that I think it's really fun, it is.

Alec:
Well, so let's dive into it because obviously you've seen a lot in this industry and so what are you seeing today? What's changing? What's happening right now?

Tammy:
Well right now we're actually catching up to the technology that's been out there for a while.

Alec:
Well that's an interesting comment because there's been a lot of people that have recognized that post-crisis, the mortgage industry just froze. Innovation stopped, investment and technology stopped and now I like that comment of just catching up. So, what does that mean for mortgage tech and operations and all that stuff?

Tammy:
Well, I think what it means is that the consumer's driving what we're needing to do in order to be able to be relevant in our industry. Because the consumers are wanting to go on their phone or their computer where previously they would come face to face or call us or come some other way to the mortgage lender. And now anymore they're able to search online for price, look for the best lender online and it really has come down to being able to work the way the consumer wants us to work with them. And many consumers are moving more and more towards wanting to work online.

Alec:
Yeah, and you look at all the other industries and all the other things we consume as humans from the Amazons and the Ubers and Netlixes and Disney Plus and all the stuff that we're just consuming and then you'd have the mortgage process and it still feels pretty clunky compared to what other companies and industries have taken technology. And you've been, at least as long as I've been here, you've been a real pioneer in trying to push our industry forward. Meeting with Fannie and Freddie, writing White Papers, trying to figure out new things for appraisals. So, let's talk, what are you most excited about that you're working on right now?

Tammy:
My favorite thing that I'm working on right now is finding ways to give customer surety as close to the application as possible. I think that's really what the customers are wanting, so utilizing data and other automations to be able to give the customer a seamless experience and take the pain out of the mortgage process. That is what I'm most excited about.

Alec:
Okay, so we have to unpack that because if you look at the mortgage process and if you're listening and you're not in mortgage, you're going to get the full behind the scenes how the sausage is made process, but for us mortgage geeks, we live this every day. It's a linear process and if you go back in time to when I originated in the early 2000s, it was a paper file and it had a left and a right side and I would stack it in the right stacking order with my cover letter and then I would hand it physically to processor and then it was in their drawer.

Alec:
And then when it got moved to the underwriter drawer, I could see it in line over there and the customer of course can't see any of this stuff. And even today, even in our world today, a lot of customers still can't see what's going on. Most mortgage companies deliver a turn time and say it'll back tomorrow sometime. So, when you say surety as fast as possible, I think this is probably a good time for you to unpack. The industry and a lot of people that have followed Loan Depot have seen the Mello Smartloan come out. There's lots of social media, by the way it's a very buzzy language around it, the Smartloan what does that mean and there's been some articles and some PR around it.

Alec:
And even the concept of a digital mortgage has been thrown around the industry in tons of different ways, so maybe share your viewpoint on what a digital mortgage is and then maybe just share about how the Smartloan started and what it's doing and where it's going. Because that stuff people are going to get jazzed about.

Tammy:
It's really fun, I know, I'm jazzed about it. So, on as far as what is a digital loan, I think if you were to ask a hundred people in the industry what a digital loan was and for them to write down a definition of a digital loan, you probably have a different definition from every single person.

Alec:
Totally. Even ask the customer what's a digital, they're like I don't know.

Tammy:
So, is a digital loan a customer being able to do their application online? Is a digital loan a customer being able to digitally validate their income employment assets?

Alec:
Right, like day one certainty tools.

Tammy:
Yes. Is a digital loan a fully paperless loan?

Alec:
Oh, here you go.

Tammy:
Is a digital loan a loan that you're able to close digitally and disclose and sign digitally as well?

Alec:
Yeah, right, because there's paper at the signing table.

Tammy:
So, is it completely paperless a digital loan or what is a digital loan. A lot of people think it's the online application and I think that that is just table stakes anymore, we have to have it. We have to have it in order to be able to serve the customers the way they want to be served, but it doesn't necessarily mean that that's a digital loan. I think that being able to use the data that you receive in order to be able to streamline your process frontend and backend and be able to deliver an electronic closing is a full end to end digital experience for the customer.

Alec:
Yeah, I mean when I see mortgage tech from my sales perspective, it seems like a lot of the frontend stuff is getting what I would call digitized. So, leveraging some day one certainty tools, we're able to get a certain percentage of customers validated online through data. But then it seems like once that's done and that loan crosses over to our fulfillment partners, especially when I talk to other companies, it seems to go back in time.

Tammy:
It goes down the analog path.

Alec:
It goes back in time, it's like we did all this cool digital stuff and then all of a sudden I'm doing it the way I did in 1982.

