YouSaid · the spoken record

Sanjay Gupta

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65
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2025-09-11
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2025-09-11
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  1. “To a lot of kind of like manual process and inefficiency. I think that when we were starting the company, there were three key reasons that we looked at, which said it was time to build new LOS. The first, honestly, was that the market was just begging for it. I had the great fortune of getting to know a lot of big clients at Blend, and executives would just call me. It felt like every month. And I was like, when's Blend building an LOS? And I'm sure Tim got this question a lot too, or it was like, you know, do you know of any new LOSs? Or which LOS should I switch to? I don't like mine. And there were actually a couple, particularly cheeky lenders who asked, like, hey, Mike, how about you just come and build us an LOS? And so you get those questions a lot. And I think that reason number one, obviously, is the market is demanding it. There's a lot of lenders who are just saying, hey, we need some competition in the space. We need some fresh thinking. Reason number two was really around operational cost. Andrew and I touched on it a little bit at a higher level, but fundamentally, like mortgage lenders that are independent mortgage banks don't really make money per loan on average today. And the main reason for that is the cost to originate continues to balloon. There are all sorts of contributing.”

    2025-09-11 · a16z Podcast · Inside the $13T Mortgage Machine · IDENTIFIED FROM THE TRANSCRIPT · source

  2. “So an LOS stands for loan origination system. You can think of it as the system of record that a lender uses when they go to originate a loan. And so I had the fortune to work at Blender with Tim actually. I sat next to him and we worked on basically the consumer front end of that experience. So you go on like WellsFargo.com and you apply for a mortgage and that's blend. But what happens actually as soon as you submit your application is all that data gets handed off to an internal system. And that internal system is really where the data is considered the source of truth. It's where the processors, the underwriters, the closers are all going to be logged into that system all day long looking at loans, looking at documents, understanding and underwriting your loan. It's the system that integrates the internal system that integrates to every other vendor that these lenders are using to manufacture the loan. And that kind of back office system is what they call the loan origination system or the LOS. And these are historically pretty old systems. I won't say very old, like Andrew replaces very old systems. I replaced pretty old systems that”

    2025-09-11 · a16z Podcast · Inside the $13T Mortgage Machine · IDENTIFIED FROM THE TRANSCRIPT · source

  3. “Sticking with you for a second. You were already in the mortgage industry before you started Vesta. Do you want to talk a bit about you could have started many different companies in the mortgage industry? You chose to start an LOS. Why?”

    2025-09-11 · a16z Podcast · Inside the $13T Mortgage Machine · IDENTIFIED FROM THE TRANSCRIPT · source

  4. “Format to begin with, and you definitely can't get it all out, and then you can't figure out how to intelligently pass that all the way through the capital market to the end investor, to the person buying the bond. It's lossy even to transfer it to the servicer, which tends to, again, make a terrible customer experience, but also just create a lot of confusion and inefficiency. And so the lack of transparency, I think, in the data throughout the mortgage ecosystem is another one of those hotly discussed topics that really, I think, contributes to potential unfair treatment. It contributes to a lot of regulatory overhead where the regulators actually have to spend a lot of manual time and effort figuring out what's going on. It contributes to a lot of friction in the capital markets being able to develop new products or better understand the credit risk of the securities they're buying, which of course hurts pricing. And so there's, of course, the consumer experience, which is opaque and confusing. There's the lender experience, which is expensive in manual. And then there's also this underlying data problem from the old infrastructure as well, which I think causes a lot of bigger downstream problems as well.”

    2025-09-11 · a16z Podcast · Inside the $13T Mortgage Machine · IDENTIFIED FROM THE TRANSCRIPT · source

  5. “Yeah, I mean, I think Andrew covered a lot of it. A lot of it is cost, a lot of it is customer experience. Somehow weirdly, like, Andrew talked about those things, and I'm going to talk about capital markets, which is like the inverse of, I think, what we usually do. But I think that there's obviously a huge amount of manual labor and structural cost that creates for lenders, which to Andrew's point, like the consumer is eventually paying for everything. I don't think anyone looks at mortgage lenders' profits and goes, oh my gosh, the mortgage lenders are making tons of money here. We don't need them to lower costs. It's like if they can lower costs, competition will probably mean that results in lower costs for consumers. The thing that maybe Andrew didn't touch on, which I think is also really important about this old infrastructure, tends to be the availability and transparency of the data. And so every time you talk to like a capital markets person or an investor or someone trying to enter the private label market so that they can create some of these innovative financial products that may be able to help consumers differently, the problem you always end up with is, hey, you've got a system that makes the loan. That system doesn't necessarily have all the data in a structure.”

