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Ask the Expert: The Age of the Tech-Assisted Mortgage


September 10, 2020

Hasan Rizvi Thank you, everybody, who’s joined us, and obviously a big welcome to Thuan for taking the time. Welcome to the Ask the Expert series, where we ask industry leaders about their unique perspective on how to navigate the most difficult challenges faced by the broader real estate and financial services ecosystem, and also give you a chance to ask the experts some of the more pressing questions on your mind.

My name is Hasan Rizvi, I’m the CTO of States Title, and today I’m excited to welcome the CEO of Loan Factory, Thuan Nguyen, to talk about the topic, “The Age of the Tech-Assisted Mortgage.”

Thuan made a career switch from a software engineer to a mortgage broker and has been a California mortgage broker since 2006 when he founded Loan Factory. Since becoming a broker, he built the mortgage software known as MOSO, which helps mortgage brokers with customized websites, online application generation rate alerts, and cloud-based document management.

He was named the number two broker nationwide by The Scotsman Guide 2019 ranking with production of $507 million. He’s now on track to close over a billion dollars in 2020. Congratulations!

With that, we’ll get started. Welcome, Thuan, again. So, in our short introduction, we mentioned you made the leap from data and engineering to become a broker and founder of Loan Factory. A number of our leaders and employees did the same, bringing prior knowledge and an innovative attitude to our mission here at States Title. What made you move into mortgage and what attributes do you think someone needs to make such a big move successfully?

Thuan Nguyen Very interesting question. And my answer is probably not what you are looking for. I made the move by chance. It’s just that I got tired of working – I used to work for Morgan Stanley, a Wall Street company – and I got tired, I didn’t like it. So I stopped working.

And before that, I bought a house and I saw that the broker that helped me – the transaction was so smooth and she made like more than $4,000. And I felt like she didn’t do anything and she made so much money. So I thought, maybe I can do that too. And that’s why I made the switch. And when I became a mortgage broker, I did not have a mentor. No one helped me at all. I just studied online, got the license, became a broker and opened my company.

And because of starting a company without any experience, without any customer base, I didn’t know how to run it. So, it wasn’t successful at all, and I had to shut it down. I went back to the tech world where I worked for a startup company, but at the same time, I didn’t give up. I kept learning. I kept improving. I kept learning, so that I could build up a customer base. I built up my knowledge base, and eventually, customers began to love me and they kept coming back and kept referring more and more customers.

I didn’t even use technology until about seven years ago when I ran into problems. As you know, back then, seven years ago, there were only one or two software technologies to help with mortgage… And when I had like 200 loans, it became impossible for me to manage.

I didn’t even use technology until about seven years ago when I ran into problems. As you know, back then, seven years ago, there were only one or two software technologies to help with mortgage, which is Calyx Point, and it’s very basic. And when I had like 200 loans, it became impossible for me to manage. So that is when I start using my own software, MOSO.

Hasan Rizvi So you kind of mentioned this already, but you saw, obviously, an opportunity that drew you in. Since then, what challenges do you think we’ve addressed, and what big problems still remain, from your perspective?

Thuan Nguyen There’s a lot of challenges, and I’ve been addressing problems ever since – I’ve been working and solving problems for the past seven years. But as you know, there’s always going to be problems. And I’ve been addressing a lot of issues. But then, remember, we built MOSO for mortgage brokers mostly, not for the lender yet. And I solved tons of problems.

You have to be aware that every company, they have their own problems. Everyone has their own problems, and it’s very difficult to come up with a solution for everyone. And that is why it’s very difficult to build a software that addresses everyone’s problems. I can only focus on building a software that addresses the problems that faces the broker. Mostly small and medium-sized brokers. And now I’ve run into a problem when I grew so big, I became sort of a big broker now with different types of problems – and I’m in the process of addressing and fixing the problem right now.

Hasan Rizvi Let me ask you this. So as you said, you kind of started building your own software because you saw some gaps, and we’ve seen several lenders and brokers developing their own software and data stacks. Why do you think we need custom solutions, can you give some examples of what you faced that made you develop your own software as opposed to something that might have existed before, and what were the main customer needs that you wanted to support?

