11.4.26 Blue Wave Midterms; FirstClose’s John Aslanian on Home Equity Platforms; Data, Data, Data

Robbie ChrismanWelcome to the Chrisman Commentary, Daily Mortgage News Podcast. I'm your host, Robbie Chrisman. Topics on today's episode include election results and what it means for mortgage rates, what the latest economic data actually is doing to mortgage rates, and my interview with FirstClose, John Aslanian, on home equity lending trends and how the FirstClose platform aims to improve lenders' efficiency and borrower experience. Here, take a listen to a little preview. Most homeowners aren't interested in refinancing their first mortgage today because they're sitting on low rates. And this problem's just been exacerbated since the spring, and as we've seen rates go higher. How has that changed the role of home equity for banks, credit unions, and mortgage lenders? John AslanianYeah, absolutely. It's the rate lock effect. They don't want to touch that first mortgage where they want to tap their equity. You know, home equity product's a great product just for life, right? For college, for you know, expanding your home, for a remodel, for whatever you may need, right? So I see this product moving sort of to the front of the list. It's so hard to get a first mortgage done these days. There's not a lot of refinances, not a lot of purchase business. So we see banks, FIs, credit unions really prioritizing this product and investing in it, but they've got to get the tech stack uh in place to support it. You know, all that to say, rates high or rates low, you know, HELOC's just a great tool to have for every homeowner. Robbie ChrismanThanks to this week's podcast sponsor, First Close, which helps financial institutions grow a successful home equity business with innovative solutions that minimize application drop-off, automate time-consuming processes, and reduce time to close from weeks to days. To learn more, visit firstclose.com. If your election lasts more than 48 hours, consult a physician. Yes, there was is an election, which is certainly a discussion topic, but regardless of the results, many people who don't own homes want to buy one. And people who do may be facing life changes and could use personal advice. Here's a trend. Homeowners who won't give up a 3% mortgage are becoming landlords instead. Do you have a product and the underwriting to help them at every stage? Another reason for personal consulting with borrowers a fixed-rate mortgage may remain stable for 30 years, but the cost of owning that home does not. Property taxes continue to rise, insurance premiums are increasing across much of the country, utility costs are climbing, and climate-related risks are beginning to reshape both local markets and the availability of coverage. Those expenses are becoming a larger driver of affordability than interest rates alone. Yet, they remain secondary considerations in many lending, servicing, and valuation models. The result is a growing disconnect between qualifying someone to purchase a home and preparing them to successfully own it over the long term. Homeownership should not be evaluated solely at origination, but rather over the full life of the loan. Switching gears slightly, markets view the democratic sweep of Congress as limiting the likelihood of additional tax cuts and deficit finance spending that could push treasury yields higher. We can look for a halter on AI. But put another way, a divided government is potentially good for mortgage rates. Historically, Trump's election victories were followed by sharp increases in the 10-year treasury yield as markets priced in tax cuts and pro-growth policies. With inflation, Fed policy, and deficit expectations ultimately determining how much relief borrowers see. Capital markets desks should favor light, flexible positioning as liquidity tightens and year-end approaches. For today's interview, I wanted to welcome onto the show FirstClose's John Aslanian to talk home equity lending trends and how the First Close platform aims to improve lenders' efficiency and borrower experience. Since joining First Close as chief revenue officer about 18 months ago, he's driven substantial growth across the business. Client retention has increased from 88% to almost 98%. Bookings are up 170% year over year, and professional services revenue has grown more than 500% year over year. He's also nearly tripled. FirstClose go-to-market staff, growing the sales, account management, marketing, customer success, implementation, and solutions engineering teams. The home equity space has obviously blown up in a fantastic way over the last several years. FirstClose whole mission is giving borrowers easy access to the equity in their homes. I would just love kind of like a state of the union in the home equity space and how you see it as as we you know move toward 2027 here in the fourth quarter of 2026. John AslanianYeah, absolutely. So my background is um mortgage technology, 27 years now, LOS, POS, uh world. And um yeah, what it really attracted me to first close is really just the opportunity in home equity lending where you got the lock-in effect for most of borrowers in the US. They don't want to move, they don't want to touch their two and three percent forever rate. So this is the forcing function of how do I tap the equity in my home? You know, how do I have a flexible financial tool? I believe personally, you know, home equity is a tool that everyone should have and just have, whether they need it right now or not. So, yeah, absolutely. Um, just talking to the founders, Tim and Ted Smith, and just really looked at the space and like, you know, it's like a it's a niche of a niche, right? It's specific to home equity and it's very nuanced. Banks, credit unions all create their own loan programs and they keep those loans on their portfolio. So they all operate differently. Huge opportunity for automation, from what I see from my perspective. Robbie ChrismanA recent study found lenders using your platform saw a 7.99 times average annual return. I really should say an