From IPOs to ice cream, 5 bits of wisdom from Quicken's Bob Walters

Bob Walters, the president and COO of Quicken Loans, kicked off this year's Digital Mortgage Conference with a bang.

His keynote session covered the ways in which the coronavirus turned 2020 into the year of unexpected disruption, speaking on accelerated technologies and the next wave of industry digitization, as well as comparisons to Amazon and why the Rocket Cos. IPO is like selling ice cream.

Below are a few key points from the discussion.

The coronavirus-driven leap in tech adoption accelerated change
"I think a lot of things that would have inevitably happened are now happening much faster than they would have before," Walters said.

Remote online notarization, e-signature, alternative appraisals and the application process itself all became more modernized out of necessity over the last few months. Many of the in-person aspects of a transaction that existed mostly unchanged for decades were altered thanks for social distancing measures. The modern replacements that had been waiting for widespread adoption were picked up all at once.

"When you think about coronavirus, you think about acceleration," Walters said. “It's been a terrible tragedy for so many people but it's also changing our world. It's accelerating so many things … and mortgage lending is no exception. It's being changed pretty radically. A lot of the technology that's been accelerated is tech that's allowed people, consumers, homeowners, to transact in a less physical way."
Direct data sourcing is the one of the next big things in tech
As lenders get up to speed with the tech tools that allow them to transact in the current environment, the natural question is, what comes next? What will the next wave of mortgage tech look like? Sourcing data directly from its sources will be a major step in creating more efficiency, Walters said.

Lenders contacting institutions, such as insurance companies, which have borrower data will create additional convenience for the borrower (who no longer has to supply such documentation) and it will minimize inaccuracies, Walters said. The key for the industry will be knitting it all together into one, holistic process.

"We're going directly to the sources. Instead of calling a homeowner’s insurance agent in town to send a deck page, we can go straight to the big insurance company — with the client's permission — and pull that data directly," Walters said. "Two great results are occurring because of that. It's easier for the consumer. They don't have to go rummage through their files and find these things. The second thing is the data quality is better. When you go straight to the source, you don't have 'page 10 wasn't readable,' you don’t have the possibility that someone might intervene. When you have multiple intermediaries touching it, opportunity for foul play goes up, but so does the ability to lose pages, to have smudges and things like that. The fewer hands that touch data, the better."
Algorithms can enhance the effectiveness of human work
Even with the heightened technology usage, people conduct the mortgage business through processing, underwriting and taking the applications. However, human work comes with human error, especially in the Byzantine world of lending.

"What questions do you ask? There's Fannie guidelines, Freddie, FHA, VA, jumbo, you have RESPA, you have state guidelines … How can any human being possibly remember all the permutations and iterations of all the different questions that you may ask?" Walters said. "And they screw it up. They forget to ask something or don't ask things differently. It leads to rework and confusion. If you apply a modern process to allow scalability, that's really what technology is bringing."

Once data becomes digitized, artificial intelligence can be leveraged to sift through all applicable rules and regulations, eliminating anything forgotten or mistook by loan officers.
Quicken’s guide for growth is no competitor. It’s Amazon
Quicken Loans has a mission to drive innovation and technology into the mortgage process. When assessing its success and looking where the company could go next, it doesn’t compare itself to industry peers. Instead, it uses a modern megalith as a model touchstone.

"There are many great companies in our business but we are looking at the Amazons. We are looking at companies like that and building this digital platform," Walters said. "The innovation that'll come with how loans flow through the system, how technology interacts with people to speed up the process. Nobody gets a loan because it's fun ... You want to purchase a home, you want to lower your interest rate or maybe I want to take some equity out. And you want to do it as quickly as possible and you want as much certainty as possible. Instead of a 30 day process, it should be a five day process, maybe even a 24 hour process. That's where technology can take us. There is no reason it can't be done in 24 hours."
Getting shares from the Rocket Cos. IPO made some employees tear up
With Rocket Cos. going public and selling a small portion of the company through its IPO launch, CEO Dan Gilbert still has higher aspirations for Quicken Loans. The IPO will provide liquidity for projects in the works but also potential for future acquisitions but won't change who they are in the long term, according to Walters.

It's possible — especially with the strength the mortgage industry displayed during the coronavirus' economic shutdown — it starts a chain reaction with other companies following suit. But what remains to be seen is if valuations will stay high if interest rates start climbing and refinance volume dries up.

"It's like selling ice cream. When it's a 90 degree day you sell a lot, when its 40 degrees, cold and drizzling, you sell less. But if you think about long term value, it is built by companies that change the way that business is done," Walters said. "They continue to gain market share, market power and with that over time comes long term profits. Mortgages might be a little bit lumpier than other industries as far as revenue and profit streams go, but it's an $11 trillion industry. In a down year, we'll do $1.5 trillion. It's very robust and vibrant and it's not going away. The firms that revolutionize and change for the better the way mortgages are delivered to people will win in the long run and investors in those companies will win in the long run."

In the public offering, Rocket gave every team member shares of the company.

"That might be normal stuff in Silicon Valley, but in Detroit that's special. There were people in tears,” Walters said. "People who never owned a stock in their lives to have a meaningful amount of equity in the company is a big deal."
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