Tammy:
It's still that same thing that you were talking about where you had your file folder, left and right and you were hole punching and by the way, if your hole punches didn't directly aligned, we were pulling that back out and restacking that and we all had our rubber thumbs as we're flipping through the pages, right?

Alec:
The rubber thumbs and the rubber band ball.

Tammy:
Yes and Agaco fasteners, we had to have lot of Agaco fasteners. But really what we did with our LOS systems is we simulated that linear process and we really just have a simulated paper file flow format.

Alec:
So I've heard you say that before and it rocked me then and I'd love for everyone to hear that again. We in mortgage tech just took the paper process and recreated it with computers. We didn't enhance it, we're just like, "Well, we do it just this way so let's make the computer do it this way."

Tammy:
That's right, exactly.

Alec:
That's amazing, but that's not innovative.

Tammy:
No, even our, if you look at our electronic file which is holding our paperless file, it's still left side right side in the same stacking order as what we did with our paper.

Alec:
Okay, so how do we do this differently?

Tammy:
Right, so a lot of people have been going down a swim lane approach which is definitely an efficiency approach.

Alec:
And break that out, when you say swim lane, explain that.

Tammy:
So, a linear process would be the way that you described it with handing the loan from the originator to the processor to the underwriter, back to the processor, back to the underwriter, back to the processor, back to the underwriter, finally to the closer funder and getting the loan completed. That's a linear process, really. Where a swim lane approach would mean like the originator could be pricing the loan while the processor's ordering stuff, while the underwriter is making a decision while the closer's setting up the loan for closing and all the people can be working simultaneously on the deal, that's a swim lane.

Tammy:
That's a swim lane approach where everybody can go in their own lane but at the same time sometimes, right? And then a simultaneous format that really is what the Mello Smartloan is, is it's a loan that has intelligence and it's really artificial intelligence, but it knows what it needs to be completed. And it reaches out for the docs and data in a simultaneous format, receives the docs and data, brings it back in, uses it with the artificial intelligence, so calculations to auto-clear any requirements on the loan and get the loan completed and get to a clear to close. And it could all be done at the time of application.

Alec:
So okay that was a lot, we're going to unpack that. If everyone's hitting rewind right now, they're like, "Okay, hold on a second, I got to hear that in slow motion." Because we're just so chipped and we're so used to our normal process. So, let's unpack this again, I've heard you say this before and from a leadership perspective I think it's really cool where you have continued to pioneer and preach we want clear to close for the customer as fast as day one. Time of application, clear to close. Which I hear a lot of people talking about like, "Hey, let's shave one more day off our process." And you're like forget that.

Tammy:
Or they say we close on time, it's like well you better.

Alec:
That's doing your job.

Tammy:
If you're in the industry, we should close on time, so that is not remarkable.

Alec:
Hey, look, I'm a millennial and I just want my participation trophy for closing on time. I want my little blue ribbon that says I swam down the lane.

Tammy:
That is definitely not what our consumers are asking for.

Alec:
Correct and you look at how we're experiencing all of our lives, it's like we want ... there's a great comedian on Netflix who was like, "I want Amazon yesterday." Where it's like just give me want before I even know what I want. I just want it delivered instantly and then in the mortgage it's this whole crazy process. So let's break down what you just said and explain it again for slow sales people like me.

Tammy:
I don't think you're a slow sales person.

Alec:
So, when did you start working on the Smartloan?

Tammy:
Well, I've been here at Loan Depot for two years and the day I came.

Alec:
So you showed up and you said let's get on this journey?

Tammy:
Yes.

Alec:
Which is cool because it does take a long time to create change.

Tammy:
Because this is Anthony's vision.

Alec:
I know.

Tammy:
Anthony Shay's vision to be able to give the consumer the experience, a full home buying experience and what the way the consumer wants to be served. And so when I came, when I was recruited here, I really was attracted to the tech forward approach of Loan Depot but also Anthony Shay's vision of being that one stop shop for home buying experience and serving the consumers the way they want to be served. So I've been in many sell centric organizations and we are a sales centric organization here at Loan Depot, very sales centric, but we are also very consumer centric. And we become even more sales centric by focusing on the consumer because the consumer-

Alec:
That's exactly what I was going to say. You become sales centric today, modern sales is consumer centric mindset a thousand percent.

Tammy:
Which modern lending was something Anthony talked about as I was being recruited, being a consumer centric brand and being really a lifestyle choice for customers and how they want to be served and how they want their home buying needs met is really what we're accomplishing with the Mello Smartloan. So, the day I came in I knew it was my responsibility as part of what Anthony Shay's vision was to be able to help to create the Mello Smartloan.