    2025-09-11 · a16z Podcast · Inside the $13T Mortgage Machine · IDENTIFIED FROM THE TRANSCRIPT · source

  6. “There was a bunch of regulations that came into place. All of that affected both what people had to pay, the mortgage assistance that was available, and the infrastructure at the time just really wasn't available. So there was a lot of hectic maneuvering between all the different servicers, the regulators, plenty of people were stressed, but there's definitely a better way to duel it where everyone ends up in the right place a lot faster.”

    2025-09-11 · a16z Podcast · Inside the $13T Mortgage Machine · IDENTIFIED FROM THE TRANSCRIPT · source

  7. “If you had way better software, if all of this was more efficient, then you can kind of see every part of the process like a pizza tractor. Now, we have since learned that Domino's does not actually give you all the steps in the pizza tracker, but just imagine the way that it should work, which is as all these things are happening, as you're going through the multiple parts of the process, you know exactly where you are every part of the way, and you can call in and say, hey, I know I'm in this part of the process. How long does it take to get from part A to part B to part C, and that gives you a lot more comfort? And it's a way less stressful way of going about this. And maybe the last thing I'll sort of add on top of that, right, is there's a deep reason, which is ultimately homeownership is a really, really key part of the American dream. And so if you improve the fundamental infrastructure that allows all of this to happen as a country, you're able to effectuate public policy faster and it actually improves societal outcomes. Simple one is obviously COVID always, right? When COVID has”

    2025-09-11 · a16z Podcast · Inside the $13T Mortgage Machine · IDENTIFIED FROM THE TRANSCRIPT · source

  8. “A little bit less obvious of a reason is things like mortgage assistance, right? So Mortgage assistance is the part of the equation where a homeowner who has a mortgage isn't able to pay the mortgage. And so just imagine that you're a homeowner who recently lost their job or you have a partner that's sick. And so you had to step away from work. You apply for mortgage assistance, which is, again, a pretty time intensive process because you have to send all this paperwork in, you have to get them to acknowledge it. But it's a little bit like sending a lot of information into the void. And you don't really know what the process looks like. You don't really know the parts of the process and where you're really in the queue. And so you call in the next day, they say to you, they're working on it. You call in a few days later. They say they're working on it still, and you like really don't know if they lost it. You don't know if something had happened. And they're supposed to give you a response in 30 days. But between when you submitted it and the actual 30 days, it could be full radio silence. It could be lost. You don't know. And then you start to wonder, am I going to lose my home? Am I going to have to move out? All these like really negative thoughts. Versus.”

    2025-09-11 · a16z Podcast · Inside the $13T Mortgage Machine · IDENTIFIED FROM THE TRANSCRIPT · source

  9. “Kind of transaction. So for all these reasons, the housing finance system does have some structural challenges around innovation. It's the government's role in it. It's the standardization of it. It's the people dependent nature of the transaction. And so even if the industry and consumers want it to be faster, easier, cheaper, more pleasant, it often isn't that way.”

    2025-09-11 · a16z Podcast · Inside the $13T Mortgage Machine · IDENTIFIED FROM THE TRANSCRIPT · source

  10. “The typical American buys a new house every seven to ten years. So they don't do this very frequently. And finally, buying a house and getting a mortgage is not just a financial transaction. It's a really highly personal experience. And it's really tied up in really deep-seated emotions about home and family. So for all these reasons, consumers have a tendency to rely on people instead of technology to guide them through this process. They're looking for really trusted partners like a real estate agent, which many people would think of as sort of anachronistic, but those people play a very influential role in the process. Or like a mortgage loan officer, you could say, hey, I could do all this myself. But the fact is people want to get advice from people as they go through this transaction. So consumers care a lot about those trusted experiences, maybe even more so than about speed and convenience as they do this very high stakes, very infrequent.”