eight times annual return. Otherwise, people are thinking I'm gonna read off a script here. Lenders hear ROI claims from vendors all the time. What does that eight X number actually represent and why should lenders trust it? John AslanianYeah, absolutely. So we partner with a company called MarketWise Advisors. They're a trusted, independent, third-party firm. And what they did is conduct a survey on first close customers. I actually uh go way back with Jordan Brown, uh, their CEO. I think we did the first LOS study in the industry together. So the results came from actual customer data, right? It's not one story, one point in time, or a handpicked story. He surveys as many customers that will respond. And the data is the data, right? The stats show that on average, you know, the customers see an at an 8x return from an investment at first close. So that means for every dollar invested in first close, you're receiving nearly eight dollars in value. And a lot of that's just faster cycle times, reduction in errors, you know, higher closing rates and pull-through, just an overall more efficient process for home equity. Robbie ChrismanAs I open by saying, home equity demand is obviously strong. But I'm seeing data out there that shows only about half of applicants make it to closing, and lenders are still averaging lengthy cycle times, which to me, home equity would be the origination type that should have those problems the least out of any. You'd think more people would make it to closing, and that cycle times would be way down. What's really causing lenders to lose business today? John AslanianYeah, it's pretty wild. Uh, the more I get into it, the more I learn. It's super interesting. So a couple things are going on here. It's just really manual, outdated workflows for home equity. We'll walk into a credit union or a bank and they'll tell us it's 45, 50, 60 days. And I'm thinking, oh man, that's longer than a first mortgage. How can this be? Right. So a lot of it's just outdated workflows, manual processes. We see lenders who invest a lot of money in uh nCino for their first mortgage or blend and have these really nice, elegant platforms. Then you move your cursor over to the right and say, apply for a home equity loan, and you get a 12-page PDF. That's just not gonna work in today's day and age, right? We live in an Amazon world, everything comes today. So borrowers get fatigued, they move on, they don't like the tools, they're not sophisticated, they move on. Um, another thing we see is just lenders are working apps that are never gonna qualify. So, one thing we really help with is helping eligibility up front. You know, before you create a username and password, 10 fields. We do a soft credit pull, we do an AVM, and we'll provide the borrow with offers if they're eligible. And if they like what they see, they can decide to apply. So just helping the lenders really suss out the borrowers that they shouldn't be working with. Robbie ChrismanYeah. All of this kind of ties together. Savings in terms of faster cycle times, fewer errors, higher pull-through. I I think there was a recent MarketWise study that that said first close customers experience an impact of more than $750 per loan. And so, you know, I'm just I'm wondering how all this is connected. Obviously, people would love to have greater capacity without adding staff. They'd love to have higher pull-through, they'd love to have fewer errors. All these things are great. John AslanianYeah, absolutely. So we talked a little bit about it. It's just um using an LOS or a tech stack that's maybe not designed for real estate. We see a lot of that out there. Um, lenders are not necessarily using their mortgage LOS for home equity loans or HE loans, they might be running it in a consumer lending department, and that's a different product. So literally, there could be no integrations to settlement services. So they're their op staff for jumping in and out of the LOS to order services and keying the data back and forth. That gets really old really quick, and that makes the process take forever. Outdated guidelines is another thing we see. There's this blanket statement hey, we're gonna run a full appraisal on every HELOC, a full uh title on every HELON, whatever they that might be. Like it's time to really modernize the guidelines because those things slow down the process and they cost a fortune, right? If you can get an AVM and a property report and and be a lot quicker, can save the credit union or the bank thousands and thousands per month. We talked about faster pull-through times. Like we can get someone under 10 days for a home equity loan if they're using the full platform. That's meaningful if you're doing 45, 50, 60 days today. Less time's chasing documents, part of our service. We do the chasing for the customer, right? So title reports, appraisals, we're really enforcing the turnaround time. So our staff has like a white glove service where we'll chase the orders for our customers. Robbie ChrismanYou alluded to this at the beginning of the interview. You spent more than 25 years in mortgage tech and SaaS, including nCino, and I some of the pre-eminent technology companies in the space. You've seen a lot of vendor ROI math. What's usually wrong with it? How do you how do you feel like first close is different? John AslanianYeah, I think it really needs to come from a third party that runs the analysis and the data is the data, and that's uh MarketWise as an approach. The data is the data, the results are the results, right? If they're bad results, you're probably not going to hear about it in the market, right? Because Jordan's just not going to change anything, right? But the results are good for us, right? So um multiple surveys. I think we had north of 60 respondents. So there would be sometimes a customer wouldn't respond at all. Some customers had five people respond, right? So it's the real life stories of their experience and reduction of cycle time with the FirstClose platform. Um, I think that's a big component of it. The other part of it