Alec:
So what's crazy is I'll talk to loan consultants today that I'm recruiting or in our own company and I'll ask, "How much of your day is spent, as a percentage, how much of your time is spent tracking down conditions? Gathering items, going back and forth with underwriting, waiting for underwriters to look at your file and then getting on a phone call with them." And it's a lot. A lot of loan officers say it's like 70% of my time and the more productive loan officers are, the more time they have to spend in just file management.

Alec:
So, two years ago you had a vision, you came alongside Anthony, he brought you in to execute this vision and now fast forward 2020, it's crazy and it's landed. I mean, we're here. So, you gave us the 10 second Smartloan example of it knows what it needs, it does all this fun stuff, but let's go simplistically. I'm a loan officer and I take an application of my customer and let's say I either get some data but I don't get a lot of data or let's say I get no data. I don't use any day one certainty products, just because by the way I still have loan officers that send out, I've seen them, on the back of the card which it says like, "Please prepare me your two years tax returns, two years WTS2" I'm like, don't do that, don't get any of that stuff.

Tammy:
I used to do that when I was a loan officer, I had it on the back of my card.

Alec:
Back of the card. So, today though, now fast forward, what are you going to do or what's the system going to do when I show up with my stack of paper, maybe a couple things digitally validated?

Tammy:
So the system, what we've done is we've been able to take the paper and convert it to data even if we don't get the digital validations. Still, it's a better consumer experience to press the button and get the data and it's better quality, but if I were to get the paper, we are able to drag and drop the information into the system and then the system takes the data off of the docs and runs it through algorithms to be able to calculate the calculations we need to be able to auto clear conditions.

Alec:
So you've said auto clear conditions twice now and people are hearing this and just sounds like space magic dust.

Tammy:
I know.

Alec:
Because it's like what do you mean auto clear. So, let's go one step further, so I'm a customer and I walk in with my pay stubs, my W2s and I give them to my loan officer at Loan Depot, I upload them to the portal, what's going to happen? What does the Smartloan do at that point?

Tammy:
The Smartloan takes the pay stubs and W2s.

Alec:
Let's just use pay stubs.

Tammy:
Let's say pay stubs?

Alec:
Yeah.

Tammy:
So it takes the pay stubs, it recognizes that's a pay stub, it auto files the pay stub into your electronic file, it auto indexes it and indexes it as a pay stub. Where previously you've been able-

Alec:
It's a human's job previously.

Tammy:
Yeah, you had to be able to break out all the different documents and manually file and then type this is a pay stub for borrower one.

Alec:
Oh my god, yes, of course.

Tammy:
All of that is done by the system. But when it does that, it also takes the data off of the docs and uses artificial intelligence and machine learning along with a rules engine to be able to ingest the data and then come out with a result. And so it's calculating the income and then if the income matches what the condition would be on the loan, it's able to validate that information is correct and what's needed in order to be able to complete the condition.

Alec:
How long does it take?

Tammy:
Seven seconds.

Alec:
Okay. So, I'm going to say it back in my dumb way. You're saying that the Smartloan can take in a pay stub as an example, it can recognize that it's a pay stub, it auto files it in the right spot in our system, it can lift the data points off of it and put those data points digitally into the system. And then it can effectively read it and if the data points, if it's 40,000 and that's the income and that's what we need for the loan, it auto clears it, no human will look at that deal for that pay stub?

Tammy:
That's right.

Alec:
Okay, so sounds crazy, sounds insane, sounds super fun, what happens if it doesn't work? What happens if it can't read it or it's never seen it before or whatever?

Tammy:
Then it goes the normal boring manual way.

Alec:
Yeah, it goes back to a human.

Tammy:
Yeah. Obviously this doesn't replace humans, I think about in 1995 when DU and LP were coming out.

Alec:
You're going right where I was going to ask you the next question. So you're predicting it, go ahead.

Tammy:
And everybody thought that, well, that's the end of the underwriter, we've got DU now.

Alec:
Yup, who needs a human.

Tammy:
And it's not true, I mean we still need the humans for risk management, for making sure that we're meeting investor requirements. The computer doesn't have its DE, it doesn't have its [crosstalk 00:20:19]

Alec:
I love that by the way, I've heard you say that before, the computer doesn't have its DE.

Tammy:
Right, it doesn't.

Alec:
Of course.

Tammy:
Although DU does say ZFHA if it goes through scorecard with an accept, so that would be that chums number for the computer, so maybe it does have its DE as long it goes through total scorecard. But for conditional commitments, reviewing appraisals and all the processes that need to be done by VA, there's a lot of things that still need to be completed by an underwriter and overall, the quality of the file is still the underwriter's responsibility to make sure that everything meets investor requirements.