Thuan Nguyen Basically, when you run a business, there’s a lot of requirements. Requirements regarding marketing and advertising; how to build trust; how to collect applications; how to process the loans; how to collect the documents from the borrowers; how to communicate with the borrowers; how to keep track of the important information that the customers want how to do CRM; how to communicate to the borrowers about the current rate or the future rate; and how to bring back the customer.

Let’s say if they closed a loan with us seven months ago, six months ago now the rate drops: How do we bring them back? How do we build a relationship with the realtor? There are thousands of questions and thousands of problems that we need to address.

Let’s say if they closed a loan with us seven months ago, six months ago now the rate drops: How do we bring them back? How do we build a relationship with the realtor? There are thousands of questions and thousands of problems that we need to address. And when we build a software, we try to address all of these problems.

Hasan Rizvi I think there are two things that seem to emerge from this. One, it looks like your product was really the amalgamation of an LOS and the capabilities of a CRM, because those obviously existed in various forms. But it looks like, given your focus on service, you really started with, “Why are you successful in this business? It’s because of service!” which we agree with. I mean, clearly, this is a very service-heavy business. And, you know, that’s what customers require, and that’s why they come back. It seems like you really wanted to focus on the service element, which is why you went in the direction of trying to get the core LOS capabilities integrated very closely with the CRM. Was that part of the motivation and how did that play out?

Thuan Nguyen So the motivation is: There are some solutions out there, but they are broken up. They are very specialized – CRM, LOS, POS – we built MOSO to have all of these components together; one piece of software that does everything. We have a website, facing the consumer. The client can fill out our application online. They can submit documents online. We have a CRM to keep the communication with the borrower. We have an LOS, and even post-closing, we have an automation system to send out emails to the borrower automatically.

So I built every single solution all together in one piece of software that handles everything. And I don’t think there’s such a software right now out there like this in the market that does everything. And as you know, it’s not easy for the software to talk to each other. You might have a very good piece of software, that might be your LOS. But then you have no way of interfacing with the customer, collecting the application and paperwork. You don’t have a CRM system to maintain a relationship with your customer. So it’s extremely difficult for the software to talk to each other.

And even a simple thing like phone communication, like phone messaging. We work with RingCentral and we are integrated with them so that everything we do works together, so that we can simplify our process and make everything so much easier.

Hasan Rizvi And it looks like, outside of the service integration, the ability to integrate with all the different ecosystem providers was another important element.

Let’s switch gears a little bit. Obviously, you know, COVID-19 came unplanned, and everybody’s seen changes because of that. And obviously the volumes have increased for all the reasons that we all can understand. How have you responded to keep up with the loan volume and evolve the customer experience in these challenging times?

Thuan Nguyen This is a very interesting question, and I think everyone is facing this problem. Some title companies have had to shut down their operations. Some title companies stopped working with 300 brokers so that they can focus on their main customers. It’s an issue that everyone is facing right now. And I remember back in March, when we had a wave of refinancing, I was so backed up. We got over 1,500 active loans and we could not process any more. So when the loans came in, we got stuck: We could not even touch it or submit it for more than two days. Nothing could happen because everyone was so overwhelmed. Every processor was handling 80, 100 loans and they could not process any more.

You know customer service is important. They come to us for help. They want us to help and lock the rate for them ASAP, and if we have a loan sitting there, going nowhere, of course, everyone will get mad. So I came up with a solution by improving our process.

So that is the problem that we faced four months, five months ago. I was upset, of course. When customers came to me and I could not help them, the customer was upset. You know customer service is important. They come to us for help. They want us to help and lock the rate for them ASAP, and if we have a loan sitting there, going nowhere, of course, everyone will get mad. So I came up with a solution by improving our process.

We turned into an assembly line. When we had a loan coming in, we have a different department to take care of the loan. The first department can be set up and when it finishes, the LOA or the LO can jump in and underwrite the loan, and then pass it onto submission, pass it on to condition, and pass it on to closing. So we built an assembly-line model. And now that it’s up and running, we can handle more than double that volume. Now we have over 3,200 active loans, and we are able to move so fast. Every loan can come in, we can submit and lock a rate for them within the same day. So that shows you how innovation, how my ability to adapt and make changes will allow me to solve any problem that I see.

Hasan Rizvi So it looks like specialization, like the way to kind of organize your work, was a big part of it. On the technology side, coming back to that a little bit. So, as you know, what we are focused on, in addition, is also seeing how we leverage data science and emerging technologies. I’m curious to hear your experience in terms of data science, particularly: how have you leveraged or have you seen any applications, and how have you seen that deliver value to your process?

