Leaders in Lending
Leaders in Lending

Episode · 1 year ago

Rapid Changes in the Lending Landscape w/ Nat Hoopes


The lending landscape is always evolving.

Recent changes in government administration, combined with the shifting dynamic of economics in response to the COVID-19 pandemic have accelerated this evolution.

Nat Hoopes, Vice President of Government Relations and Regulatory Affairs at Upstart shares his financial lending insight from DC, the changes underway, and the way banking is evolving to keep up with a rapid digital transformation.

Tune in to hear about:

- A sharp focus on the administration and regulatory changes in DC

- Expanding access to credit and lending inclusivity

- The ways COVID has accelerated the digital transformation roadmap for financial institutions

- How banks and credit unions can evaluate their economic mobility in the communities they operate in

- A policy expert’s career advice and perspective and predictions for the future of banking

OPTIONAL: Check out these resources we mentioned during the podcast:

- Nat Hoopes

- Upstart

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I think the biggest thing is the laser focus of this administration on racial equity and economic mobility. You're listening to leaders and lending from upstart, a podcast dedicated to helping consumer lenders grow their programs and improve their product offerings. Each week here, decision makers in the finest industry offer insights into the future of the lending industry, Best Practices around digital transformation. In more let's get into the show. Hi and welcome to leaders and lending. I'm your host, Jeff Keltner, and I'm joined a day by upstarts, vice president for government relations and regulatory affairs, not hoops, not welcome to the podcast. Thanks for having me, Jeff. Yeah, thanks for joining us. I appreciate I had a twist a few arms to get you to come and join us here. It's yeah, you know I'm a hard one to book. Well, I appreciate your making the time. You know I we talked to a lot of lenders out here on the PODCAST, but I do know that everybody's got their eyes turned towards DC, the recent election, the change in administration. But now you know, change in leadership at some of the regulatory agencies is I know every bankers kind of trying and trying to figure out what's coming down the pipe. How you think it's seeing things changing in Washington after the election in November? Sure. Well, you also have all of that change in DC jet supposed against the the dynamic of the kind of everlasting covid response right where people are, you know, stuck in environment that has been, you know, highly unequal in its outcome and in terms of how people have suffered under this pandemic and being impacted, frankly, depending on whether your frontline worker versus, you know, a sort of knowledge economy worker, and so all of that disparity, I think, put a really sharper focus on the change where you also have Democrats taking control of the White House, both the House of the Senate and that you know, the agenda, the Biden build back better agenda, is now, I think you can say, super charged in some ways in the in you're seeing it in the stimulus bill that was just passed. One point nine trillion dollars in covid relief, and now you're...

...taught hearing rumballer package and working on infrastructure, and so that's a lot of change to sort of digest. All at once. And then you're not even throwing in the regulatory change. So you mentioned the regulators. We don't even have an appointee yet at the OCC we don't have an accurk confirmed appointee at the CFPB. The FDI see is a commission will be under, you know, more of a kind of divided leadership for a while. But there is a lot for lenders to grapple with, and that's just at the federal level, not to mention the state level, which is obviously its own, its own set of things and and response to somewhat to the federal environment. What do you think consumer lenders are mostly keeping their eyes on in terms of what's coming down the pipe, coming out of those various government agencies and groups? Yeah, I think that the big question is going to be whether you see return of a lot of the Obama era economic policy and and regulatory policy that a lot of the lending community saw stood up in the way at week of the Dodd Frank Act in two thousand and ten responding to the last financial crisis. A lot of those names and faces and approaches are very familiar and so I think that that that would be a place for the regulatory agencies to head that, I think a lot of the lightning community wall. They see challenges and some headwinds and some maybe more strict or or, you know, detailed oversight of some of their programs. They are comfortable with in the sense that they know what to expect. I think if you see a departure from some of those approaches or people named to these posts that take the agencies in some very different or unexpected directions, that's when I think regulation becomes much more of a sort of front line or a top line concern. That's it's no longer sort of something that you always are dealing with in the background but but isn't top, top of mine for a bank leader. What do you think of the major areas where you expect kind of return to more Obama era like, if you will, kind of oversight, and where do you do you are there areas you see for coming like major departures from what that looked like, where they maybe we see a different kind of regimer set of concerns or specific areas and that maybe you expect a tighter degree of scrutiny. Over, I...