Alec:
And then what about like order outs, verifs? What does the tech do for that stuff?

Tammy:
So, we're automating all of our order outs so that I can reach out and that's why we talk about that simultaneous format. And I think of it as a circle with rays of the sun coming out and reaching out and receiving the docs and data and then bringing it back in, auto clearing conditions and then tasking anything that still needs to be reviewed. But when we're auto ordering items, we're ordering things like title, hazard, appraisal, flood or any third party service that needs to be ordered at time of application and auto ordering it, requesting the data and then taking the data to be used in our process to be able to see whether the data clears the information that's needed to be able to validate that application.

Alec:
So my brain starts going crazy when we talk about this stuff and I love it because I love change. Change is opportunity and because a lot of people fear change and when you fear change you tend to resist all the stuff instead of embracing and then it tends to bypass you or whatever happens, it's stressful. But when I see this I'm like, oh my gosh, my day's going to free up. I mean, if I'm a loan officer and I'm hearing this I'm going my day's going to free up. Because for a loan officer, one of our biggest frustrations is I submitted my file, I want an answer. I don't want to wait around. I'm as impatient as my customer is and so you're telling me in seven seconds for what percentage of stuff in your opinion?

Tammy:
Well, right now about 70% of the conditions can be read and calculated by the engine.

Alec:
That's crazy. I think the industry isn't ready. I think it's going to shock some people. I can see a loan officer today going that can't be true because you have to have a human look at stuff.

Tammy:
And there are still things that humans need to review obviously and there's also a lot natural language that the computer doesn't yet take in data format. And so layered risk, different complicated reviews definitely still need to be done by underwriters and underwriters still need to validate the total quality of the loan, but it is anymore, we're delivering data to our investors and agencies.

Alec:
That is a good comment, so let's talk about that. Because you're still delivering the file to agencies and investors the way they want it, you're just decisioning it differently.

Tammy:
Yes, we're just taking the data from the direct data source versus something given to us by a customer or another party and we're getting it straight from the closest to the real source of truth and bringing that data in and that is more pure data.

Alec:
Yeah, I was going to say, less opportunity for fraud or for something else to happen to it.

Tammy:
Absolutely, it's a better quality transaction.

Alec:
So this is obviously really fun and exciting, what effect do you think it's going to have on the industry? What about just on our company too, what effect is this going to have?

Tammy:
When I think about effect, I really think about how's it going to change the customer experience because I really keep focusing back on what does our customer want. And Mello, which is our tech brand, is Greek for "about to be" and it's really Anthony's way of having us anticipate the consumer expectation even right before their wanting it. And so I think that this is something that we've anticipated that consumers want, I think they actually do want it now.

Alec:
I do too.

Tammy:
But what we're wanting to do is take the guesswork out of the mortgage process by utilizing data to give surety to the customers at time of application. And so where we can we're going to be ordering all of the third party services and being able to get to a clear the close as close to time of application as possible. And instead that's where I think we need to flip the script in our industry to talking about clear to close and quickly can we get to clear to close with the correct data versus closing on time.

Tammy:
Because I think clear to close is really what a customer wants so that they don't have a lot more surprises that are negative as they're going through the mortgage process.

Alec:
I love that comment Tammy, I talk to so many originators and we do so many loans for great customers that at the end of the day, there are so many people advertising 10 day closes and I get a little visceral because I'm like does the customer even want that.

Tammy:
Right, are they going to pack up their family and their dog and all their belongings and move to a new place in 10 days? Probably not.

Alec:
I mean, if you're saving a customer and a loan fell through, I get that, they want to close their late-

Tammy:
Or they're competing with a cash offer sometimes.

Alec:
Yeah, they're in a penalty position, sure, but the average customer does not want to move in 10 days. That's too much chaos.

Tammy:
It's hard, it's hard to move in 10 days.

Alec:
But you nailed it, what they do want is they want the loan to be done. So, I've been talking to some people about the Smartloan and they always bring up what about appraisals. Because it's like well, if we get someone credit approved at time of application in seven seconds and everyone's head falls off and as soon as they get back together because I still don't think people realize what that means. You say it, I've it a bunch, it sounds nice, but a customer submitting paperwork and having that cleared in seven seconds and having the loan officer and everybody else seeing that at the same time, real time, takes so much stress out of the process.

Alec:
So much like generic turn times go away except for exceptions, that to me is going to change how we do business, but then appraisals.

Tammy:
Yes and I think that appraisals are one of those key things that it's always been the trigger to go to final approval because the appraisal is usually the last thing that comes in on the deal.

