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.
00:09:54 · Anthony Pompliano
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00:11:04 · Michael Tannenbaum
[00:11:04] S0: There's probably three main reasons. One is the the home equity environment that we're in. Two is the technology that we talked about, and three is the fact that we're helping people go after what is generally a greenfield market. So on the first, if you just look at the home equity environment, we talked about that, but there's about 35,000,000,000,000 of home equity outstanding. And in the rate environment that we're in, home equity is red hot. Right? People are looking to take money out of their homes. The second is the technology. We are far and away the market leader from a technology standpoint. We do almost 2,000,000,000 of this a month. We've done 30,000,000,000 to date. We're triple a in the capital markets, S and P, and Moody's. So we're... We have this great platform that that is attracting people. And then I think, lastly, what you're seeing from the partners is they're looking to grow their business in this environment. It is a tougher environment for consumers as we talked about with affordability. It's a tougher environment for rates, and we're offering a greenfield product, a way to monetize customers, and essentially go after a customer base that would have previously been not profitable. And just to to kind of put it in perspective, our average loan amount is around a $100,000. With a $12,000 cost to originate a mortgage, it's 12%. Right? Simple math. That's not tenable. Whereas with Figure, we can turn a customer, which would be maybe smaller balance, again, back to the affordability point, potentially ignored previously, now is profitable because we've taken so much cost out of the system. So a previously $12,000 cost originate now is one, and that unlocks a whole segment of customers that are now profitable for our partners.
00:12:47 · Anthony Pompliano, Michael Tannenbaum
[00:12:47] S1: So how do you guys make money, right, if the cost comes down so significantly? [00:12:50] S0: So we take base... Basically, you could think about our business as the loans that are originated have somewhere between 58% value, right, between the fees that are charged and the interest rates that are earned by the investors. And we take a portion of that out when our customers sell the loans. So it's sort of a marketplace fee earned at the time the loan is sold. That's the main way. But we're also the servicer on a lot of the loans, which means on behalf of the investors, we collect payments and manage compliance disclosures, etcetera, we get paid to do that. So we earn an upfront fee at the time the loan is sold and then a fee over the life of the loan. [00:13:33] S1: Now we've been talking a lot about HELOC and mortgages and stuff like that. You guys are really in the lending business. Right? It's not just HELOCs. You guys are starting to do a lot of other things as well. Can you talk about maybe the expansion of the business and how you think taking this idea of, like, how do you compress fees, how do you use technology to really attack this, and how it applies in these other areas?
00:13:50 · Michael Tannenbaum
[00:13:50] S0: Yeah. I think the mortgage is obviously a major asset class. It's the largest consumer asset class. But the opportunity in the capital markets with blockchain, the opportunity to standardize and drive efficiency is not just a mortgage opportunity. It's not just a home equity opportunity. So you've seen us do a few things, to to expand beyond there. One is we bought a company that actually focuses a lot on investor mortgages. So people that buy homes, fix them up and sell them, or fix them up and rent them out. That... I think about 25% of The US housing stock is actually owned by an investor. So that's a really big opportunity. We bought the market leader in that space, and we're taking their technology, which was market leading, bringing it on chain, and making it part of our our our capital market. But you've also seen us do things in the auto space. Right? We partnered with an auto lender to bring their capital market activity onto blockchain, onto our platform, and standardize that as well. And you're also seeing us do that in small business lending, which is another great opportunity. I mean, it's equally... Talk about affordability. You have, you know, very high small... You know, ask anyone who's tried to get a small business loan. Rates are really high. Your alternative would be the small business administration, which is capped annually in terms of amount of money that they give out and also is known, to be a little bit slow. Right? And so we are breaking through that area as well by branching out into these other asset classes. Ultimately, our mission is to bring the entire capital markets on the chain, and we're doing that in all these different lending asset classes.
00:15:30 · Anthony Pompliano
[00:15:30] S1: When you look at these other areas, tokenization is really kind of the underlying thing. When I go on your website, though, I don't really see... Like, the consumer websites don't talk about tokenization in any material way. Can you talk a little bit as to, like, the plumbing versus, like, the consumer pitch?