Welcome to the 8th episode of the #AskAPrivateLender Podcast brought to you by Mortgage Automator. In this episode, we are talking to our partners at Lendesk who have recently acquired another software company Finmo. Alex Conconi (Founder & CEO) and Greg Williamson (CRO) discussed with us the innovations in the private lending industry, security concerns, building the ultimate borrower experience, and more! It’s a must-listen for modern alternative lenders and brokers looking to understand the importance of technology for the industry.

Listen, watch, or read the interview below. And stay tuned for more episodes coming up!

 

Lawrence: Now, Finmo has been acquired by Lendesk. First of all, congratulations. I think that’s incredible. I think it’s a win for not only you guys but, I think, for the industry as a whole. I think it’s important when these different technologies come together, and they build something that’s better together than what could have been separately. Kudos to you guys.

Why don’t we start off with how this all came about? If you want to start off maybe with your background? Alex, you’re the CEO and founder of Lendesk. You guys started, I think it was seven years ago right?

Alex: Yeah. Crazy how time flies, but yeah it’s been about seven years since we first started on this project that’s now become my life.

Lawrence: Very cool. Greg, you guys started Finmo a few years ago, right?

Greg: Well, we officially incorporated in April of ’17, so just a little over three years.

Lawrence: Your original vision, being in the broker space for a significant amount of time. I guess you saw a void in the market? You saw that there would be a better way to do things for brokers, to submit deals, to get your work done. You guys started that venture to put it into place and help out the community?

Greg: Yeah. I was a broker. I was fortunate enough to enjoy some pretty good success in that business. It started out really, I met Carter, and he came to work with me at my brokerage, generating leads, particularly online. He was a master. He’s from the US. We got along famously.

Then he got to the point where he could drive so many leads, but if you recall back then, six, seven years ago, the drop off was massive when the customer says, “Okay, I’m interested. Now, what do I have to do?” To get the application, or to get the customer into the system, what was available at the time was not good enough, I guess. Interesting side story. Because he’s from the US his original inspiration was Rocket Mortgage, because Rocket Mortgage came into the market and it was like, “Hey, this is what I was talking about. Push a button. Get a mortgage. All digital.”

It’s just funny how the world works because here we are part of Rocket now. But that’s true. Then he was showing me Rocket Mortgage at the same time that I was understanding that there was an opportunity to disrupt the marketplace in terms of what was available. That’s how Finmo was born, and that’s how we came together.

Lawrence: How did this deal come about? Alex, was it something that you guys at Lendesk thought you were lacking in your system that you wanted to pick up? How did it happen?

Alex: Yeah. Greg, how did we meet? I think we met through… It would have been Greg Paul on our team. I know a lot of people know Greg Paul. He would have been calling Greg. I think you might have been on vacation in Hawaii?

He wanted to give you a demo of our system. I think your response at the time was, “Well, I’ll take the demo, but just so you know, I think I’m going to be starting a competing system. Before you demo me, make sure that you know that I might become a competitor someday.” Greg said, “Okay, well I’ll take that back to Alex.” Greg Paul brought that up with me.

I said, “Well, that’s very interesting. He’s clearly a high integrity individual who would say something like that. I got to meet this guy.” We had a call. You were still on vacation. He told me about his plans. Obviously, I think it was clear from the beginning. I mean I liked Greg as a person right away. Even before meeting him, just hearing about him through Paul.

But as soon as we got on that first call, I think it was clear to me that we shared a vision for how the process could just be made easier for everybody. But I think the first thing I tried to do was just convince him, “Look, you don’t want to get into this business.”

Greg: It’s a true story. He was trying to talk me out of starting it.

Alex: I was like, “Just work with us, because I’m telling you man, the only way you’re going to make a business out of this is to make sure that you’ve got access to lenders.” And really our journey was a little bit different than the Finmo journey in that Finmo really started with brokers and working with brokers.

We started on the other side, with all the lenders. At that point in time, I think we’re talking maybe two years or so ago, maybe three years ago, I was right in the thick of completing building our lender network, so flying back and forth. I lived here in Vancouver. I know you guys are in Toronto. Flying back and forth, Vancouver to Toronto, Vancouver to Toronto.

Meeting with these lenders who are mostly headquartered in Toronto. Trying to find the right person among these lenders to convince to connect with our system so we could make this vision a reality. I knew first hand just how difficult putting together that lender network was, but I also knew how important it was to make sure that you could deliver on this vision of digitizing the process, and right in the middle you’ve got this very important step which is getting the application into the lender’s hands.

That’s how simple it is today. We’re going well beyond that now. We’re doing the whole back and forth with documents, and statuses, etc.

Greg and I stayed in touch for over the years, and actually, I got to know Carter as well, and some of the other members of the team. Really, I think what brought this all to a head was just that we have completed our lender network. We now have access to over 200 lenders. Contrary to what you might hear from some of our competitors, we do have our own direct connections. There’s some number of lenders that we work with other partners on, but we do have our own direct connections with Scotiabank, First National, Home Trust, all the major lenders.

Meanwhile, Finmo had done a really amazing job of, I think building the number one digital mortgage experience for mortgage brokers and their clients in Canada, bar none. Another product we had at the time was we actually acquired last year, and really I think has blossomed over the last 12 months, is a product called Lender Spotlight.

I think it’s really just a matter of timing, that it just made sense to bring all those parts together. I think having done so now, we’ve got the most complete digital mortgage platform in Canada. It’s just a matter of putting all those parts together. I think our partnership with Mortgage Automator is a big part of that.