    2025-09-11 · a16z Podcast · Inside the $13T Mortgage Machine · IDENTIFIED FROM THE TRANSCRIPT · source

  11. “And credit unions and fintechs and hedge funds and other players. And those providers are financially incentivized to create innovation and product and in service. That's generally not true in mortgages, which are very standardized. If you try to even change one word of the loan documents when you go to a mortgage closing, you're not going to get the loan. You can read all the documents if you want, but if you try to insert anything or cross anything out, you're not going to get the mortgage loan. And that's because everything has to be standardized and meet the written requirements of the products. So that's another reason why there's not a lot of innovation in this market. And then the third aspect of the mortgage market that I think does slow innovation is the very nature of buying a home and getting a mortgage. For most Americans, buying a home and getting a mortgage is by far the largest financial transaction of their lives. And it doesn't happen very often.”

    2025-09-11 · a16z Podcast · Inside the $13T Mortgage Machine · IDENTIFIED FROM THE TRANSCRIPT · source

  12. “Attracting enormous amounts of global capital to the U.S. housing market, which is bigger than virtually any other housing market in the world, by a lot. So this mortgage-backed security system that the GSEs issue with explicit or implicit government guarantees, those securities are the most liquid securities in the world other than U.S. treasuries. And that's only possible through the standardization of all the terms and conditions, including the underwriting and servicing standards of the underlying mortgages. So if you think about the difference between lots of consumer credit products, whether it's a credit card or an auto loan or a personal loan, and you compare that to mortgages, on the other hand, there are many flavors of those consumer credit products. That's really not true with respect to mortgages. That's because there are lots of non-governmental credit providers for non-mortgage credit like banks.”

    2025-09-11 · a16z Podcast · Inside the $13T Mortgage Machine · IDENTIFIED FROM THE TRANSCRIPT · source

  13. “Business that do slow innovation. The first is that the US housing finance system is backed by the U.S. government in one way or another in virtually every aspect of it. While some mortgage loans are held on bank balance sheets or sold to investors, the vast majority of U.S. mortgages are backed by the federal government through the government-sponsored enterprises, Fannie Mae, Freddie Mac, Jeannie Mae. And because the taxpayers are either explicitly or implicitly backing this entire system, it is quite appropriately highly regulated. So there isn't any big, thriving private mortgage credit market at scale where there's a lot of new or innovative products that are being created. So all of this is really backed by the government. Second, the success of the U.S. mortgage market is a function of standardization. The GSEs are a really quite successful.”

    2025-09-11 · a16z Podcast · Inside the $13T Mortgage Machine · IDENTIFIED FROM THE TRANSCRIPT · source

  14. “Well, first, let me, Angela, just respectfully challenge your premise a little bit, which is that the industry is fundamentally resistant to innovation. For example, 30 years ago, Fannie Mae introduced an automated underwriting system that's still used to this day to originate virtually every mortgage loan in America. And that was a really remarkable innovation when it was created 30 years ago. And that was a long time ago, but more recently, we've seen an industry push for more innovation. For example, in 2018, there was this very famous rocket mortgage Super Bowl ad called Push Button Get Mortgage, which wasn't actually literally true at the time, but it certainly signaled a focus on greater speed and convenience and efficiency for consumers. But there are, in fact, really quite a few aspects of the mortgage.”

    2025-09-11 · a16z Podcast · Inside the $13T Mortgage Machine · IDENTIFIED FROM THE TRANSCRIPT · source

  15. “Ultimately, homeownership is a really, really key part of the American dream. If you improve the fundamental infrastructure that allows all this to happen as a country, you're able to effectuate public policy faster and it actually improves societal outcomes.”

    2025-09-11 · a16z Podcast · Inside the $13T Mortgage Machine · IDENTIFIED FROM THE TRANSCRIPT · source