00:01:38 · Michael Tannenbaum
[00:01:38] S0: Yeah. Well, first of all, thank you for having me. And just to clarify, Figure is a marketplace of partners that collectively originate the most, home equity lines of credit in the country, but us, we are ourselves, the the rails that that happens on. And... But to your point around affordability, you've seen a huge increase in home prices, and that's obviously benefited homeowners. You've also, at the same time, seen interest rates come up, which has locked people out of the market and actually kept people in their homes. Right? Because people who have these low rate mortgages don't wanna leave those low rate mortgages because they're now in the money. And that has set up a very, I guess, fruitful environment for home equity. People have a lot of home equity, and they don't wanna refinance their mortgage. So what they're doing is taking, money out of their house and using that, for example, to consolidate debt so that gets into affordability. Because as we know, as rates rise across the board, there's just this overall sense that prices are up, rates are up, costs are up. It's increasingly hard to buy a home. And so people are looking at ways to save time, to save money. Figure is a big solution there. That's true for consumers, and it's also true for our partners, which are the fintech companies, the lenders, the banks that are struggling with a very expensive origination process for anyone, you know, in the audience who's gotten a mortgage. They know how painful that is, how much paperwork, how much back and forth. So all that ties into affordability as well because that process and the costs that come with that process also add add to these costs, and Figure has stripped out so many of these. You know, a mortgage done through our process is about $1,000. Industry average is 12,000. That's kind of three x over the past couple years. So this affordability, these costs are out of control, and Figure is cutting through all that with a very streamlined, approach to home equity and and mortgage more broadly.
00:03:34 · Anthony Pompliano, Michael Tannenbaum
[00:03:34] S1: So there's, like, the price of the home, then there's the, like, cost of the money to help buy the home. That's right. And then there are, like, the transaction fees. And you see a lot of movement here. Right? You see the realtor, kind of the legal ruling that, hey. Maybe the the 6% isn't gonna end up being the standard, and now people can kinda negotiate. What you're talking about is specifically the transaction fees around getting the mortgage, getting [00:03:55] S0: the Title insurance. Title, etcetera. And [00:03:58] S1: when it comes to some of that stuff, it seems like maybe there's two inputs, if I... I'm understanding correctly. There is the speed at which you can do this, and then there is the cost. And these are related, but there are... They are technically separate things. Can you describe maybe, you know, like, what are the concrete things that you guys are doing to speed this up? And then how does that have an impact on the cost side?
00:04:15 · Michael Tannenbaum
[00:04:15] S0: Yeah. So the average... On on the speed side, the average mortgage process is around forty five days. Our actual average time is nine, and that includes a government mandated three day waiting period. So it is a very fast process. And the reason why we're able to do on the speed side, the primary reason is that we use an embedded technology in capital market. So, normally, when you're originating a mortgage, right, you have to figure out, well, who's gonna buy that mortgage? It's a thirty year asset. It's often somewhere between a $100,000 and a million dollars. So it's it's hard to, quote, find a home for that. Right? And a lot of the companies that do mortgage aren't banks, and even banks themselves don't wanna own an asset with interest rate risk for thirty years. So what normally happens is a... The the the... There's a lot of back and forth trying to figure out where that loan goes and a lot of kind of crappy software in the middle. Figure is an integrated software and an integrated capital market. They go hand in hand. So everyone using our software, every customer and every loan partner that we have knows exactly where the loan goes. It goes on Figure's Marketplace. And as a result, there's not nearly the back and forth that you would have. I think a great example of that is we don't have traditional human underwriters as part of the process looking at the loan and the situation and making a judgment. It's an all model based approach looking at the customer's bank account and the cash flows associated with that bank account. We don't have a traditional appraiser process where you may... You know, your audience may be familiar with when you buy a home, often a person will go out to the house, check it out, and come up with their assessment of value. Again, we use models for that process. So we strip out a lot of the third parties in a one kind of integrated software that comes hand in hand with that capital market. And the result is that nine day average as fast as five versus the forty five. So it's much, much faster by removing third parties. On the cost side, similar because so much of the cost is that back and forth, but that's actually where blockchain starts to come in. And our capital marketplace, which as I mentioned, comes hand in hand with that software, it is on blockchain rails.
00:06:29 · Michael Tannenbaum
So there's two primary things that we've done there. One is we've taken the attributes of the loans, right, the credit score, the income, all that. We've put them on blockchain, and we've reduced the amount of time that in... That an investor buying a loan will have to go back and check that data because they know it's verifiable on chain. We've cut 80% of the cost of third party diligence reviewed doing that. And the other thing's fraud. You know that fraud is such a big deal in financial services. We use the blockchain to track the loan over its life and ensure that someone can't double pledge it or double sell double sell it. And if you go back to 2008 when there were all these liar loans, you know, this is a great use of blockchain to get around that. So it's a lot about software and speed on the front end and kind of blockchain on the back end to to increase the speed and to lower the cost.
00:07:22 · Anthony Pompliano
[00:07:22] S1: Now when you think about, kind of the scale at which you're doing this, you guys have grown incredibly quickly. One of the things that, I see a lot of people talking about online and, you know, I invested in the business, in the private market. We, have held shares in the public market. The rule of 40 Yeah. Is, a way that most people analyze a, kind of enterprise software type business. That's right. And the idea is how fast are you growing revenue and how fast are you growing EBITDA. You add those numbers together. You're over 40, that's excellent. So you're going more than 20%, 20%, that'd be great. Right. You guys rule of one fifty, I think, in the last quarter, where you guys are actually growing both revenue and EBITDA at such an incredible rate. Where is that growth coming from? Like, why is it growing so quickly?
00:08:07 · Michael Tannenbaum
[00:08:07] S0: Yeah. I mean, we've broken the trade off between margin and and growth to your point. Right? Normally, it's like I'm investing for growth, so my margins are lower. I think with Figure, that really gets to that marketplace strategy that we have. So it... You know, we have a bunch of partners that are leveraging our technology to originate assets, and they're doing the marketing. Right? They're doing the sales. So it's almost in a... Some way like franchising, right, where you have a a franchise that uses your brand, and you're not spending all of those costs, you're just getting the higher margin piece of that business. It's kinda similar with Figure in that we've got 500 different partners, all spending marketing dollars, all hiring sales forces to use our product. And as a result, we provide the capital market, the software for them to create these mortgages, but we're not out spending money to get the customers ourselves. We're not we're not out using our own balance sheet to lend to the end customer. And as a result, it's a higher margin business, and it's... And we're able to make a bunch of different bets on different customers. So just as an example, we have Lowe's home improvement. Right? They're out there using the home equity product in stores, you know, in in home improvement stores across the country. At the same time, we have regional banks that have historically had not as strong technology in this space using the deep investments they've made in their branches and in their brand. And we're just, you know, sort of piggybacking off all that. And you... And and we've got 500 different individual bets that are all growing. And at the same time, we're we're just not putting out as much capital or marketing dollars. And so I think you're seeing that in the margins, and that's also fueling the growth.