Thuan Nguyen What makes me successful and different than others is that I focus on every little detail. Every little detail. So when I level up my application, I make sure it’s simple. We only collect the necessary information from the borrower, because if you ask them to fill out a full, long application, they will give up. And we try to automate as much as possible, so like property tax insurance, we can estimate. I pay attention to detail: The data that they have from the customers. This is something that I need to focus on.

When the consumer comes to the site,  we give them what they want. They want to know the rate, the costs. They want to know if they qualify or not. They want to know if they refinance, would they save money or not. You know, the important thing is – after we answer all the questions that they have – they can click on a button and fill out the application.

I’m still not focused completely on data science yet, but I am mainly focused on the process more than the data itself. I focus on what the customer needs, what the client needs, and focus on that. So I view my pricing engine and I allow my client or anyone to use our pricing engine. As you know, most of the lenders and the banks, they don’t show their rate to the consumer. But I am different. I show my rate to everyone. They can come through our website and check the rate. It will take them 30 seconds. The consumer can check out the rate, the cost, the payment. They see if they qualify or not.

We make everything so simple for the client. So instead of having a website with too much information, we make it so simple. When the consumer comes to the site, we give them what they want. They want to know the rate, the costs. They want to know if they qualify or not. They want to know if they refinance, would they save money or not. You know, the important thing is – after we answer all the questions that they have – they can click on a button and fill out the application.

So it’s very easy and simple. And when they fill out the application, we automatically create an account for them so that they can come back and finish the application where they left off, so it’s very convenient and easy for them. That is what I’m looking at: What is in their mind.

Hasan Rizvi I think you kind of alluded to it a little bit already, but as you look forward now, particularly from a technology perspective, it looks like borrower experience is a big focus area for us – data science might be another area that you will invest more in. But can you give us some sense of what the roadmap is ahead in terms of your MOSO platform, and what are the investment areas that you’re very excited about?

Thuan Nguyen Yeah. So the customer experience is definitely important. We give them what they want. They can see all the answers customized to their situation. And what makes my company, my process so good is that we give them the control. We give the customer the control. They are the ones that fill out our application. They are the ones that submit the document to us. They are the ones that monitor the rate. They are the ones to tell us to lock the rate. So they are in control of the entire process, not us.

But in effect, I give them the control, but I give them the work. They do all the work for us, I don’t have to do it. That way they are happy, they know what’s going on, they’re in control, and if anything happens, anything goes wrong, it’s their problem, it’s not my problem. So that way it saves me time,saves me trouble, and makes everything move so fast, so easy.

And that is what we are working on, that’s what we are good at. And the area that we are focusing on is to have more automation. We are working with a few lenders to get their pricing into our website and allow our team to one-click and submit the loan to the lender.

We are trying to be integrated with the lender. At the same time, we are trying to integrate with the title company so we can get the fee directly from them. And if that happens, we can have a one-click to generate the LE for the borrower, for the consumer. So integration is the key, and we are focused on the integrations. And then – I hope most of you know – the new 1003 will come in now sometime next year, and we are working on that as well to make sure we are compliant.

Hasan Rizvi OK. So before I take a couple of questions that I have, let me ask you one other thing. In terms of your platform, as well as your business in general, are there any particular metrics that you track, particularly in terms of the efficiency metrics, the times to close, or customer satisfaction? What are the key metrics that drive your business that you track on a daily basis?

Thuan Nguyen Yeah, I mean, this is something I want to focus on as well. Customer experience and customer happiness is so important. So I give my employees a bonus if they get a five-star review from the customers to help motivate them to provide excellent service.

And then, the next step would be: in the next month, we’ll focus on tracking the turn time and how long it takes my staff to submit a loan, to get the loan approved, and to close the loan, and if the customer is happy or not. So we will break down every department. What are the turn times for each department? And that way I can reward my employees and I can track their performance to make sure we can continue and can isolate the problem. Is it submission, set up, condition or closing? Where is the problem? Then I can track the metric over time to try to improve it constantly. So those are what I’m focusing on to improve the turn time and efficiency.

