Tom Wilkins of Mortgage Media recently had the opportunity to sit down with Faith Schwartz.
Schwartz has held leadership roles in many aspects of the mortgage industry including TMC Mortgage, CoreLogic, Freddie Mac, OptionOne, and Fieldstone. She’s also part of Wilkins’s Executive Round Table for Mortgage Finance. Additionally, she serves on boards for companies such as FormFree, Class Valuation, and Gateway First Bank, and other tech and mortgage companies. The two discussed bracing for a potential downturn, FormFree’s technology and how dealing with data can be a messy business.
Tom Wilkins: Hello, this is Tom Wilkins from Mortgage Media and we’re here in Austin, Texas for the MBA Annual event, and I’m here with an old friend, Faith Schwartz, owner of Housing Finance Strategies and co-founder of Next DC19, a conference coming up in DC. Faith, thanks for joining me here today.
Faith Schwartz: Hi Tom, it’s great to see you and great to be with you.
Wilkins: Faith, let’s start off by you telling me what you’ve done to get you to your current situation.
Schwartz: Well, I’ve been in the mortgage business or affiliated with it for many years. I like to say 25 plus, but a little over 30 years now. And about four years ago I stepped down from CoreLogic to decide to get a little closer to the business again. I’d had really a fun career. I feel like my history is great and I wanted to do something a little different to modernize the mortgage business and really help this business get back to financial stability with a great secondary mortgage market, and just help the business perform better versus the crisis days.
And it’s been fun. I’d say FormFree and Class Valuation are both really FinTech companies trying to transform the market through data, source data, and great technology to kind of think differently about workflow and get closer to the consumer. Whether it’s the collateral side or the front end income asset and employment side, there is room to automate and improve the process. So, that part’s been fun. I do some advisory work for the mortgage business, mortgage companies and trades to stay close to the business and strategically navigate Washington DC. And I’ve just joined the Gateway First Bank which is something I am very excited about.
Wilkins: That’s great. Well, and speaking of staying close to the business, you couldn’t ask for more than a conference like this to meet old friends and have new networking opportunities. So, aside from that, what do you hope to learn at this conference and attending the sessions that you can take back and use in your business?
Schwartz: I think this is a great conference to, like you said, meet old friends. I’ve already run into people. Even if you don’t see them in a year or two, it’s like old home week. That’s the beauty of this conference. I’m spending a little time on the capital markets to transcend the current state for when the GSEs go private or private capital can compete. I’m thinking about how to leverage inserting strong processes and source data into the capital markets where it is not necessary to have a GSE guarantee but replicate similar processes. For this to work we need to have transparency on how to scale good process and information into the private markets to build confidence and excellence into lending for investors. This requires some strategic thinking and input from the investor world to better understand their appetite for good information in lending.
So, I also will attend a few of the regulatory overviews from Director Calabria among others. I’m on a panel or two myself on compliance, data privacy and security. I’m participating in a round table with some companies to talk about the transitions in the technology space as well as compliance space.
Wilkins: I saw that in the schedule, so I should be in the audience. Speaking of technology, where in the industry when it comes to utilizing technology such as what FormFree’s doing, where do you think we are as an industry with regard to technology? So many people are skeptical.
Schwartz: Exactly. You and I both know that there are very disparate groups of people in this business that need information. And how it flows from end-to-end is still very clunky, and the shiny pennies are all over the place, but there’s not a great end-to-end solution yet. And my view is that, over time, the source data will become the driver of authentic verifications and authentic solutions on underwriting risk and credit. And the way that you can access that source data in a safe and secure manner all the way through the process. Frankly, I think longer term to even monitor loans long-term, having access to that information through borrower consent will be a long-term play for good business both on the collateral side as well as the credit and assets side. We’re not where we need to be is really what I’m saying.
Wilkins: Even though we’re both optimists, if I were a pessimist, I would ask you, what is your best tip that you could give to someone in the industry regarding technology to help them navigate through a potential downturn?
Schwartz: I will say, and again, we both know this, the originations of the past five years have been remarkably without with high defects. They’ve been good to excellent credit borrowers. So, I do not see the same world that we saw when we hit the crisis and having a big portfolio of low to moderate credit risk borrowers. I also think we have missed many borrowers over time due to that tight credit outlook. And so, I would say the downturn doesn’t scare me as much, but I do think the access to credit and the high cost of origination has to change.
So, part of my interest in this is to blow up the $10,000 per loan origination cost. It’s ridiculous and it’s going to keep people from our market. We already have a low home ownership rate now, and that just adds to why people can’t get credit if the cost is truly $10,000 a loan or $9,000 a loan. So, we have to start reordering our business. And I do think picking a strong vendor is important for your main system, and there are many of them out there. Vendors in this day and age must have clear ability to connect with third parties, other vendors such as FormFree, to keep being current with the moving parts in technology. Then understand their roadmaps, who do they communicate with, what’s the real cost of that, transparency, authentic data source, and make sure that you’re working with counterparties that can keep you at the tip of the spear instead of kind of stuck in the mud and getting information 30 days into an application. Because that’s the only way they built their modules and their workflow.
I think it’s transparency, calling good APIs, getting on the program of data standardization, and really rethinking your business process flows. And people who aren’t thinking that way will get really stuck in the high cost of originations and there will be entrants that surpass them and they will be at a competitive disadvantage.