Lawrence: The way you say that “We put these products together…” Lender Spotlight, for instance, people go and they log into the Lendesk platform, and Spotlight is in the Lendesk platform. I don’t know how it works currently with Finmo. I would imagine that people go to the Finmo platform. Is that going to transfer over and merge into the Lendesk platform, or are they separated?

Greg: We envision a future that comes along with our grander vision of ‘mortgage in minutes’. We have all the data in Lender Spotlight. We have the third phase of ‘mortgage in minutes’, just getting the lenders to get a much better submission package. I think a lot of our competitors often focus on building a great tool for mortgage brokers, whereas at Finmo we always started our vision with the borrower experience.

If I focus on the borrower and do that really well, well then the mortgage broker is going to be happy. Joining up with Lendesk brought the other piece that we needed which is the lender.

Think about the two sides of it. You got the borrower, and you got the lender and the mortgage broker in the middle. If I can make the lender’s experience fantastic, and so reduce their costs, increase their efficiencies, well then once again as the mortgage broker, my target customer is better off and will choose my system.

We always did that side. Coming to Lendesk, we were focused on the lender. We hear this all the time. Lenders would say to us, “Look, man. I don’t need any more business. I don’t even want any more business. What I want is clean business. I want the best business.”

Most platforms, particularly if I’m only interested in creating the best mortgage broker tool, I won’t be thinking of those things. Most platforms will miss the obvious piece of, “If I can give the lenders the type of deals they want,” it’s not just typical validations in our systems. 

You guys have done it. I know you guys have built connections. You know the brain-busting stuff of validations. It’s one thing to just say, “Yes, there is something in this field.” It’s an entirely different thing when it’s like, “I know what’s in that field, and I can compare it against the data set that I know at Lender Spotlight. I know that this actually is a cheque.”

For example, if I’m a lender and I’ve got all of your policies when the customer presses Submit on their application, I can run all of the queries in the Lender Spotlight database so that I can show a mortgage broker, “Here are the four or five lenders that would actually do this deal.” I know that they’ll do this deal because it meets their policies.

Then, “Do you want to send it to one of those lenders?” The mortgage broker could press send, and if all of the data with those lenders that are up to speed on this, and the documents could go all at once, that’s how you create a mortgage in minutes.

Lawrence: Joe, I remember when you were a broker back in the day, you had Lender Spotlight in your head right? I remember. We rented a condo together, and Joe, he’d always have all the products in his head. He’d have to know. He’d almost get quizzed, “Hey, what’s the product at whatever company?” He’d have to know exactly what that product is.

Joseph: Except, do you know what I had to do? I had to, via Excel, put in every single product at the time where there was like Citi Financial, HSBC, First National, all those lenders, and know every product from 75 to 85, to 95% with what premiums, what discounts, fixed rates, variable rates. It was a nightmare. I would have given away my unborn child at the time to literally have access to a system like that.

Alex: One of the big differences from when you used to do that, Joe, to today is that the governments have made things just more and more complex every year. Between 2008 and 2018, I think there was something like 10 different regulation changes, the consequence of which is that these rate matrixes that the lenders put out are just getting more and more complicated.

The rate that you’re able to get can vary based on loan-to-value. It can vary based on credit score. It can vary based on insurable, un-insurable, etc. One product now can have, just for one product and for one term, can now have a number of different rates. It’s become that much more complicated to keep all of that in your head.

I think that it’s a mutual problem not just for the brokers but for the lenders. They think about their own products, each of them in a slightly different way. They communicate them in a slightly different way. Then that means the brokers are left to interpret these different rate sheets from all these different lenders. It’s a real challenge.

I think with respect to alternative lenders in particular, what a broker might still be able to do, and certainly did back in the day, is for those main lenders that they use, they’ll at least be able to remember indicative rates, and they’ll at least be able to remember their favorite products. Maybe their five-year variable, their five year fixed, insurable, un-insurable. Normal ratios.

They’ll be able to remember a few of those key things, but what happens when the deal that comes across their desk doesn’t fit those particular products that they’ve remembered or memorized? That is where I think something like Spotlight comes in very handy.

I think it’s also a big reason why we’ve seen such explosive growth in the whole alternative side of the business, why your business has been growing. Why many of your customers’ businesses have been growing so rapidly is just that alternative lenders have never been more important than they are today. 

I’ll give you a little bit of an inside track into some of the stuff that we’re doing right now. We are going to announce some real enhancements to the Lender Spotlight platform as it pertains to the whole alternative side of the business. I’ll be really excited to share that with everybody. We got a number of things to share in the next month or so, but we’ll be rolling that out really soon.

Joseph: I have to say I commend you guys for not only rolling out a product like Lender Spotlight, but I think connecting that to the Finmo platform. Just providing that whole experience is, I think, brilliant. I remember being a mortgage broker. The onus was on me to be really good at memorizing all these products.

It’s fair to say that not every broker is going to put in that kind of effort today. I think you’ve made it much easier for them to be successful right from day one potentially, just having all of that at their fingertips. 

Now, I do want to ask you guys a question. You’re saying ‘mortgage in minutes’, and obviously we have a connection with Lendesk and creating that pipe from borrower experience to broker, to lender, and back. Walk me through the experience. I’m your borrower. I’ve spoken to you on the phone. I’m starting off with the Finmo application. Walk me through how that user experience is going to be different, or better, than the old traditional way.

Greg: Sure. I mean it’s actually a good setup for what our original vision was with ‘mortgage in minutes’. It was three different phases, but with respect to… The very first thing was like, “How do I get the information from the borrower as seamless, and as easy, and quick as possible”

The idea then, “Well, how hard can it be to create an application?” We used to hear that all the time. You’re just like, “Well, if you want to create an application that’s bad, then actually it’s not that hard.” We’ve seen all kinds of things where it’s just