Saturday Cup of Joe: a lending and tech(ish) newsletter

Friends & Colleagues,

Hard to imagine that anything else happened this week besides politics but turns out people are still applying for mortgages, buying houses and buying too many squares in their office Super Bowl sheet. I’m excited about the Super Bowl if for no other reason than my cousin made a Super Bowl commercial! Here’s the link to the leaked version. And admittedly, I do want to see Roger Goodell hand Tom Brady the Lombardi trophy after everything that happened over the last 2 years.

This week we look at:

  • Trump administration week in review (Of Interest)
  • Digital trends and news (Got Me Thinking)
  • All the Single Ladies (Have You Heard?)
  • CEOs look for moral support (A Look Ahead)
  • Millennials, am I right? (Sidenote)
  • Start-up martix (Quick Hit)
And now, here’s the an interesting picture from my LinkedIn feed this week. A company is trying to encourage working from home, including convincing companies to eliminate offices all together. This model is literally called “Future Office.”

Of Interest: This week the White House appeared to be active but in some ways it was mostly speculation. Certainly at the beginning of the week, many were trying to imagine how Trump would make time to address Dodd-Frank in the middle of the immigration order, nomination fights and national security restructuring.

Trump had previously called Dodd-Frank “a disaster” and said, “it’s almost impossible now to start a small business and it’s virtually impossible to expand your existing business.” There were somewhat mixed messages about how Dodd-Frank had affected small business lending, but there was no doubt that regulatory burden generally affects all decisions to expand existing businesses. According to most government data sources, “[c]ommercial and industrial lending is up significantly since the law was approved, though the amount of money lent to small businesses was little changed.” At the same time, economic growth is key to the President’s underlying campaign promise.

By midweek, there were indications that the House Financial Services Committee would move forward with the Financial CHOICE Act to amend Dodd-Frank and create a commission leadership at the CFPB. Senate Republicans than released a smaller bill aimed at doing just that.

Almost as a sidenote, there were some indications that Trump’s tax reform plans would intertwine with his financial reforms. In terms of a step 2 in the process, Trump would turn his attention to tax reform. The current plan would not directly implicate real estate taxes or mortgage interest but could begin to “nibble away,” according to an analysis by the San Francisco Chronicle.

Although neither [Trump’s or Ryan’s] plan puts a direct hit on homeownership, “Paul Ryan has said that any tax bill they do will not add to the debt. They are going to be undertaking a very aggressive search for ways to pay for their tax-rate cuts. That search is almost certainly going to include the tax preferences for home buyers,” said Howard Gleckman, a senior fellow with the Tax Policy Center. Whether they survive the ax “is impossible to know.”

Then Friday, National Economic Council Director and former Goldman Sachs executive Gary Cohn put Dodd-Frank on the chopping block with some comments. Later in the day, Trump released an Executive Order directing Treasury to report on all financial regulations within 120 days and to craft a response/analysis according to core principles. The text is available here. Overall, it’s more of a mission statement, though it did raise some interesting questions about consumer protection. For instance, policy statement (a) states: “empower Americans to make independent financial decisions and informed choices in the marketplace, save for retirement, and build individual wealth.” In my opinion, it raises consumer expectations as well as raising expectations on consumers. Are we sure that Americans want more independence in dealing with financial institutions? Are we sure it is still a good idea to promise individual wealth? Only kidding…sorta.

The Takeaway: How much political capital does the new Trump administration have? I think we’re finding out that might not matter anymore. The first week brought a flurry of Executive Orders, firings and additional promises. The takeaway? There is still the question of what role, if any, Paul Ryan will plan in coordinating healthcare, tax and financial reforms, not to mention whether Trump will fire Richard Cordray and turn time and attention to a fight with the Bureau and Senate Democrats. It seems like a lot on the plate for one White House but then again, that’s what Trump promised during the election and he won. It’s a whole new ballgame and maybe the old rules of deliberation do not apply.

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Got Me Thinking: I’d be remiss if I didn’t highlight a LinkedIn post from Debbie Hoffman, Chief Legal Officer at DigitalRisk. On Monday, Debbie wrote about “Digital Trends in Home Purchasing,” and while she said some awfully nice things about Rocket Mortgage, that’s not why I wanted to highlight the post. Debbie tapped into a key tension in digital business development today and that is the expectation of what consumers are asking for versus what technology can actually deliver. She also noted that lenders can react to the online market in ways that do not require a full Rocket Mortgage experience. She’s exactly right.

I like to highlight fintech companies from time to time, but much of what is in development today is also the result of extremely high consumer expectations. Here are a few examples from this week:

1. Once we rolled out Rocket Mortgage, the calls for fully online closings were quick to follow. I was asked this week to focus on QL’s policy for remote closings, including remote e-notarization. This is obviously a major upgrade and competitive advantage for our company, but it is also largely customer-driven. Our Rocket customers are requesting online closings and now the technology and law have to catch up. (Seems technology, as usual, far outpaces the law).

