Saturday Cup of Joe: a lending and tech(ish) newsletter
Friends & Colleagues,
SCOJ79. Week 79 of this experiment. 79 weeks in Detroit. Thank you to everyone who signed up over the last few weeks; I really appreciate it. Every so often when I’m putting together the news of the week, a theme emerges. Typically, I just collect articles as they seem interesting or relevant to what we do: real estate, mortgage, homeownership, the American Dream, leadership, etc. Every now and then, the articles or stories coalesce around particular subjects. This week, transition emerged as a theme. The transition from traditional assumptions to data-driven decisions. The transition from cable to streaming. The transition from Gen X trends to millennial trends. The transition from own to rent, from single-family to communal living, from football to soccer. Ok, maybe that’s a bit ambitious. But you get the idea.
Thank you for subscribing and I hope this newsletter remains valuable. I had an exciting and productive week. There’s a lot going on in Congress, at the FED, at CFPB, and in the market. Capital One announced an exit from the mortgage industry. Tech platforms and start-ups continue to try to solve for the mortgage industry’s inefficiencies. Still, many of the old problems persist: Consumers don’t take preapprovals seriously, consumers do not supply documentation early in the process, many jurisdictions still don’t accept electronic recording, and state law limits fully electronic closing(s).
The next year stands to be a dramatic transition in the industry. There’s no reason to continue to spend money on a platform that cannot compete. For instance, lenders — even the largest institutions — either have technology that makes the process more convenient and more efficient or relationships (and a portfolio) that make loans cheaper. Otherwise, it is becoming impossible to compete.
My guess is that over the next year, larger banks attempt proprietary mortgage platforms, institutions that do not prioritize mortgage lending exit the market, and vendors and service providers continue to roll out solutions for lenders who need to try to compete with automated / plug-and-play strategies. Again, transition remains the theme. What do you think? Do you think the automation in real estate and mortgage (platforms like Rocket Mortgage) are the transition to a new world? What’s your organization doing to respond?
This week The Wall Street Journal published the story of high-profile debt collectors in England that are stuck with collecting settlements or judgments against the mega rich. In some cases, the firm actually underwrote litigation and then had to chase down the payments as well. In other cases, the firm was hired by the holder of a judgment order to collect on the amount. It has all the makings of a great movie: international travel, online and in-person surveillance, real-time chases and “just misses,” and sketchy profiteering on all sides. Definitely worth the read.
It’s getting harder and harder to read about technology advancements, specifically the delivery of financial services, without encountering more and more on blockchain technology. Forbes published five predictions about digital transformation. There are two I’d like to highlight. First, the author predicted no future need for banks if digital platforms can handle the retention and ledger-keeping. Second, blockchain allows a consumer to follow a product, component, or ingredient from source to purchase. This type of visibility could be a game-changer for how consumers vote with their wallet on products and services.
Speaking of banks becoming obsolete, the American Banker decided this week that because Wells Fargo finally integrated banking information with fintech data-sharing platforms that all banks will follow suit. The funny part is not whether nonbanks have been doing this for years (we have) but the fact that data sharing is the least of the banks’ worries. As evidenced by the Forbes article above, data sharing will help banks stay relevant, but it’s now becoming clear that they are fighting an uphill battle.
Included this week:
· Of Interest — The subtext of all these millennial articles is transition and what that means to you
· Next Belt — Tunde Way’s Detroit is served with a side order of reality
· Fintech update — Several tech companies hit the news this week
· Walk the Talk — Branding countries and nation-states
· Quirky Story — The value of urban land
· Today’s Thought, the Quote and bonus
Of Interest: I came across a Wall Street Journal article this week with the catchy title “Millennial Home Buyers Send a Chill Through Rental Markets.” As you know, I love writing about homeownership and millennials. When both are in the same story, look out. After reading the story, though, I almost wished I had skipped it. Much of the story was simply the same homeownership stats we’ve seen before. Urban rentals are up. Suburban and rural single-family homes remain strong. Nothing to see here. However, the article ends with two items I thought worth sharing.