...think you'll see student loan servicing and the return of the Obama are paid a lending rule at the CFPB. Are Sort of two things that you expect are going to get a lot of oversight. The student loan issue is obviously one that's front and center because borrower student loans payments are largely halted and so there's just a lot of policy questions about what happens when those borrowers, you know, have to start paying again. Yeah, are they going to you know, is there going to be any kind of a relief? How are they going to be dealt with? What's the income base for payment going to look like and what are the rules and the regime that govern the services of those of those products? So that's a big one. To a lesser extent, I would say auto. There's always going to be a lot of, you know, healthy oversight of auto lending just because it's such it's the third largest, you know, category of credit, but behind mortgages and student loans. It's a product that everybody needs to have to get to work every day, that you know, people need in general to have access to transportation and autos, and so you know, that's an area where you can see more scrutiny and where you always have the balance within a democratic administration is the support for access to credit. So you think about the importance of, you know, pushing home ownerships as a possible wealth build building mechanism. There's a lot of talk about down payment assistance, about using CDFI's support for, you know, minority depository institutions. How can we get more credit out there into the community? And so I think for lenders there's not just a hey, the regulators are coming sort of a story. There's also a federal policy may be supportive of US trying to lend more inclusively, interesting DC and openness. I mean we've obviously at upstart had a number of conversations with that various agencies around kind of alternative underwriting techniques that can potentially expand access to credit it. Do you see that kind of diving deeper into how that's overseen or what the rules of the road are for kind of expanding techniques or data points being something that the agencies take up in the vein of helping broad and access to credit through some of these mechanisms? Yeah, you know, I could see them trying to maybe do something to expand on the two thousand and nineteen alternative data statement.

The regulators, jointly, the CFPB, the OCC, the FTI S in the Fed jointly put out a statement that was very supportive in general of that, you know, use of alternative data. It also said, you know, you need to oversee the use. If you're going to be using it, you need to make sure that you're overseeing it in a safe and sound manner and the models are performing the way they're supposed to and that it is really helping you include more borrowers. So I could see them doing more with that. I could see them doing more trying to provide a little bit more certainty for AI and ML models. That's been something. Governor will brainard gave a speech in January about AIML and possibility of sort of taking comment from the public in that area. But that's all of those are, you know, avenues for for potential exploration. That would be helpful, you know, to the use of a company like upstart. Now you'd mentioned auto lending and I'm curious what you see coming down the pipe or the conversations you're hearing. I know that there have been some temporary thing put in place in terms of the requirements around what signatures or powers of a turning in various states, and it's not just a federal policy issue with Max fixed. Your job, I guess, a bit harder because if it's not even just state by state issue, sometimes it's a county by county, DMB by dmv level issue for House of somebody. What do you see coming in in terms of the focus on auto lending and what that's kind of mean for lenders and what the government is trying to achieve? And from a post subjective point of view? Yeah, well, what you've seen states do is covid has really accelerated the shift to digital interfaces or, you know, digital experiences, and so government's by and large did not want people having to walk out a go to notaries or have notaries come to their houses if possible. So in places where, you know, perfect lean entitle on an auto transaction to the extent that that was a notary requirement, they're now generally allowing what's called remote notary and those are either by executive order or the states have passed a law to allow that. And Similarly, a lot of department of motor vehicles are now accepting just docu signed documents. You know we all are doing a lot more docu signing these days and so they're sort of, I think the world is waking up to the fact that you're not going to see a lot of fraud just because somebody's signing on...

