Tom Wilkins recently sat down with Brian Madocks of eOriginal to talk about the mortgage industry’s adoption of digital transactions, weathering a potential market downturn, and the competitive landscape for his business, which recently launched ClosingCenter with the goal to Make Digital Mortgages Simple.
Tom Wilkins: This is Tom Wilkins from Mortgage Media, and I’m here in beautiful Austin, Texas at the MBA Annual Conference. And I’m sitting here with Brian Madocks, the CEO of eOriginal, the leading digital transaction management solution provider. Welcome, Brian.
Brian Madocks: Thank you, Tom. Good to see you.
Wilkins: Good to see you. With more than 25 years in business technology and application software solutions, Brian has served as CEO and executive roles at Revitas, Vitalyst, SunGard Higher Education, and SAP America. Brian is also on my executive round table for Mortgage Finance, where his expertise shows regularly during our biannual events. Brian, again, welcome. Let me ask you the first question I’ve been asking everybody. Why attend this conference, and what do you hope to get out of it to take back to your team?
Madocks: Well, it’s good to see you, and thank you for sitting down and giving me the opportunity to share my thoughts. This conference is fabulous. The MBA is great event on all levels. More importantly, well it’s very well attended, but it’s also very well attended by the right people. The senior leadership in the nation’s largest entities, originators, custodians, warehouse lines, and, of course, all of us as providers to the mortgage industry.
I think they do a fabulous job organizing this, pulling it together, and most importantly having the right people attend that gives us access to meet with one another, and then, of course, the agenda, and the topics that are discussed. I think for this particular event, hopefully as we look back in several years, we look at this as one of those inflection points in the mortgage industry, whereas all the right pieces come together, so that digital transactions can be a much bigger reality than they are today. Within the mortgage industry, we believe, given some of the announcements and progress that’s being made, we’ll look at this conference as one of those inflection points, which for eOriginal, as a digital provider to the mortgage and other industries, we view that as very important.
Wilkins: Tell me a little bit about what’s coming. We talked a little bit about the Ginnie Mae announcement, but give me sort of a highlight of what eOriginal is doing at the moment.
Madocks: The way we look at things is that all the right pieces are coming together. So, if I just back away from that a little bit, and start with the consumer. The consumer is ready. eOriginal, our product is used, our capability is used by multiple verticals within the lending industry. Marketplace lenders that underwrite primarily personal loans, and student loans, auto finance. I mean you go and borrow money to buy a car, whether it’s new or used. Solar panel financing, equipment leasing, other sectors and now mortgage is the most recent entry.
The digital adoption in mortgage is the lowest compared to those industries. If you move over to the personal loan market, as of the end of June, 49.4 percent of all personal loans originated in the United States are originated by non-bank marketplace lenders. Like SoFi, like Lending Club, like Marlette and others. Forty-nine point four percent up from 5 percent in 2011. What does that tell us? That the consumer has adopted digital.
They’re ready for digital, and it’s happening in personal and student loans today. Now, as I said, we serve many different sectors within the lending community. Auto finance as an industry, is second behind marketplace lenders and personal with about 20 percent of their 31 million loans per year being closed on digital platforms. From the moment you sit down in that finance manager’s office at a dealership, all the way through the secondary market where the loans move to a custodian, sold, or securitized.
By the way, as of this week, we have had 226 secure digital securitizations closed on our platform, valued at $97 billion and about 5.2 million loans. That tells us that the secondary market is there and it’s fluid. There’s liquidity. So, the consumer is ready. Other industries are much further along the digital journey compared to mortgage. Of the mortgage loans originated each year … call it 6 million, that’s just a generic number … in 2018, about 29,000 were digital. About 70,000 were closed digitally so far this year.
That’s what’s flowed through the MERS Registry. There’s an enormous opportunity for mortgage. We’re still at the early stages. When I say we’re ready, the consumer’s also ready. Second, I believe all of the technology is there from the variety of vendors, whether it’s a Blend on the front end, eOriginal for closing, and eOriginal on the management monetize. The MERS Registry and Fannie Mae have been digital. Freddie Mac has been digital. And now Ginnie Mae has just selected eOriginal for their digital platform, for them to accept and buy digital loans, or for digital loans to flow through Ginnie Mae.
All of those pieces are in place. The secured party capability with MERS is going to be released later this year, which will give the warehouse lenders the confidence that their collateral is properly protected. Understand there’s some nuances around it. But between the consumer, the technology and then capability being implemented across the mortgage industry between originators, warehouse lines, custodians and the government sponsored entities, that the platform or loans that flow through is ready. It’s just a matter of now getting started, because the benefits are enormous to all the participants.
Wilkins: So, the timing is good, to say the least?
Wilkins: Who would you view as a competitor to what eOriginal is doing? And ideally there isn’t, but I think there probably are.
Madocks: Within the mortgage space, there’s a couple of competitors. DocuTech has a bold capability that has a few clients on it. DocMagic, the same. Deutsche Bank uses DocMagic for the custody platform, which is great because Deutsche Bank is one of the leading custodial providers. When I talk about the infrastructure and participants being in place, I would rather see Deutsche Bank use our platform than my competitors. The fact that Deutsche Bank can offer digital capability as a custodian to the mortgage industry, is good for everybody.