Alec:
Yeah, you're waiting.

Tammy:
Yeah and the turn time is outside of your control. So you're ordering the appraisal hoping it's going to come back with quality.

Alec:
Well in some places the turn time's like three weeks.

Tammy:
It can be.

Alec:
I mean and it's like oh my gosh, you're totally at their mercy.

Tammy:
Yeah, especially when you've got like a re-fi boom and there's less appraisers than there are transactions in the area and things really can get backed up on the appraisal side.

Alec:
So what's going to happen with appraisals?

Tammy:
There's a lot of cool things that are out there right now in appraisals.

Alec:
Well, like what?

Tammy:
So, even just what we've done with DULA US, running DU and LP time simultaneously, using the agnostic format, being able to utilize either way, either path. There used to be this, I don't know if it was like a myth, that people felt like if you ran DU and then you ran LP after it, it was not okay.

Alec:
Oh so, no, this is a real thing.

Tammy:
Right?

Alec:
I was afraid, I don't know where I learned it or how I learned it.

Tammy:
I don't know why.

Alec:
I think when you told me you can run both and I'm like, what do you mean? I full on was like you can? I was told the agencies get mad, like somebody's going to come and yell at me.

Tammy:
Yeah, and there's no agency yeller out there, but-

Alec:
It'd be incredible if somebody showed up, "Hey."

Tammy:
Yeah, wait, you just pressed the LP button right after DU?

Alec:
I'm out.

Tammy:
Yes, so I think that the agencies want you to follow their requirements and so they like it when you run their Day US.

Alec:
I mean what pick up as, and maybe you don't know the answer to this, but since you rolled out DULA US which elegantly shows both options where you've got waivers, property inspection waivers, has that increased our property inspection waiver and any clue by how much as a percentage?

Tammy:
Three times.

Alec:
3X more property appraisal waivers?

Tammy:
Property inspection waivers or appraisal waivers, yes.

Alec:
Which is money for the customer and time.

Tammy:
Time and money. It reduced your time so your cycle time can be reduced between 12 and 18 days and it saves the customers about $500 in fees.

Alec:
I'd say take 500 all day long.

Tammy:
Right? And it gives you more surety because you know that value's already acceptable and it's not really a waiver. I know that we talk about it as a waiver.

Alec:
That's our language.

Tammy:
But it's a digital appraisal because the agencies have so much data on that property that the value that has been reviewed is acceptable based on the data that they have.

Alec:
So outside of waivers, I keep calling it that because I can't help it, what is the future of appraisals look like? And this is totally pie in the sky out there, but what's the future of that?

Tammy:
I think that there's still going to be more streamlining and we've been doing a lot of prototyping and working with our agencies and investors on better ways to collect the data that's needed in order to validate the-

Alec:
Like what, what have you done that's fun?

Tammy:
I've done drone appraisals.

Alec:
Drone appraisals? Like the drone flies over the house?

Tammy:
Yeah, the drone flies over the house.

Alec:
Okay, who's piloting the drone? This is awesome.

Tammy:
Yeah, we have FAA regulated drone pilots and most of them are ex-military.

Alec:
Of course. So drone appraisals, what else? That's awesome.

Tammy:
The 3D holographic appraisal where it shows the inside of the property in the 3D format, a lot of people have seen those in open houses.

Alec:
Yeah, I was going to say on open houses.

Tammy:
Yes, so they've gotten so exact that it shows the exact-

Alec:
Layout.

Tammy:
Yeah, layout of the property. And so that could really be a possible option for an internal view of a property from a investor and agency perspective.

Alec:
What else?

Tammy:
The bifurcated model where you have an appraiser that sits at their desk and receives the data and then gets photo feeds from somebody else that goes out and inspects the property but in the end, the appraiser at their desk gathers all the and the pictures to complete the appraisal.

Alec:
That sounds like a big efficiency pick up than having an appraiser drive all over the place every day.

Tammy:
It is, especially with the lack of appraisers in some areas. So an appraiser that might have to go out to all these different properties would be able to do, I don't know, maybe three times as many if they were sitting at their desk receiving information.

Alec:
And that does leverage the gig economy in some way?

Tammy:
It does and so we've been able to use different website picture taking capability to be able to request pictures of different properties with geo stamping.

Alec:
So like an Amazon driver cruising around could snap some pictures of the comps.

Tammy:
Yeah, an Amazon driver or an Uber delivery person or somebody that's in the area could get a little extra money by taking pictures of properties while they're in the area.

Alec:
And does this translate into savings for the customer besides speed?

Tammy:
It does, so it helps the turn time get down to less than two days.

