This is my latest post in my Free Startup Ideas series.
I've been coming up with business ideas since my earliest childhood memories. Most of them have been absolutely terrible. Some of them have been decent. And now I'm going to give away some of my best ones for free.
Am I really give these ideas away with zero expectation of return? Absolutely.
- Ideas are worthless. It's all about execution. If you want to take one of these ideas and run with it, do it. I'll even be happy to give you a brain dump with all of my notes on the idea as I’ve been thinking about most of them for a while.
- I take coffee meetings all the time with people looking for startup ideas. Perhaps one of these ideas will help them spark a new idea of their own.
- I want to get these ideas out of my head to clear some of my brain's RAM. That way I can come up with new and better ideas.
- I like giving things away and planting seeds.
Without further ado...
Pitch: When it comes to mortgage lending, there is a very binary outcome that rules the world: the mortgage payment was received this month or it was not. Mortgage lenders are completely reactive in this process. Up until the point where a payment is not made, banks have no clue it's coming. Mortgage Monitoring gives lenders on-going data intelligence on their lenders after origination to allow them to better manage their risk portfolio.
Backstory: A good friend of mine invited a few people out to celebrate. It was a big day for him, and he was buying drinks. He just closed a mortgage on a new home, and on top of that he just bought a brand new Audi. I typically make it a point not to celebrate collecting massive debt, but I was happy for my friend. When I asked him why he decided to close on the house and car on the same day, he looked at me like I was clueless. In order to close the mortgage, he needed to have a certain risk profile. He had been waiting to buy a car for a long time and as soon as the mortgage closed, he went and piled on some more debt.
Smart. And scary. And the company who underwrote the mortgage had no clue. Then I started thinking more about this. The company who owns my mortgage, whoever that may be at this point, has no clue who I am. The only thing they know about me is what I told them when I filled out my mortgage application many years ago. They still think I'm a recent college grad who just started working at UBS with $50,000 / year salary. And they know that I check the box of on-time payment every month. Unfortunately, there are many people who miss payments and the banks are blind to this event until it's too late.
Use Data, Be Proactive
We have unlimited data available to us now. It's right at our fingertips. If we want it. And it we know what to do with it.
Social indicators, like the curly fry effect, can predict a person's relative level of intelligence just by the things they like on Facebook. What we're talking about here doesn't even have to be that complex.
We are going to provide mortgage lenders with on-going monitoring of the financial lives of their borrowers. Using Yodlee, we can aggregate bank and financial data on our borrowers quickly and efficiently for all of our customers. We can tell instantly the risk profile for every loan a mortgage lender has on their books, and we can tell whether the borrower's financial position is improving or deteriorating.
This data would be incredibly valuable for mortgage lenders to better understand their risk about what they have on their books. It will allow them to take proactive measures to work with borrowers, and even make intelligent predictions about exactly when a borrower will miss a payment.
But. But. But...
I know what you're thinking. Why would a consumer ever sign up for this monitoring. Well, the answer is simple. You offer a slightly better rate than what they can find elsewhere. This discounted rate would be offset by the money you'd save through risk mitigation. Plus there may be a selection bias in that the only people who would willing sign up for this monitoring are the people who feel confident in their finances.
True, default mortgages aren't costing banks nearly as much today as they did back during the financial crisis, but that doesn't mean there isn't massive opportunity here. Even with significant delinquency rates at an all time low of 2.1% (excluding mortgage loans made at peak stupidity years), that's still 2.1% of a $13.5 trillion dollar market. Those are very big numbers.
So let's make it happen. Mortgage borrowers get better rates. Banks get better risk management and oversight. The world has a better chance of avoiding another financial meltdown. A triple win -- my favorite type of win.