Why You Can't Get a One-Click Mortgage Refi

Joe Weisenthal (0:02)

Bloomberg Audio Studios.

Tracy Alloway (0:04)

Podcasts, radio, news. Hello and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.

Joe Weisenthal (0:23)

And I'm Joe Weisenthal.

Tracy Alloway (0:24)

Joe, do you remember a month or so ago, we recorded an episode all about why mortgage rates were going up even though the Fed has cut?

Joe Weisenthal (0:34)

Yes, this was a big one at the time, and I think it still is really important. Basically, there's this intuition that people have that the Fed affects policy by cutting rates, and one thing that happens when rate cuts is that borrowing costs go down, and one form of borrowing that's very popular is mortgage rates, but we're in the middle of a rate cut cycle. The Fed cut 50 in September, then another 25 at its subsequent meeting, but mortgage rates have generally not moved down at all, and in fact moved up after that 50 basis point cut. By the way, we're recording this November 25th. We haven't seen much improvement at all, and so there is this, I don't know if it's really a mystery, but there is certainly a story about the Fed in the middle of a rate cut cycle, and yet it not really feeding through to a lot of kinds of borrowing.

Tracy Alloway (1:23)

I don't think it's a mystery. We did a whole episode on it, explaining what's happening.

Joe Weisenthal (1:27)

You're right, you're right. We explained it all. You're right.

Tracy Alloway (1:29)

But what I was gonna say is, as part of that conversation, you asked a really interesting question.

Joe Weisenthal (1:35)

Thank you.

Tracy Alloway (1:35)

Which, for once.

Joe Weisenthal (1:37)

For once.

Tracy Alloway (1:38)

Which is, why can't we have a one-click mortgage refi? Do you remember that?

Joe Weisenthal (1:43)

Yes. So, I've refied a mortgage in my life. It's kind of annoying. If you're in the right situation, you can save money and it's probably worth it, but it involves a lot of paperwork, et cetera. And I think we're so used to one-click financial transactions, or maybe two clicks or whatever. One of the things that came up is that there are often a lot of mortgages out there that theoretically are sort of in the money, where the borrower or the homeowner could take advantage of lower rates, but they don't for whatever reason. Perhaps one reason is they don't know that rates have gone down. Perhaps another reason is they can't be bothered to do all the paperwork and stuff. And so there are these lag effects. And so I've always sort of wondered, why can't you just have a one-click, one-click refi?

Tracy Alloway (2:29)

Well, as someone who lives in fear of paperwork, I think this is an interesting question and we should talk about it. And it turns out we actually have the perfect guest. We're going to be speaking with someone who was involved in a one-click mortgage lender, Mike Yu, co-founder and CEO of Vesta. Mike, thank you so much for coming on Odd Lots.

Mike Yu (2:52)

Yeah, thanks for having me.

Tracy Alloway (2:53)

So why don't you give us a very quick career summary? Why are we talking to you?

Mike Yu (3:00)

Yeah. So I've spent my entire career in the mortgage industry on the tech side. Surely, I like to joke that everyone who ends up in mortgage origination stumbles into it by accident. So I worked at Blend.

Joe Weisenthal (3:10)

Kids don't dream of one day I'm going to be a mortgage originator. You didn't dream of that when you were in elementary school. Anyway, keep going. Sorry.

Mike Yu (3:18)

Actually, when I'm recruiting engineers here at Vesta, I tell them, I'm like, lots of founders will give you some weird story about how they've dreamed about doing this thing since they were 12 I could tell you a story like that and you wouldn't believe me anyways. So let's be honest, we stumbled into it. I started at a mortgage tech startup, Blend, in 2016 So the company was about 50 people back then. And we built a ton of the borrower facing experience for big banks, big mortgage lenders, et cetera, with the goal really being how you make the process more digital. Like it was all paper forms back then, even for the borrower to fill out. And then how do you eventually consolidate that down into one click or one tap if you're on mobile. That company went public in 21, but I left in 2020 to go and build a different startup, Vesta, where I think a lot of what we struggled with that blend was the core infrastructure in the back end of the system made it really hard to consolidate the mortgage process, accelerate it, cut costs for lenders, save time and make it easier for borrowers. And so kind of working on the back end system of RecordNow, where I think a lot of the other technology problems are. And I think as this is about one click mortgages, I think there are, of course, some technology limitations, which is why we started the whole company. But there's also a fun variety of regulatory implications that I'm sure we'll dive into today, too.