Wilkins: Let’s talk about FormFree for a moment. On sort of broad level, share with me what FormFree is doing, how they’re making their mark in the industry. How’s business and adoption levels?
Schwartz: It’s really been interesting. FormFree, I can honestly say, they punch above their weight. They’re not a front-end system. They’re not a point of sales system. They’re a series of data, authentic data sources, smart data that feed several systems whether it’s a point-of-sale system, or a loan origination system. Because many of them as you know don’t have good point-of-sales systems. And then they have direct integrations with major lenders. And then they have been serving the broker market. I believe that they are the only one serving mortgage brokers where they can get access to asset data, which then feeds employment and income data. And they’ve worked very closely with those GSEs and we’re the first pilot partners for Rocket Mortgage for instance to provide assets for that launch, what they first launched.
FormFree is Brent Chandler – he leads it and he’s a real visionary. He’s an entrepreneur. He’s a fun guy. It’s a small company doing big things. I would say their adoption’s very high. They’re sticky all over the market. They’re integrated with over 100 integrations. And their partnerships and strategic data sources are really not matched in the industry. So, they don’t think just asset and current employment, they think identity. They think liens and judgments. They think, what do I need to know about me? I’m the borrower and how can I, in a very easy way, have a mobile app called Passport that serves those data sources and then integrates into all of the different systems? So, the data calls come from a FormFree, which is secure and safe from the data sources. So, banks, liens and judgments, property records.
It’s a very innovative process and it’s also seamless. They’re ahead of where the consumers are and where the lenders are? Yes. Are they just an asset company because that’s what they serve today; many, many customers with many, many systems? No. We’re way ahead of that. So, they have a lot of R&D going on around all of that. It’s very fascinating.
Wilkins: Who are considered competitors for FormFree?
Schwartz: I think there are different types of competitors. So, one could say Blend is a competitor? Not really because FormFree is NOT a point-of-sale system, but the components of a Blend might be if they don’t use Form Free. FormFree’s integrated with almost every system you could have heard of. I’d say maybe 90% of the big POSs and LOSs they’re engaged with or higher. So then if you take them out of the equation then it’s data aggregation. But data aggregation is kind of a different market. It serves the wealth market and some other verticals but it is interestingly not really that dominant in mortgage. Mortgage banking is hard and unforgiving. You need to get it right every time. Aggregation serves banks. This is on the bank side. If you think about what borrowers, who’s meant for, and things like that, they’ll use data aggregators.
FormFree’s kind of a data integrator. They sit on top of data aggregation, and they integrate with clear API calls into all these different systems. And then they normalize the data and makes sure that there’s nothing that’s gone wrong or it’s gone down. They’re a little bit unique. And so they work with the Roostify’s, they work with the Ellie Mae’s, they work with broker direct connect systems. So, they don’t have a direct competitor that does what they do. It’s a little bit different. So, if you said that a data aggregator, they can be the source of it from banking, but they’re not really big in the mortgage industry. They’re big in some other industry; credit cards or wealth or auto. FormFree is a little unique. It doesn’t have a true match for what they do.
Wilkins: So does Form Free partner with Ellie Mae?
Schwartz: Oh yes.
Wilkins: And Roostify.
Schwartz: Oh yes. Yes. So, they’re strong partners with them. Think of a world where data is the most important thing you’re dealing with. It’s a messy business if you don’t know it. I’ve learned it from Brent Chandler and it is not for the faint of heart. You have to understand that if a bank goes down and how you’re calling their data, maybe it’s your interaction through a website or the direct API call into the bank, but something’s happened, you can’t just stop the mortgage business applications, right? So, you have to have alternatives or make sure you’re getting that same information that the borrower gives you consent to do.
And having that kind of intense scrutiny over all of the data flows coming in is one example. The mortgage business being very different than any other business. They don’t do the credit reporting, but I’m using an analogy. You can’t say, I can’t get credit reports this week because I can’t process my loan. It’s those kinds of things. It’s a zero-tolerance business as you know. You have to be on top of accurate data sources. They’re partnering with someone like LexisNexis for property data, liens, and judgments. So, they have very strong ties and integrations with some names I can’t even mention that are very unusual in the mortgage business that gives them a lot of good source information. They’ve worked well with the credit investors like Fannie and Freddie and even the FHA and VA world of lending.
Wilkins: So, with your time in the advisory role and board role at FormFree and with owning a business, Housing Finance Strategies, and everything else doesn’t leave much free time. So, tell us what you do in your free time with family and relaxation, hobbies. What do you do?
Schwartz: I have three kids. And I split my time with Austin and DC because my husband is back in school at UT, University of Texas in Austin. We’re pretty outdoorsy. We like to hike. We’re taking a trip to go sailing with our kids in January. Diving, hiking, reading, talking with friends, listening to music, eating too much barbecue. It’s all on my personal list. I try to stay busy and have a lot of fun. So, life is good.
Wilkins: I don’t think you have any worries about staying busy!
Schwartz: No, it’s been fun. I love the mortgage business. So, being here is fun, talking to you is fun.
Wilkins: Thanks very much for taking the time out of your busy schedule, I know how busy you are.
Content has been edited for length and grammar.