First, trends like marriage and millennial career planning are closely monitored on Wall Street among investors. For instance, the article says, “Their marriage rate over the next five years will likely play an important role in demand for apartments and houses.” Is Silicon Valley doing the same kind of monitoring/watching? Do fintech companies inherently assume they know millennials simply because most of the founders and employees are millennials? I wonder. Second, one Wall Street analyst is quoted as saying “We’re at the leading edge of transition.” This is an important point.
A valuable lesson that I’ve found as a leader within organizations is that people are people. It takes a long time for big changes to take hold across large groups. At the same time, young people know where changes are coming from and where “things” are going, so slight changes in communication or convenience can take hold very quickly (see smartphones, Facebook, uber). So, is housing a big enough change to withstand fintech and other innovations nipping at the edges? Do people ultimately want to own the physical home and be responsible for all the changes/upkeep/outcomes? How fundamental is that change? As we restructure our modes of communication, our office environment(s), our families, are we also altering some fundamental things like where we’ll live? If so, where is the transition going?
As Dan Gilbert loves to say, it’s all about the speed of the game. Adaptation is the most important characteristic of a growing business. I we apply that at the individual level, we might say curiosity is the most important characteristic of a successful person. How is your organization keeping up and what is your plan for changing trends in technology and lifestyle over the next five to ten years?
Next Belt: I read a story this week that purported to cover Detroit’s growing culinary scene but really hit home on issues of economic development and race. Tunde Way, the chef and author, wrote a passionate criticism of calling Detroit’s revitalization anything other than white privilege again defining the rules of the game. One of the most personal sections for me was: “Then (and now), Detroit was a site of pilgrimage for white folks looking to solve problems, presumably created by other bygone white folks.” As someone introduced to Detroit by my best friend who worked tirelessly to try to make an equitable and fair Detroit, I was hurt by this sentiment. At the same time, it made me stop and consider my role in the city. I don’t think it’s naïve to believe in what’s going on Downtown. Yet, I recognize the sensitivity our city has to issues of race and, particularly, promises of “this time it will work for everyone.” Way’s article was an important perspective for me to share. While I felt it was unfair for him to assume that somehow in the last three to four years Detroit should have made more progress in race relations than anywhere else in the country, there were other observations that reminded me how far we still have to go here. And that’s an important reminder. Downtown could be seen as a constant reminder of how the system only works for some, usually white or economically-privileged people, tainting anything that comes out of the Downtown revitalization with that reality. I think I can understand how that would feel like a slap in the face. Ultimately all I can do is be the most enthusiastic contributor to my company and my community. So that’s what I’m going to do. But I was grateful for this article because it really made me consider another point of view and how it’s important to write about Detroit as more than just start-ups and new opportunities.
Fintech Update: I had one of those moments this week that happens when you haven’t heard of something or thought about something in a long time and then it pops up like three times in a week. Well, I’ve written in the past of various fintech platforms that I hear about but over the last few months there had been fewer and fewer. That could be partly because my work changed and I was traveling more with less time to keep track of the Wall Street and Silicon Valley news, but this week I had three sites sent to me for review by friends and colleagues. Here’s a quick thought on each.
- Homee http://www.homeeondemand.com/ tracks the movements of local contractors, allowing homeowners to find and order a contractor/handyman on demand in their area. Pros: It gives homeowners the perception of access and control, especially in an emergency. It also meets a real market need. Cons: No matter what platforms we create, contractors can’t simply drive around or be around waiting for a call. Pricing could be a make or break. Homee takes responsibility for every provider that shows up.
2. GoldenKey https://www.goldenkey.com/ allows homeowners to sell their homes “fast and commission free.” The site has collected a group of investors that bid on available properties, pay cash, and close quickly. Pros: Convenience is important and hassle-free is a huge selling point because the unknown is the scariest part of selling. Cash sales close quickly and sellers will pay a price for speed/reliability. Cons: The service is only available in North Carolina right now. It’s hard to know if you are getting a fair price. Investors must be ready to move quickly. By and large, people overvalue their homes because of sentimental value and perceived value.