2. Wealthfront, the app-based investing service, rolled out Path. Path is their financial planning tool and brings long-term financial planning capability into your smartphone. I found their emergence over the last year or two impressive, and this only solidifies their place in my mind as a company to watch. It’s slick and clean presentation at exactly the right moment in the market.

3. Speaking of Wealthfront, a Canadian competitor with a similar name, Wealthsimple, extended its reach into the US market. I’m not that familiar with Wealthsimple but it seems to be a leader in this space within Canada and one to keep an eye on.

4. SoFi became a retail bank. I’ve written from the very beginning of Saturday Cup of Joe that Social Finance (SoFi) would have to decide where to get funds to loan and/or how to bring in additional stability. Well, SoFi answered that question this week by acquiring Zenbanx for $100M. Now SoFi will offer checking, credit cards and money transfer capabilities. Jury is still out on whether this is the partnership SoFi needs to fuel their model or a last attempt to avoid having to restructure the company.

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Have You Heard?: Beyonce is pregnant! You’d think that’s a totally irrelevant segue but actually, I thought of her this week. Favorite Bey song? “Single Ladies”, obviously. So, this article from Bloomberg gave me another excuse to find this Single Ladies (may have to skip ads) video oh yea, and this one. The Bloomberg piece does not uncover any new trends but brings more data to an existing trend — single women are the most likely group other than married couples to own their own home. Outbuying single men by double the rate, single women continue to favor their own narrative. Millennial women are just becoming homebuyers, so it is difficult to tell which direction the trend will go from here, but over the last 30 years women have been more likely to be homeowners and single parents (which contributes to homeownership).

I often write about where homeownership will go over the next 10 or so years, and this trend bodes well for our industry. Women will continue to have opportunities to create their own paths to homeownership, family and community. All good things for our industry and our country.

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A Look Ahead: Speculation is the name of the game in politics, policy and Presidents these days. Fortunately for most companies, the policies being discussed are at a relatively high level and do not directly influence their businesses. Unfortunately for large public companies and the economy at large, America’s top CEOs are struggling with how to direct businesses in this new political climate. I wrote last week that business leadership were developing strategies to avoid any attention from President Trump — one way or the other.

This week, the stakes only increased. NYT’s Dealbook column wrote about the confusion among CEOs on how and when to speak out. Over the weekend, it was clear you can be damned if you do and damned if you don’t. The article went on to quote John Chipman, the director-general and CEO of the International Institute for Strategic Studies (IISS), “…in our globalized world, every company needs a foreign policy. Now, our largest companies also have to think about having a domestic policy — and possibly a moral policy, too.” This can be difficult for some companies. Here is a great piece summarizing certain companies’ positions, including an industry-by-industry look. Do you believe every company needs to have a social policy position? If so, how vocal or public should it be? Great, difficult questions for any leader and particularly those of us running our organizations or anticipating starting companies in the future.

Also found on LinkedIn this week

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Sidenote: Millennials and personal finance, am I right? You’ve got a millennial writing to other millennials in Inc. about the 5 lessons of personal finance that don’t seem particularly earth shattering or new. But they are good ideas. On the other side of the spectrum, I found an interesting post about millennial potential from an unlikely source — The Art of Manliness. In the spirit of looking for value wherever we can find it, I thought I’d share. The question I’m interested in comes toward the end of the article — Will Millennials Become the New Greatest Generation of Personal Finance? Ironically, this section came after the sentence “In other words, modesty and thrift have become cool again.” No kidding. But back to the point — whether or not millennials will become the greatest generation of personal finance- the question is how the next generation’s interests and politics will change our economy. I’ve written often about homeownership, but the question also applies to retail shopping, online shopping and subscription “shopping.” Millennials do seem more conservative financially but also more likely to eschew big box stores for websites and curated collections. Since this is Sidenote, I’m gonna eschew a conclusion and just leave it there.

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Quick Hit: Interesting matrix of start-ups. This matrix looks at industry (rows) and value-add or method (columns). There are a lot of companies missing but a thoughtful way to look at this landscape.

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Today’s Thought: Never know where value can come from. We say the inches we need are all around us. This week I’ve been spinning it to “you never know where the inches will come from.” So I’m always trying to stay open to any opportunity because you never know where or when the next moment may present itself. This week it was a random conversation in a hallway that led to a breakthrough on a project. It could be the idea that occurs to me on the treadmill or the willingness of a colleague to review a memo / proposal that they didn’t work on just to test the theory. There are small pickups that can come from unexpected places or ideas sparked from unexpected connections or coincidence. Thinking about progress or advances as small, incremental wins is also the way I’m trying to approach difficult questions and projects. Reasonable, incremental gains on a regular basis. Success as habit.

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Bonus Content: Kara Swisher, a tech reporter in Silicon Valley, was interviewed by Tim Ferris on his podcast. It’s a long, long interview but well worth it. Good insights on self-awareness, hard work, and how to think about your standards (especially at work). Well worth your time, if you are interested.

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Quote: “The golden era of the internet is upon us.” — Debbie Hoffman

Continued success,