Alec:
That's the magic number right there, that makes me really happy.

Tammy:
The cost of the appraisal goes down to less than $200 an appraisal.

Alec:
Oh my gosh, this is where I get excited because I feel like it's a one two punch because there's always been a stress on the mortgage process of if I want more platform and bells and whistles, I have expense. If I want better rates, I got to have less infrastructure, there's always tugging on each other. And a lot of people in retail, from a sales perspective, sell service above rate and now you're telling me I can get service and a cheaper process with technology enhancements and it feels like a one two punch.

Tammy:
And if we do a less expensive process then we can pass that savings on to the consumer which is something else that they would love to see.

Alec:
They would love some extra money and cheaper process or better rates, absolutely.

Tammy:
Better rate is really that holy grail that you want to get to, but the cost of doing business makes it so that it's harder to give that better rate. But if you have a more streamlined, more efficient process then you can give that back to the customer in rate and price.

Alec:
So we unpacked appraisals a little bit, let's talk about paperwork and signings. So today we have an e-hybrid process, maybe break that down a minute and then maybe talk about full digital.

Tammy:
Yeah, so the hybrid e-close and that doesn't sound sexy at all.

Alec:
I know, we got to dress that up.

Tammy:
Mello Smartclose.

Alec:
There you go, Smartclose, I like it.

Tammy:
What we've done is we've been able to roll it out in all 50 states where we offer a streamlined closing for our customers. That they can digitally sign anything that's disclosure type information three days prior to closing. And then they go to closing and anything that has terms and conditions of the loaner needs to be notarized and recorded can be wet signed.

Alec:
How many documents is that like four, five, six, seven something like that?

Tammy:
Yeah, you got a big thick stack of documents even though we're paperless.

Alec:
Of course.

Tammy:
Paperless, right?

Alec:
That's like the ultimate joke. Paperless until you go to your loan signing.

Tammy:
Yes, and then it's got these-

Alec:
And then you're murdered by a stack of dead trees.

Tammy:
It is, there's like those stickies that have the arrows that say sign here, sign here with the yellow highlighted line.

Alec:
Well anyone that's listening that's closed a loan knows the pain of this.

Tammy:
There's pain.

Alec:
Because if you done your own loan signing, I mean your hand cramps, it's bad.

Tammy:
Yeah, you might need a couple pens.

Alec:
At least do pens. And so with the hybrid process, they basically sign all the disclosure parts with their CB, couple, three days earlier.

Tammy:
Right, and then when they come to closing, all they have to do is sign anything that has terms and conditions of the loan and needs to be notarized and recorded. So, it can go from an hour and a half to a 15 minute closing.

Alec:
Four minutes, well if it's me it's like see you.

Tammy:
But the thing that I think is even better is that the customers get to review their documents before their closing and can be able to ask their questions, feel comfortable with what the transaction looks like.

Alec:
That's a really good point, I didn't even think about that.

Tammy:
And the customers want that, they want to be able to understand it. They don't want to go to a closing and be like sign here, sign here, sign here.

Alec:
300 pages, super overwhelmed.

Tammy:
It's hard to be able to review everything, this gives them the ability to be able to review their documents ahead of time and feel comfortable with the transaction before they go to sign.

Alec:
What about full digital closings?

Tammy:
So full digital closing are still in a beta format. We have the plumbing in place to be able to do it.

Alec:
How does it work?

Tammy:
A full digital closing would be that there are no wet signatures, it's all electronic signature.

Alec:
Crazy.

Tammy:
And there is remote notary.

Alec:
Remote notary?

Tammy:
Yes, so the remote notary can come on to the corner of your screen, just like if you're FaceTiming or Skyping and they authenticate the customer by a metric authentications and there are several different biometric authentications which really, I mean everybody's familiar with it if you think about the thumbprint recognition on your iPhone or the facial recognition, those are biometric authentications. There's also a touch pad authentication that's also available that, did you know that the pressure that you place on your signature actually is a fingerprint of your signature so that's pretty cool.

Alec:
Pressure on as you draw your signature, like the pressure points where you put the pen harder and softer? So mine which is literally two circle squiggles, that's my fingerprint, no-one else can do that?

Tammy:
Yeah, nobody else is going to be able to do your two squiggles in the way that you do.

Alec:
That's right, they're very special squiggles.

Tammy:
It's so special. It's like a snowflake squiggle.

Alec:
Oh my gosh.

Tammy:
But we also use the holographic imagery on your ID, there's holographic imagery on the ID that the remote notary could utilize as well. The thing that I think is cool, there's lots of cool things about remote notary, that you could close from anywhere. I would prefer to close at the beach.

