Former U.S. Treasury Secretary Jack Lew is making the move to mortgages.
Lew announced Thursday he will chair the advisory board of consumer-lending tech company Blend. The San Francisco-based start-up handles online mortgage applications for incumbents like Fannie Mae, Freddie Mac, U.S. Bank and Wells Fargo.
The company has attracted $160 million of private funding from Andreessen Horowitz, Greylock Partners, Peter Thiel’s Founders Fund and other venture investors, according to Crunchbase.
“Blend is transforming home finance, which is critical to our nation’s economy,” said Lew, who also served as Director of the Office of Management and Budget in the Clinton and Obama Administrations, in a press release. “The company is uniquely positioned to simplify more areas of consumer lending in partnership with banks, lenders, and other technology providers.”
Fintech newcomers like Blend have made serious inroads in the mortgage business, which plagued banks during the financial crisis a decade ago.
In 2008, lenders got caught up in offering easy access to money and high-risk loans, with little to no documentation. The Dodd–Frank Wall Street Reform and Consumer Protection Act, or Dodd-Frank, banned risky loan products and now requires way more documentation. Lenders also need to disclose all the costs involved in each loan and verify someone’s ability to repay.
What would have been added paperwork required by Dodd-Frank has largely gone online, and been replaced with data.
Companies like Blend still need to collect private information like a W2 and payslips. But having it stored online means verification in fewer steps, and “less friction,” when assessing someone’s credit-worthiness, according to CEO Nima Ghamsari.
“This data is being verified in real time, it’s harder to make the wrong decision,” Ghamsari told FridayCrypto. “That’s not to say the financial crisis was caused by the lack of data but symmetry around data can mitigate that kind of risk.”
Tech companies like Lenda, SoFi, Lending Tree, Quicken Loans, and RocketMortgage are among those using machine learning to issue loans in “one click.”
Blend, which partners with some of those start-ups and said it processes more than $1 billion in applications per day, is opting for the partnership approach.
“Financial institutions know they can’t build everything themselves,” Ghamsari said. “There’s been more of an equilibrium where the banks and fintechs are working together, and will accelerate the pace of innovation.”
The company also said Marc Greenberg, who spent 15 years leading finance operations at Pixar Animation Studios, will join the company as senior vice president of finance and strategy.
— Former Treasury Secretary Jack Lew will appear on FridayCrypto’s Squawk Box at 8 a.m. ET Thursday.