We applaud that. Freddie uses DocMagic, Fannie uses eOriginal, Ginnie Mae uses eOriginal. So yes, there are competitors. We think we’re the leading one, because we have over 500 clients across all those sectors, 226 securitizations being closed, 29,000 loans a day flow through our platform. We believe that for the part that we do, we are one of the leading providers bar none, and where we’re going will further position us as the leader in this space.
Wilkins: What would be your best tip that you’d give to someone in our industry, to help them navigate a potential downturn? I’m not saying it’s going to happen, but there are some writings on the wall that we may be headed for something like that. Maybe not as bad as 2008, but what piece of advice would you give those people in the industry?
Madocks: Yeah, so as it relates to a downturn, I’m with everybody else. It’s not a matter of if, it’s only a matter of when. Personally, right now I think the economy is still incredibly strong and defies expectations. The trading challenge is probably number one in everybody’s mind. The good news is that it’s fixable overnight. We can just say, “We’re done. Back to business as usual.” Maybe that’ll happen. Maybe there’ll be a nice resolution. But it’s highly fixable.
The geopolitical risk is a bit of a challenge, because you never know what is going to happen. There’s the unintended consequences of a Brexit, and what that means for everybody. And then of course, geopolitical risk in terms of what is going on in the Middle East. Although, that seems to always not happen, or be as bad as people think. And I keep my fingers crossed that continues to be the case.
I think the consumer remains incredibly strong, and all signs point to that happening. Personally, I hope the Federal Reserve does not lower interest rates any further. I’m old enough to have seen 18 plus percent Treasury rates. My first mortgage was 11 and five eighths, but not everybody has that same history and perspective.What you do to get ready, is really continue to watch underwriting standards.
Digital enables people to be in a better place. Although that’s not the only answer, because it allows lenders to move loans, sell into the secondary market and realize the benefits much more quickly. But I would say, if I could give one piece of advice it’s that we don’t know when it’s going to happen, so why wait? We just had our mortgage client advisory council meeting, and a lot of people are waiting for one, two or three other things to happen, where there’s plenty of opportunities to start the digital journey today. Whether it’s just with an e-note, because that can be executed in all 50 States, or if you want to have a full digital close-in, from the application close-in, and then moving into the secondary market. There’s plenty of places where that could be executed today.
Wilkins: My last question, Brian, is more on a personal level. What do you do in your spare time? I don’t think you have very much of it. Family things? Do you like to travel? Do you have hobbies, sports?
Madocks: I, of course like everybody that does what we do, our days are full. First off, I really like what I do. I like being in the game as a CEO of a technology company, hopefully making a difference for everybody that’s involved in our organization, our employees, our customers and our shareholders. And I take that very seriously. On a personal level, I’m married and I have two grown children. We have a house in Maine that we love to get up to as often as we can. I’m a bit of a fitness nut still. I try to work out five days a week. The reality is three to four is a good week.
I ski a little bit now, a little more cross country skiing and then downhill. I grew up as a surfer. I still own my surfboard, but I haven’t been in the water for some time, and perhaps at sometime we’ll have the opportunity to do that again. So, a little bit of all of the above, and golf is my absolute number one go to sport. Every free minute, every free weekend that’s where you’ll find me.
Wilkins: I live in Half Moon Bay, CA, which arguably has one of the three biggest waves on the planet, other than Jaws in Maui and Nazaré in Portugal. But we have Mavericks right in my backyard, and that is unbelievable. When it’s firing, as they call it, those waves can get up to 60, 70, 80 feet.
Madocks: It’s incomprehensible to me.
Wilkins: Right, it really is.
Madocks: As a skier I’ve gone off ledges where you free fall maybe 30, 40, 50 feet before you hit snow, but it’s on such a steep incline it’s really hard to hurt yourself, right? When I was in college and went to Puerto Rico to surf, and surf maybe 10 or 12 foot waves. And let me tell you, those are big waves. I grew up on the East Coast where we don’t have waves that are that large, and if you do, it’s very sloppy and very difficult. A 10 to 12 foot wave is huge. 40, 50, 60 feet, comprehensible to me. And good to them, and I enjoy watching them but not participate.
Wilkins: It’s amazing, and not to dwell too much on it, but the contest that they have when the conditions are right is called Men Who Ride Mountains, and they have 24 of the big wave surfers from all over the world who qualify, and they’re on call. And they have a 24 hour period where they say, “Okay-“
Madocks: This is it.
Wilkins: “It’s on. This is it.” And they fly in from all over the place, and they have the contest.
Madocks: And they have guys on jet skis to get them going fast enough.
Wilkins: It’s Crazy.
Madocks: It’s something else. I nearly drowned twice, both times was surfing. And the second time, was I had a bungee cord hooked up to my ankle and I took a header over the tip of the board on maybe a five, six foot wave, but it was extremely powerful. And as I fell, I was not able to catch a breath. So I had just exhaled, and then I was just being dragged under water. And then when I finally came up for air, I inhaled a mouthful of foam and then was dragged again. And it was all I could do not to inhale a full mouthful of water. So, I don’t know how they do it, because when they go under they’re under for a long time. And they’re getting rolled and bounced all over the place. I just, I don’t understand, but good for them.
Wilkins: Yeah. Better them than me. Well, Brian, thank you. It’s always great to catch up, and I appreciate your time, and we’ll do it again.
Madocks: Thank you, Tom. Good to see you. Thanks.
Content has been edited for length and grammar.