Alec:
Well, okay.

Tammy:
But wherever you want to close your loan is fine and the remote notary does video the transaction as well which I think is pretty cool because that's another documentation source, a digital validation of the signing of the loan which I think is very good and actually adds quality to that transaction. So remote notarization, some are doing it in the industry, we've done it by beta and I think that in 2020 we'll see more and more of remote notarization. The county, some aren't ready for it.

Alec:
Yeah, I was going to say, you're outpacing some of the counties, they're not ready.

Tammy:
Or the states maybe aren't ready, their laws are antiquated, but more states are coming on every day to be able to accept it and we're fully plumbed for it, so we're ready to go. I'm getting my hybrid e-close adoption rate up and then I'm going to roll county by county.

Alec:
Oh my gosh, the customers are ready, I just don't know if the industry's ready.

Tammy:
Well, I think everybody's ready to close their loans at the beach, wouldn't that just be lovely?

Alec:
I'm down. All right so, wow, we're almost 40 minutes in and we've unpacked a ton of crazy stuff. What's next in the Tammy mind? Because I know you're thinking six steps ahead, I know you're not just like what's tomorrow, what is and where is this whole things going to go in your mind?

Tammy:
I think the customer will be able to self-select the things that they need to in order to feel that they are controlling their transaction. That will use more and more data versus documents and we will eventually not need to use paper documents anymore at all. But using digital validations, using data as close to the source as possible will continue to improve the quality of the transactions.

Alec:
Yeah, well I just imagine that pulls out tons of risk, speeds up tons of turn times and gets you more accurate information immediately. And I bet there's somebody in here listening that's scared of this conversation and they're scared because they built their entire business off of being a loan structuring guru. They know all the twicks and turns, they know when do one year tax return versus two and when to go LP and when to do this and what to do this.

Alec:
And when you're talking about going direct to data sources and gathering in the information, that almost removed their ability to pick and choose what to show or package. So, how would you help somebody who might be feeling a little bit intimidated or insecure this is going to replace them?

Tammy:
Yeah, so I think the value comes from the human touch and that's something that a computer's never going to replace.

Alec:
That's the clip, dude, right there, that's the one. I love that, you're right. You're totally right, the human touch.

Tammy:
The relationships that we bring are what help us to be that trusted advisor on the most important transaction that a customer may have in their lifetime.

Alec:
Yeah, lodger's debt.

Tammy:
Yeah. And so they really do, even though they like the streamlined speed of the process, they like to be able to have surety as close to application as possible. They also need a trusted advisor, they may have never gone through this before. They don't understand and they need somebody to guide them through the process and that's really what the sales team needs to continue to do is continue to foster the relationships. Our business partners and our real estate agents want the surety at time of application too.

Alec:
Yeah they do, of course they do.

Tammy:
Yeah, a builder doesn't want to build a home without a golden approval. And if we give them a golden approval, it helps them to be able to feel comfortable in building that home and knowing the customer qualifies.

Alec:
Our realtor partners, to your point, they don't want to take someone around they don't know if they can actually buy the home, they want them to be sure that it's all buttoned up. So yeah, you're right, I think the industry is ready, I think there's just going to be waves with this stuff. And in fact I do owe you a lot of credit because when I first hung out with you a couple years ago and started to hear what you wanted to do, it's crazy to see it in fruition which is really cool so congratulations, that's got to feel really good.

Tammy:
Thank you.

Alec:
But it also really got my mind pivoting to the future of the loan professional especially the local one who's in community who are my people who I really care about. And if the process to get a loan, I even heard you say that maybe the future state is just people walk around approved constantly all the time.

Tammy:
It could be, it could be that people have their information in a way where, and this may be a little bit down the road.

Alec:
I like it, let's talk about post-apocalyptic, let's get all weird, it's good.

Tammy:
I think that they could have their digital wallet with their data where they have their income, employment, asset information available to them and then they give us a token to allow us to access it for the transaction. And that token gives us the information without us having to reach out to third party data sources because the third party data sources keep their information in their digital wallet constantly updated. So that customer could know at any time what they would qualify for, but they would still need that trusted advisor to understand what product's best for them, what they're trying to accomplish and how they can at best accomplish their goals and to still guide them through that transaction. It's complicated.

Alec:
Yeah, so when I heard you talk about that stuff, about constant approval, wallet, token, everything's plumbed all the time in real time, my brain went to man, the future of the sales people, my people, it's very clear to me that in order to maintain their position in the industry and not just get run over, that they have to create a lot of influence with humans, actual people. Because those people are going to potentially can get their loan approved with a retinal scan or a face recognition and if that's what approving your loan, then the question is where do you go get your face scanned.

