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The history and opportunity of the modern mortgage [video]

a16z.com

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Re: The history and opportunity of the modern mortgage [video]

#41

Post by PretzelFisch »

jasode wrote: post #26

Another way of summarizing Alex Rampell's video: The mortgage industry is ripe for disruption. Yes, there are massive economic inefficiencies in the whole mortgage lending business and since a16z's motto is, "software is eating the world" , there are opportunities for tech startups to disrupt all of that. To spur discussion, I'd categorize "disrupting mortgage industry" into 2 general buckets: (1) disrupting the proc…

The disruption everyone talks about in this industry is much like self driving cars so far off into the future. Can the process be streamlined yes, can you get rid of some of the players not really. You will always need a title check you will always have to handle servicing( some banks and lenders do it in house depends on the cost) you will always need someone to buy a pool of loans and sell it to other investors.

Re: The history and opportunity of the modern mortgage [video]

#42

Post by nugget »

PretzelFisch wrote: post #41
jasode wrote: post #26

Another way of summarizing Alex Rampell's video: The mortgage industry is ripe for disruption. Yes, there are massive economic inefficiencies in the whole mortgage lending business and since a16z's motto is, "software is eating the world" , there are opportunities for tech startups to disrupt all of that. To spur discussion, I'd categorize "disrupting mortgage industry" into 2 general buckets: (1) disrupting the proc…

The disruption everyone talks about in this industry is much like self driving cars so far off into the future. Can the process be streamlined yes, can you get rid of some of the players not really. You will always need a title check you will always have to handle servicing( some banks and lenders do it in house depends on the cost) you will always need someone to buy a pool of loans and sell it to other investors.

You don’t always need a title check - you just need a party willing to bear the risk of problems with title, which are rare. There is plenty of margin to play with there.

Re: The history and opportunity of the modern mortgage [video]

#43

Post by celestialcheese »

PretzelFisch wrote: post #41
jasode wrote: post #26

Another way of summarizing Alex Rampell's video: The mortgage industry is ripe for disruption. Yes, there are massive economic inefficiencies in the whole mortgage lending business and since a16z's motto is, "software is eating the world" , there are opportunities for tech startups to disrupt all of that. To spur discussion, I'd categorize "disrupting mortgage industry" into 2 general buckets: (1) disrupting the proc…

The disruption everyone talks about in this industry is much like self driving cars so far off into the future. Can the process be streamlined yes, can you get rid of some of the players not really. You will always need a title check you will always have to handle servicing( some banks and lenders do it in house depends on the cost) you will always need someone to buy a pool of loans and sell it to other investors.

Title companies or title insurance is one piece I've never fully understood.

Are title companies basically just insurance companies that do a lookup in public / private records on that property to make sure the person selling the property is actually owned by them. And if they did poor research or the records were wrong, they'll pay for fees. Is that accurate or am I missing something?

Re: The history and opportunity of the modern mortgage [video]

#44

Post by cullenking »

celestialcheese wrote: post #43
PretzelFisch wrote: post #41

Earlier quoted context omitted.

The disruption everyone talks about in this industry is much like self driving cars so far off into the future. Can the process be streamlined yes, can you get rid of some of the players not really. You will always need a title check you will always have to handle servicing( some banks and lenders do it in house depends on the cost) you will always need someone to buy a pool of loans and sell it to other investors.

Title companies or title insurance is one piece I've never fully understood. Are title companies basically just insurance companies that do a lookup in public / private records on that property to make sure the person selling the property is actually owned by them. And if they did poor research or the records were wrong, they'll pay for fees. Is that accurate or am I missing something?

You got it. They sell a couple different depths of products, the more guaranteed it is the more cost. They do the research to make sure there arent any valid competing claims or partial claims to any property. They bundle that all up with an insurance package for if they are wrong.