...their computer in the square rather than, you know, printing a document out, wasting a lot of paper, wet signing the document, scanning it to themselves, sending it in, mailing it in, et Cetera. So you're seeing, I would say, a pretty rapid transformation at the state level. There's two big bills. There's one in New Jersey and one in California. Those are two big states that have resisted the use of electronic signatures and in auto sales and leasing, and if those bills passed, that will change. Even if they don't pass, there's a chance that the governors are going to do something to sort of really encourage the dmvs to accept those kind of electronic signatures just for a whole hosts of reasons, as I mentioned, environmental, health, Etcetera. There's just a lot to art to argue for the electronic experience. Interesting. How are you see state like regulators, you know, grapple with these kind of rapid changes. Me, you talked about some of these easing restrictions of there are other things you're seeing. I mean it's interesting. You comment on the adoption of digital technology and every bank that I talked to, you know, had had a ten year digital transformation road map and it's now a two year digital transformation roadmap and they feel the need to really accelerate their adoption and, you know, kind of deployment of those technologies just to meet consumer expectations, you know, exacerbated by covid where maybe the in person just wasn't available. But how do you see the state bodies dealing with that rapidity of change and in kind of adapting to the kind of ever changing reality that it's facing? You know banks, I mean in the case of electronic signatures, they don't have to do much. I mean they could accept the documents still in payper form. They just have to accept the you know, it's good. It's just got to be have the little docusign box, you know, inside digitally. But you know, people, I think lenders, are happy to mail those papers in. I think, more broadly, regulators are. Now there's been a major shift where technology. You know, whether you upgrade your technology and regulators are a little bit of agnostic now. It's sort of seen as a risk factor if you don't update your technology right, behind if you're not able to, you know, do digital count opening offer a loans that you want to offer online, either to small businesses or consumers. And so I to me, I think it is accelerating. COVID has...

...accelerated it even more and some of it is there's an opportunity, I think, right now, to leap from Hey, I just want that button on my website so that somebody who wants to loan can apply for one, and I'm like, I'm quote unquote, with The Times, to realizing that if you're going to actually your if you're going to do any meaningful volume in some of these product areas, you're going to actually have to leap frog from that to, you know, working with a partner, probably somebody like an upstart, to acquire the customer online, to have somebody send you you know a lot of people who are want to apply for loans or looking for loans on credit carm or lending tree. You know, all of us are out there comparing prices and trying to get the best price. And so anybody, anybody who wants a loan, and all alone a person Alan wants to shop around for what the bank best rate, they're going to be able to get from a bank. They're going to go and try to compare. And so that's where you know the customer really is. And so if you're, if you're a bank, looking upgrade your technology, you're going to need to be able to handle all those things, not just, you know, have a have an option for somebody to apply on your bank website. I didn't actually give not this question advance his gass, but you know, I know you came to you know you came to upstart from the MLA, from a kind of trade association for online lending companies, and you spend a lot of time and DC. You know, what is it about the the financial services industry, specifically in terms of government affairs, that attracted you and what attracted you from leading leaving more of a trade association role and coming in house at a particular player in that space in terms of you know, you're UN career progression. Sure you know I started in investment, banking and private equity way back when, and that's kind of I started it with a real interested in finance and I found myself when I was doing that work that I always also love to read the policy pages right and so I kind of had this twin passion of you know, yes, I'm building excel models and in I'm doing that, but I I just had this feeling that that I could add a lot in the policy sphere. So they end up shifting and go working on the hill and going through the whole process of the Dodd Frank Act, working for, you know, Senator Lieberman, then senators got Brown, and then working on the jobs act, on crowdfunding, and I got kind of a really interesting fintack that way. And so working in trade associations and working in this roll...