3. RealKey https://www.realkey.com/ allows mortgage originators to collaborate with other participants in the transaction. Framed as a mortgage application solution, the service is the front-end piece (collecting of info and docs) of the process. Integrations with real estate contract software like DotLoop exist in roll out. Given that the mortgage industry lagged behind the curve in automation/technology, many are rushing to try to capitalize on this moment. Visibility, transparency and removing questions is important for consumers. Artificial Intelligence might help consumers complete the 1003. RealKey only solves for one small piece and does not even replace DotLoop and DocuSign. It does not appear to include a solution for disclosures or closing documents. From what the announcement stated, the solution appears too small in scope to be a game-changer.
Not Fintech: Compass purports to increase real estate agent productivity with tools, automation and other integration that works a deal from start to finish. Compass made news this week with a $1.8B valuation (with a B!). It sounds like Salesforce for real estate from what I can tell, but these brokerages could be so far behind the curve that they missed CRM improvements. Given the competition and developments in direct-to-consumer real estate solutions (some featured above), it’s surprising that broker tools could get unicorn status from investors. At the same time, there are hundreds of thousands of brokers out there and getting even partial market share is a huge win given the size of the company. This is an area to keep an eye on.
Walk the Talk: “Look inward, discover yourself, find your place in the world.” This is the advice two (married) consultants from the London firm Institute for Identity (Instid) give to cities, states, and countries looking to brand themselves. For me, it was good advice for anyone looking to undertake anything — job interview, career planning, project proposal, starting a small business, or creating art of any kind — because it is the starting point of all success.
Branding a nation is not unlike branding a company. Instid says every country has built some message around “perceived essence, some identity regarded as unique, even if it’s a mixture of truth and lies, elisions and exaggerations.” Isn’t that true for all of us?
The article is listed the “The Long Read” on Guardian.com and that’s definitely true. It’s an incredibly in-depth look at this topic and nation-brand-building globally. One interesting footnote for me personally was an analysis of Belarus. As a political science student in undergrad, I wrote my term paper for “Politics of Soviet Successive States” on President Lukashenko of Belarus. If I remember correctly, my analysis was the President’s authoritarianism came directly from the Soviet ethos and while creating stability, it never gave the people a chance to express themselves or grow an economy. Until he’s gone, Belarus will remain exactly the same.
Nevertheless, I was excited and surprised to see it covered here and equally surprised to learn Instid’s co-founder wrote her thesis on Belarus at the London School of Economics. I’ve always felt some pull to keep tabs on Belarus ever since that paper and it sounds like Ms. Grand of Instid built a business on it.
I hope you find this article interesting too. And be thankful you didn’t have to read that term paper.
Quirky Story: This week in urbanism. CityLab published a “report” on the value of urban land across the country. Almost half of the most valuable urban land in the country is in five cities. Most of the urban land of decreasing value is in places like upstate New York, Ohio, Michigan, Western Massachusetts, and parts of Texas. The bottom line is what we already thought: location matters and inequality of all kinds (economic or spatial) makes things dramatically more challenging nationwide.
Today’s Thought: Ambition versus experience. On one hand, there’s no substitute for experience. On the other, most entrepreneurs say that it’s not a résumé or education but actually building a business (of any size) that will dictate success. That creates a conundrum between pushing for more responsibility (ambition) and waiting to gain the experience. When it comes to additional responsibilities, I have always been in favor of erring on the side of too early rather than too late. What are you ready to try? Is there anything you know deep down you should be doing?
Quote: “I have been impressed with the urgency of doing. Knowing is not enough; we must apply. Being willing is not enough; we must do.” — Leonardo da Vinci
Bonus Content: Atlas Obscura profiled a book of beautiful pictures of old trees, mostly Western trees against starry skies. My favorite was the tree title Obscura.