Re: The history and opportunity of the modern mortgage [video]

#45

Post by loso »

echopom wrote: post #14

This is really great content by A16Z. It shows how complex building a Fintech in US actually is , often due to how many different partners you will actually need to depend on. In this specific case , you would need to have each partners offer an API that you could call to automate the mortgage workflow. Obviously , due to the nature of the financial sector it's very likely those partners don't have those APIs and don…

Welcome to my world right now. I work for a company building a mortgage product and the biggest hold up has been dealing with 3rd party apis. Some mandated, some not. Mostly all using outdated tech and obscure mortgage codes. A product that should have taken a few months has ended up taken days mainly because of delays dealing with 3rd party vendors.

Re: The history and opportunity of the modern mortgage [video]

#46

Post by robocat »

tomglynch wrote: post #2

The video is very American centric - is this the case in other countries ie Australia?

I did see an article comparing Australia with NZ.

"[In Australia] there are bundle and package fees, and related 'discounts', to complicate matters.", "And 80% of all Aussie home loans are wrapped up around these opaque bundle arrangements."

https://www.interest.co.nz/news/99862/shifting-competitive-f...

Re: The history and opportunity of the modern mortgage [video]

#47

Post by JackFr »

mooreds wrote: post #24
tw1010 wrote: post #18

Please please could someone recommend two or three books to get a more in-depth understanding of the history of mortgages, similar to what this (awesome!) video only briefly touched on.

I can definitely recommend this list of posts by Tanta, who worked in the mortgage industry for years: https://www.calculatedriskblog.com/2008/12/compendium-of-tan... I looked at turning these into an ebook (with permission from the family) but never got it published.

Tanta was an amazing resource during the run up to the crisis. I only ever interacted with her in comments to her blog but she was kind and so knowledgeable about the topic - “The Ubernerd’s Guide to Mortgage Servicing”

Re: The history and opportunity of the modern mortgage [video]

#48

Post by JackFr »

Video glosses over an important aspect of balloon mortgages. No one ever really expected you to pay the full balloon. The expectation was that you’ll pay some portion and roll the rest into a new balloon. The problem during the Great Depression wasn’t that the people couldn’t make their balloon payments (they never could) it was that the banks had no money to lend, and they couldn’t roll the balloons.

(An interesting aside, is that during the run up to the crisis, banks reinvented balloons in the form of the teaser adjustable rate. These had a low fixed rate for 2,3 or 5 years, and then would turn into 28,27 or 25 year adjustable rate loans, with they rate much, much higher. The thing is, no one was ever supposed to pay that rate. When the teaser period ran out, the borrower was expected to refi. And of course we know what happened next....)

Re: The history and opportunity of the modern mortgage [video]

#49

Post by apo »

The takeaway appears to be that the modern mortgage in the US places several intermediaries between borrower and lender.

The opportunity would be to develop the software that can replace the unnecessary entities, driving down costs and profiting the innovators.

We can take this idea to its extreme and possibly learn something. Imagine a world in which home buyer and seller transact directly using software. In a world eaten by software, we might expect this to be the norm.

Impossible? Find the one player who can't be removed under any circumstances. Add them back in, and try again.

Continue until only the minimum roster of players remain. Assume all laws remain in their current form.

I suspect a16z, along with many other fintech startups have run this analysis already and have come to a depressing conclusion: the players in place now are essential given the current regulatory framework. They may not have automated as much as they could have, but they're reluctant to go further given their regulatory burden.

That's where an organization such as a16z can come in. With software startups increasingly requiring nothing from venture capital, the last bastion of relevance will lie in the twilight zone between technology and regulation. Companies who need to get laws changed for their business models to work will need deep pockets.

Re: The history and opportunity of the modern mortgage [video]

#50

Post by mooreds »

tw1010 wrote: post #34
mooreds wrote: post #24

Earlier quoted context omitted.

I can definitely recommend this list of posts by Tanta, who worked in the mortgage industry for years: https://www.calculatedriskblog.com/2008/12/compendium-of-tan... I looked at turning these into an ebook (with permission from the family) but never got it published.

I would love you if you sent me that ebook (email in bio).

Thanks for asking. It's not available for public consumption, unfortunately.
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