...it upstars kind of a natural combination of those interests where, you know, I think that that finance, and especially access to credit, is so transformational for for wealth building in this country. I mean there's so many families that can point to and you know members of Congress will say this when you're up there. They will say, I remember that if my dad, who ran this lawnmowing business, hadn't gotten credit to like add a second lawn mower, like, we wouldn't have made it, you know, and they remember those moments where credit was everything to them. And that's literally the difference between in many cases, building intergenerational wealth is whether or not, I critical times in your life you were able to access credit to do something, whether it was built by a first home or build a business, you know, or some cases just take control of your financial life. And so that's what you know, I think that my passion is really around that twin, like getting people access, but making sure that it's equitable and that in that it's available, if possible, to all all parts of society. That's good story and we certainly heard up start. Always think about a credit is being, you know, the cost of the price and some some degree of opportunity, mobility, and therefore the cost of credit is the price of those things. You know, that's the that is the way you get access to some of those things and it's really critical to week make it as broadly available as possible. So any last advice for you know, consumer lenders out there, banks trying to navigate the coming couple of years? What are the things you'd be prepping for or where areas you'd be most focused on. You know, if you could give a couple party words of advice to those lenders out there wondering what to make of what's come out of DC he or where they ought to be spending their time getting ready for maybe what's most likely to come down the road. I think the biggest thing is the laser focus of this administration on racial equity and economic mobility. That if you're a bank and you're not serving your community broadly in terms of you know, you don't have a lot of customers in any product, let alad depositors, but in any product that have lower credit scores or hail from, you know, other parts of your city or your or your general area. You know, I think the regulators are going to start to nudge you in that direction. Like you know, in you have a mandate as a bank to serve the community, and that's not just the...

...community reinvestment act, you know, the the just move broadly. You know, what are you doing in the community? And I think most banks are right there and mission aligned they are. You know, banks are the ones who sponsor your little league right will. Banks are the ones that are there in the community, they see themselves. But in this shift to a digital environment, it's put a lot of the chips in the hands of the largest institutions that often have the best technology tools or the biggest brands on TV, and so a lot of people end up, you know, banking with institutions that are far away, and I think that some of the partnerships between Fintech firms and community banks are regional banks, has that opportunity to level the playing field. You know, it gives an opportunity for a bank that isn't of the giant size and scale that has all the technology offerings, to partner and then deliver and experience that's best in class very quickly and to compete and hold onto those depositors or go find more, you know, or lend to more people within their community without, you know, in doing it safely with good outcomes. So that, to me, I think, would be my biggest advices that I think regulators are going to start to ask, not just in the context of CIRA but overall in the context of, you know, how does your bank fit within the community that you operated? A really interesting point. You know, I came into the financial services space from the technology space and maybe you'd washed a few too many movies about Wall Street and Wolves on Wall Street and whatnot. And you know the I think your message, that about the mission alignement is right on point, because I've been really surprised how much closer to George Bailey most of the bankers I talked to are then the kind of visions you get coming out of Hollywood about Ruthless Wall Street types tonight. I think that the goals are aligned that. I think you're right. It's a question about how do we help those banks find the ways to serve those communities better, because the desires there, the capabilities are there and I think it can be a real differentiator. You're absolutely right. I mean, I'll just put a point on it. When you think about the capacity that exists as as banks have, you know, people, the savings rate has increased because of covid and thanks, you know, often times are flushed the capital. They need places to put money to work and that, you know, putting it to work in their communities via lending that now they can get, you know, via partnerships, is a huge opportunity because they can,...