is just, you know, reducing the errors, the manual work, and the increased capacity, right? If you can take on more volume with the same staff you have, that's a great result. I was talking to a credit union the other day that launched a new program. And it actually made their turn times worse because they got so much more volume and they hadn't re-engineered the back office to support it. So those are the types of things you just gotta look out for. Robbie ChrismanI have one bonus question here for you. I see FirstClose everywhere. Like when I go speak at a conference, even it's you know, uh middle of nowhere, Montana or the Carolinas or Washington State or Rhoda, there's a first close booth and like banner there. Y'all are everywhere. I see you all over Chrisman doing stuff with us. See you, see you out and about in the industry. Talk about just the the awareness campaign and and why you feel like it's a great strategy for y'all. John AslanianYeah, absolutely. So, Tim and Ted and Corey Smith, you know, founders of the company, great guys, they asked me to come in and really just rebuild the sales and marketing engine. So, lots of investments in more shows. You're seeing us at 50 plus show this year, like you mentioned, like we're sponsoring, we're attending, um, a lot more speaking engagements as well, just trying to educate the market what the options are for home equity. It's sometimes an afterthought, but getting a lot more attention these days. So, we're grateful to be supporting the industry, the credit union, the bank community. Um, it's super helpful for us. And you're gonna see us out there again next year, probably the same amount of shows or maybe even more. One more bonus question. Why not? Robbie ChrismanAre you talking about how you see the home equity space evolving, meeting bar work, demand in practical places, designing products for the modern home? Like, how do you how do you see the space evolving? Obviously, over the last couple of years, it's come to prominence, and now it's an integral part of any offering out there in terms of when you're working with borrowers. When we talk about recapture and building loyalty amongst borrowers, home equity has to be part of the equation. How do you see things continuing to evolve for the space? John AslanianYeah, absolutely. So I, you know, we say speed is the new rate, you know, and so we just have to keep re-engineering the process to make it faster. You can go buy a car, I can go buy a car and get through the financing step in 20 or 30 minutes. Like the borrowers know they have good credit, they know they have equity, and then they get saddled with this really long process. So, from my perspective, I see number one, a lot of education that needs to continue happening, right? Educating the borrower, the difference. What is a HELOC? How's it compared to a HE loan? Which one's the right product for them? I see that being a struggle. So the more you can do that up front as they're thinking about applying or that pre-application education, I think will be huge. And just making it faster. It sounds trivial, but making it faster. There are some lenders doing it under 10 days. It's your money, you should be able to tap it out of the house and get it out of the house when you want. It should not take a month and a half. So those are the two areas of focus I see right now. Robbie ChrismanVery well put. I really appreciate the time, man. I uh it's long over the week for having you on the podcast. So hopefully we do this again soon. Thank you. Thanks for having us. Although it takes a backseat to the election, economic data yesterday came in stronger than expected. September factory orders rose 1.8% versus the 1.2% consensus estimate, while shipments climbed 1.3%, which bodes well for manufacturing. Adding to the positivity, job openings increased to 7.52 million from 7.19 million, marking their first gain in five months and comfortably exceeding expectations of 7.1 million. Optimistically, the reports suggest resilient business activity and a labor market that may be regaining momentum, potentially tempering expectations for near-term Fed rate cuts and putting some upward pressure on treasury yields and mortgage rates. Today's economic calendar kicked off with mortgage applications falling 1.2% for the week ending October 30th, as purchase activity weakened, 2% remained 19% below year-go levels, while refinance applications were essentially flat week over week and down 60% annually. Despite mortgage rates easing to their lowest level since September, following the Fed's decision to hold rates steady, a decline in purchase activity suggests lower borrowing costs have yet to meaningfully revive housing demand. Other releases today include October ADP employment, the September trade balance, and the U.S. Treasury quarterly refunding announcement. Later today brings final October SP Global U.S. Services PMI, October ISM Non-Manufacturing Index, and weekly crude oil inventories. With the media consumed with the election results, we begin the day with agency MBS prices slightly improved from Tuesday's close, the two-year yielding 4.62, and the 10-year yielding 4.93 after closing yesterday at 4.95%. Let's wrap up with a joke and some housekeeping. A politician visited a small town in the Navajo Nation near Four Corners and asked what their needs were. We have two basic needs, sir, replied the mayor. Firstly, we have a hospital, but there's no doctor. On hearing this, the politician whipped out his cell phone, and after speaking for a while, he reassured the village leader that the doctor would be there the next day. He then asked about the second problem. Secondly, sir, communication. There is no cell phone coverage anywhere in this village. Thanks again to First Close for sponsoring this week's podcast. First Close helps financial institutions grow a successful home equity business with innovative solutions that minimize application drop-off, automate time-consuming processes, and reduce time to close from weeks to days. To learn more, visit firstclose.com.