Bloomberg TV and the fintech revolution - The Mayopoulos Memo | Blend

The Mayopoulos Memo: Mortgage rates, the fintech revolution, and Fannie Mae

On day two of the stock market’s meltdown during the last week of February, Blend President Tim Mayopoulos visited the studios of Bloomberg Television in New York, where he engaged in a wide-ranging interview with Bloomberg co-anchors Scarlet Fu and Romaine Bostick.

Amid the market mayhem, Tim presented calm, confident, and clear-eyed thinking on the financial topics that impact our organization and our customers.

The three discussed interest rate movements and mortgage refinancings, U.S. housing affordability, the fintech revolution, and the future of Fannie Mae and Freddie Mac.

Here are Tim’s key takeaways from their conversation:

There isn’t an absolute floor for where mortgage rates can go

Fu: I want to start by looking at the housing market and seeing what might disrupt it.

Mortgage rates are low and they may go even lower. We’ve already seen the 30-year fixed rate hit a low of 3.32% back in Sept. 2016. Is there a level at which it just won’t go any lower?

Tim: It’s like any other market, it all depends on the overall condition. So I wouldn’t say there is an absolute floor for where mortgage rates can go. We could see mortgage rates continue to decline.

The housing affordability challenge reflects an imbalance in the marketplace

Bostick: When you look at how low those rates are now, and the potential for them to go lower, do you worry that maybe the balance we have in the market, meaning between individual buyers and speculators and other folks in the market, that creates imbalances at all?

Tim: There’s actually not a great balance in the market at the moment. We have very low mortgage rates, we have a very low supply of housing, so that’s what’s driving housing prices up.

In many ways this affordability challenge really reflects an imbalance in the marketplace.

The hassle factor of refinancing your mortgage has gone way down

Fu: Lower rates often spur homeowners to refinance their existing mortgages. The conventional wisdom is you wait until rates are at least 1% lower than your current rate. Is that still the rule of thumb, given the existence of non-bank lending platforms that maybe can reduce that spread?

Tim: There’s the economics of it, and then there’s the convenience factor of it. I wouldn’t say lending platforms are necessarily changing the economics of it, from the consumer’s point of view. Although it does make it much easier for them to shop. So that’s a benefit.

But in terms of just the hassle factor of applying to refinance your mortgage, that hassle factor has gone way, way down. It’s much easier to explore what your alternatives are and be able to do that in some cases a matter of seconds, certainly in a matter of minutes, as opposed to days or weeks in the past.

New technology is helping banks deliver a better consumer experience

Bostick: When you look at the companies that have been at the forefront of this, it hasn’t necessarily been the larger banks, it’s been relative upstarts.

Do we get to a stage when those upstarts become the new behemoths, or do they just get absorbed by JPMorgan and other big financial institutions?

Tim: There are a lot of different players in this. There are the pure fintechs who are actually lenders themselves and using their balance sheets and trying to grow that business. But at the end of the day it’s pretty hard to compete with the 5,000 to 6,000 banks in the country, to say nothing of the credit unions.

The technology that’s now available to those incumbent institutions is much better. So they can actually provide a similar consumer experience. They already have the customer relationship, the balance sheet, and credit risk-taking capabilities to do what you’re describing.

We’re at the early stages of the fintech revolution

Fu: Consolidation in fintech is a big trend right now. We’ve just seen Intuit buying Credit Karma, Visa buying Plaid, and Morgan Stanley buying E-Trade. What do you think is a bigger read-through for fintech?

Tim: We’ll continue to see some consolidation among the more mature fintech companies. It’s not surprising that incumbents want to acquire those capabilities. Some of it is just a matter of acquiring some very important plumbing that’s out there in the marketplace. In some cases they give them access to data that they wouldn’t have otherwise.

But we’re really at the early stages of the whole fintech revolution. You’re going to continue to see new companies get created, they’re going to proliferate, and we’re going to see a continued evolution in that space.

It’s unlikely that Fannie and Freddie will exit conservatorship before the election

Bostick: I want to ask you a question about Fannie Mae if you can put on your old hat on for a moment.

Nomura has a report out that if Bernie Sanders wins the Democratic presidential nomination that would likely boost the chances that the White House will end the conservatorship of Fannie Mae and Freddie Mac before the November election. The thinking would be his nomination would motivate the White House to act with a sense of urgency.

Tim: This administration is already very committed to having the companies exit conservatorship. But this is a long and complicated process. This is a very big financial transaction. We’re talking about floating out the stock of these two companies, they’d be the biggest IPOs in the history of the world. It’s not something you could just barrel your way through.

They might take steps to move it down the road a little bit faster. But I think it’s unlikely the two companies would exit conservatorship before the election.

Check out Tim’s previous Mayopoulos Memo on the fully digital mortgage |

Catch up on all of his LinkedIn articles here |