...you know, they can go from you know, offering just a trickle of credit to people, you know, for instance, in LMI areas or's it codes, just a trickle to like, you know, a nice amount of volume and they can do it in their area geographically, and that's, I think, something new that that wasn't even an opportunity that ten or fifteen years ago would have existed. It wouldn't have been possible to I don't think, without the way loans are done digitally now for a bank to be able, if they're not in a personal own business or they're not in an audible own business, to be able to very quickly scale up and serve their community in credit. Yeah, I think you your point as well. Taken to that. As that capability becomes more available, the expectation of regulators and the question of if this is possible, how are you taking advantage of that to invest in that community becomes not so much well, I understand that it's hard to do, but more of a hey, they're stuff out there that lets you do this better, like, what are you doing to deploy the stuff in your communities and actually to reengage with parts that community? Maybe we're difficult to serve previously, but maybe those opportunities are more available now there were before. Absolutely all right, now, as I was going to say, but I always have the same three questions. I'll have to modify. I'm a little bit for you today that I end this with. So my first one. What's the best piece of career advice you've ever gotten? The best piece of career advice I've ever gone? This is like the lightning round. Jeff, you go. It is the lightning round. The best piece of care of as I've ever gotten. I would say don't be afraid not to follow the hurt. Don't be afraid not to fall. All right, yeah, so the like, the like. You know, think for yourself. You use your own use your own comments as don't just don't just do the thing that everybody else is doing. All right, I like it. Don't do the thing that everybody else is doing. Things for yourself. My second question the lightning round. Not Lightning strikes twice. What's the best government relations advice? I usually ask people at consumer lending, but your you know you're in the government relations side of the business. What's that? What's the Best Gr advice you have? People will never forget the way you make them feel just, you know, like you can't, you cannot replace the way people like we you know. I yes, you can navigate, you can have the greatest Gr strategy, you can hire the best lobby is, the best consultants, you can have the greatest white paper, and if the experience of working with...

...you as a person makes people feel just not good, you're not going to have a great outcome. So, like it's all about being transparent and trustworthy and having people believe that, you know, you're not just bringing them credible information, but that you're there to be a resource and that they can trust you. All right, I like that this could have. I'm not to write that down and share this with my kids for their own career vice. And my last one. What's your bold prediction for the future? Can Be banking related, government related. I'll let you choose your own adventure on this one, but give me a bullet prediction so I can bring you back into here and hold you to whether or not you you got to right or wrong. You know, I hope that we're going to see a great convergence where the like banks that are small and doing what I mentioned, you know, sponsoring the literally helping people are able to do more and or sophisticated things so that they start to, you know, in some ways be able to operate and compete with, quote unquote, Wall Street. And that would be the moment when, I think, you'd start to see that the consumers would see their bank brands all the time because they'd see them in their inbox with with novel advertising, right, because they be they be advertising the way the sophisticated big banks do. They'd see them in there in their social media feed. They would see them in their offers of loans of credit, like in their area, that you would see it would be much more likely that the offer of credit that a that a consumer would get would be from a local bank, because somebody would be smart enough to connect that local offer with somebody there. So that's my hope is that is sort of my bold prediction for the futures, that you're going to see a relocalization as people emerge from covid that they're going to be connected and want to be connected their community and community banks out of a chance to be tied in with them and in that way, through using using new technology. My only other one is that I truly believe that we are going to see have another Tom Brady Super Bowl victory. One of those is may be easier to measure than the other, but I like the two predictions. Tom Brady, I you're a little bit divisive with that one, I think now. But I love the revitalization of the kind of community banking segment and the reactivation of that and and competitional with the big banks is something I think we all would love to see. That one I hope...

...to see right. Will be back on to measure it so well not I appreciate your joining us today. Thanks so much for your time and we will have to be back again later. Thanks to if. It's always great jet. Talk to you soon. Talk to ratter. Upstart partners with banks and credit unions to help grow their consumer loan portfolios and deliver a modern, all digital lending experience. As the average consumer becomes more digitally savvy, it only makes sense that their bank does to. UPSTARTS AI landing platform uses sophisticated machine learning models to more accurately identify risk and approve more applicants than traditional credit models. With fraud rates near zero, upstarts all digital experience reduces manual processing for banks and offers a simple and convenient experience for consumers. Whether you're looking to grow and enhance your existing personal and auto lenning programs, or you're just getting started, upstart can help. Upstart offers an into in solution that can help you find more credit worthy borrowers within your risk profile, with all digital underwriting, onboarding, loan closing and servicing. It's all possible with upstart in your corner. Learn more about finding new borrowers, enhancing your credit decisioning process and growing your business by visiting UPSTARTCOM forward banks. That's upstartcom forward banks. You've been listening to leaders and lending from upstart. Make sure you never miss an episode. Subscribe to leaders and lending in your favorite podcast player, using apple podcast. Leave us a quick rating by tapping the number of stars you think the show deserves. Thanks for listening. Until next time,.

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