Hasan Rizvi Perfect. Let me take a question that is on a lot of our audience’s mind, which is around remote closing. I mean, one of the impacts of COVID, obviously, was the fact that in-person interaction became a challenge. And, you know, our CEO, Max Simkoff, has been very vocal, suggesting that the industry must make remote closing a part of the new normal, beyond just looking at the current limitations. What are your thoughts in terms of some of those kinds of innovations, like remote closing and a more electronic experience for the consumer? Did you incorporate some of those, have you seen more adoption, and what do you think is going to happen with some of these types of areas going forward?

Thuan Nguyen Yeah, I think remote closing is an excellent innovation. If it can be rolled out, I would be the first one to adopt it. Most of our business is in California and in California we cannot do remotely closing yet. But if California allowed remote closing, I would love it because it would solve so many problems.

Just a few days ago, I had a customer call me and tell me that the notary didn’t show up. I mean – a last minute thing like that – and most closings take place after hours, on weekends. The customer was stuck waiting and waiting, and the notary didn’t show up, or showed up late. And they call, and nobody in our office is working on the weekend or off hours. The customer was so upset.

Or when they sign the document, they see something wrong and they want these questions answered. So basically, remote closing is one of the best things to improve customer service. We don’t want last-minute problems, and remote closing can solve so many things. It will not only save time but money and trouble. So if the industry adopts remote closing, that would be a very good thing.

Hasan Rizvi OK. Let me ask another thing, again, switching gears, looking forward a little bit. You were the number two mortgage broker in the nation in 2019 and projected to do a billion dollars in loans in 2020. What’s your feeling in terms of the market looking forward, you know, 2021, relative to obviously some of the challenges that we spoke about in terms of COVID, but even otherwise, how do you see the market playing out?

Thuan Nguyen Very good question. I already broke the billion-dollar mark, I broke that mark already.

Hasan Rizvi Congratulations!

Thuan Nguyen I see that this year is going to be the best year ever. 2021 is going to be tough. The reason is g-fee 0.5 percent will hit it in the next two, three weeks. And most people that want to refinance may have already refinanced. Even though next year, the rate might stay low, people have already refinanced. Our industry depends on purchase and refinance. Purchases: There’s a limited number of houses, or the supply and demand out there, so we cannot increase it quickly or decrease it quickly. It is very stable.

So the markets rely mostly on refinancing right now. And if most people already refinanced then there is going to be a drop next year. It’s not going to be as good as this year. And my advice is there will be a lot of challenges in the future because the mortgage industry has seen a lot of innovation, a lot of technology, a lot of new players come into the market with technology, with new processes in place, and they are able to scale, able to offer very, very low rates. So if you are not prepared, if you are not improving, if you are not ready, you will have a hard time in this industry.

You can see there are more and more people coming into this market. A lot of LOs are becoming brokers. A lot! And the competition is getting heated, especially in the past year. There will be a lot more competition in the future, and mortgage will become a commodity. More like a commodity with technology. With the new process in place, all of that will make loans become a commodity, at least for the top borrowers. So there would be more competition coming in, and my advice is for everyone to improve, to learn, to get better so that your business can grow.

Hasan Rizvi Perfect. Thank you, those are wise words. Before we wrap up, I guess one question based on what you just said, as you describe the mix between refi and resale. In your world, did you have to prioritize given the volume that you saw in 2020 and how you’re at least suggesting 2021 might play out? Did you have to make some hard calls in terms of the product mix that you had before and after?

Thuan Nguyen Very good question. Right now, more than 90 percent of my business is refinance, and it’s easy money. Purchase is so difficult. There is a lot of time pressure and we make the same amount of money. So most brokers have the tendency to focus on refinance.
But then, purchase is very important because it’s a new customer for you, and they will come back to you. Secondly, the realtor is very important – they will refer a customer to you. So, even though it’s easy to make money on refinance, it’s so important to continue to focus on purchase, and therefore, I have to have a team specialize in purchase so that we don’t neglect that. We can continue to focus and we’ll provide excellent service so that we have more customers coming in, and more realtors referring customers to us. This is an important segment and we should not ignore it.

Hasan Rizvi Yeah, perfect. So we’re at the end of our time. Thaun, thank you for taking the time to talk to us today. Your insights and experience were extremely valuable. We really appreciate your time. Thank you very much.

Thuan Nguyen Thank you, Hasan. Thank you, everyone.

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