Alec:
And so then hopefully our loan professionals have earned enough influence where they go, "Well, I'm going to do it with Alec because he's a good dude or I like him or whatever, I trust him."

Tammy:
Well and now it can help with the real estate agent as well so that ... everybody knows that loans never are exactly just vanilla loans. There's always something surprising that comes up on a loan and that's really where you need the seasoned professional as well.

Alec:
I love that you said that because if we go back and talk about the Smartloan again, people are messy. Humans are messy and tech's going to go so far, but then it's going to require humans to come back in and look at stuff and make rational decisions. I mean, common sense with a machine, sometimes they don't make the same choice.

Tammy:
Yeah, exactly and taking the information and even though the computer may be looking for a vanilla type loan, being able to utilize all of that years of experience to be able to find a way to get the deal done even though it looks ... the computer will say, oh we can do it or we can't do it and here's the information that's missing. But to be able to restructure the deal to make it work for that customer and meet their goals and what they're trying to accomplish, that's the nuance that we still definitely need those trusted advisors for.

Alec:
What I love about this conversation is, I bet there's a bunch of loan officers getting excited because technology, man, it enhances our ability to do more. To scale, to have more freedom, more influence, more opportunity and Smartloan sounds to be like just another complement in the whole process.

Tammy:
Yeah, it's just another tool for our originators to be able to serve the customer the way they want to be served.

Alec:
It's a pretty badass tool, it's pretty good. It's like rocket boosters. Okay, so, as we wind down, I always ask the same couple questions because I think it's really valuable for people listening. Our industry is going to obviously as we just unpacked for like 45 minutes, there's a lot of change in our industry and we're on the tipping point of what I consider dramatic change. And finally have seen technology come in to an industry that's been stagnant for over a decade post-crisis and actually enhance the customer experience, bring efficiencies, reduce cost, all the things that tech does wonderfully.

Alec:
And you've managed sales people and you obviously managed a lot of operations people, I would love for you to spend a couple seconds and just unpack some advice. If you're a loan officer out there and you're staring at this crazy world, what do you tell them? What would you encourage them, how would you help them see what's going on?

Tammy:
I'd say don't try to do it all at once, take one step at a time and put something into your process that you haven't previously done to embrace some of the new tools or technology. There's a lot of tools and technology out there, but embrace it one thing at a time and look at your customer base and figure out what's most important to them. And so if it's just like putting digital online application on your website and allowing them to self serve on their application, maybe that's your first best step.

Tammy:
Validating digitally some of the income and assets, maybe that's a good first step. Doing DULA US and getting more PIWs and ACE waivers, maybe that's your step. There's lots of different ways, embracing the hybrid e-close and being able to serve more of your customers with a streamlined closing, that could be your first step. There's lots of different things that you can do, but one thing that I do recommend to the sales team, we talked about the back of the card.

Alec:
Yeah, with the W2, please give me your pay stub, W2, tax returns, yeah.

Tammy:
It would be good to try to get data first. If you could get data first-

Alec:
Use the tools we have, go out and try to get data validations.

Tammy:
And then if you can't get the data, then go ahead and go and get the paper. But getting data first is a very good way of starting.

Alec:
Well you have had a hashtag for two years, press the button which is great. Please, just try.

Tammy:
Yeah, if you could just press the button, maybe we make it easier for the customer. But if you go get paper and then you press the button and then you give your underwriter the paper and pressing the button, then you're having the underwriter double reviewing stuff and you're making it even more inefficient.

Alec:
I've heard from some people that if you go out and try to leverage the data sources and the data tools but then you go and do the loan the old fashioned way, all you did was add cost with the data tools. You didn't pick up anything because you just ... it's silly.

Tammy:
Then here's no efficiency and there's no reason why it's good for the customer to do that and it is really silly. I think it's really silly.

Alec:
I know, it's like do this and then go back to the old school way. Okay, so ending comments, what else would you contribute to anybody paying attention right now and hanging out in our crazy industry?

Tammy:
I think we need to digitize everything and we need to do e on everything. And if we can digitize everything and e all the documents, our customers will have a much better experience.

Alec:
There it is, you heard it. This is the woman changing the mortgage it's been really incredible. I appreciate everyone tuning in, we're going to wrap it down, Tammy there's a chance we'll probably have to bring you back because I'm sure we're going to get tons of questions and people being like, "Wait, wait, I need more of this." So, thank you for your time today, thank you for everybody listening, I hope you guys have a wonderful day, we're out of here.

Tammy:
Bye.


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