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In this episode, Bekim is again joined by Chris Colasanti. Chris is a founding team member of Rocket Mortgage Canada and the VP of Strategy & Analytics and Rocket Pro at Rocket Mortgage Canada from Windsor, Ontario. A graduate of the Lazaridis School of Business & Economics, Chris has brought an innovative and energetic demeanor as well as a passion for technology and data driven decision making to Rocket Mortgage Canada since 2020.
Chris is here to discuss: → Why it's so hard to start a lender in Canada, including: Canada's oligopolistic banking structure, the "big six", creating barriers for new entrants, slow regulatory changes, and the difficulty of scaling with high capital requirements & tighter margins. → The differences between the Canada and US lending industries like technology and unit economics, and how Canada's risk-averse culture is becoming detrimental to innovation and economic growth. → The lessons learned from Rocket Mortgage Canada's journey, the enduing spirit of the team and building a strong culture, and the importance of innovators carrying the torch forward.
Chris's 1st Lending Thoughts Appearance: www.lendingthoughts.com/e/11-chris-colasanti
Chris Colasanti's LinkedIn: @ChrisColasanti
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Thank you for listening to thisepisode of Lending Thoughts,
(00:02):
sponsored by Rocket Pro.
Today, I'm joined again by my
friend and colleague, ChrisColasanti, the vice president of
Rocket Pro, as well as data andanalytics here at Rocket Mortgage
Canada.
Chris and I are going to talk
about some of the lessons learnedfrom our journey.
So you're not going to want tomiss that.
We talk about culture, of course,because we can't help ourselves.
And we talk about the importanceof people carrying the torch
(00:24):
forward on this innovative journeyfor mortgage and fintech and
finance in Canada.
So thank you very much for
listening in.
Chris.
Thanks for joining me today.
It's my pleasure.
(00:44):
The only two -time guest of theLearning Thoughts podcast.
And you want to know why?Why, I began?
Because your first episode with mewas the most listened to episode
in the history of LearningThoughts.
I'm not surprised.
No?
I'm not at all surprised.
But you are humble.
I'm very humble.
Listened to the podcast.
The only podcast I've listened to,actually, was just mine.
Well, I had to boost the numbers.
So, uh...
Yeah, here we are.
(01:04):
Incredible.
I'll let the others know you saidthat.
So appreciate you joining.
And I want to have a healthy
discussion with you about RocketMortgage Canada.
I also want to have a healthydiscussion about the state of the
mortgage market and who knowswhere it evolves into maybe some
conversation about the macro sideof things, frankly, unscripted.
We're going to kind of take it inwhatever direction it goes.
But I definitely want to startwith what I think is important.
(01:27):
obviously coming to a wind downphase of our business here in
Canada.
And that comes a lot of questions
about what we're going to do next.
We'll save some of those.
But I think the important thing istrying to capture the lessons at
the end of the day.
I think that it is only a loss or
it is only failure if you do notlearn, right?
I think the John C. Maxwell quoteis, sometimes you win, sometimes
(01:47):
you learn.
I think that while in the end, you
cannot definitively say we won, Ican definitively say that we We
learned a lot and I want to try tocapture some of those things.
Is that okay with you?A hundred percent.
All right, beautiful.
So maybe let's start with there.
What have you learned aboutmortgages in Canada?
Well, Kim, I knew nothing aboutmortgages when I started five and
a half years ago with thisbusiness.
(02:07):
And I have learned that mortgagesare very difficult.
The mortgage industry is extremelydifficult and that's not to turn
anyone off from it.
It's just to say the truth, which
is that in business school, firstthing you learn in business 101 is
this concept of Porter's fiveforces.
And there are these five forcesthat act on every industry, things
(02:28):
like the threat of new entrance,the buyer power, supplier power.
And when there is a lot of thoseforces acting on the industry,
it's typically less attractive.
And so we often think about.
You know, a quintessentialbusiness example is airlines.
Airlines are not really anattractive industry to go into
because all of the forces are verystrong.
And so it makes it reallydifficult to compete.
And, you know, in our experiencewith Rocket Mortgage Cam, I've
(02:51):
come to appreciate it's a toughbusiness.
You have to be extremelyresilient.
You have to have a lot of grit andyou have to love what you do.
And it's so funny because all thefolks that you've had on this
podcast, the folks that weinteract with on a regular basis,
they're weirdly.
obsessed with mortgages you rarely
run across someone in the mortgageindustry that casually does
mortgages right you've gotrealtors that are in and out of
(03:12):
the market they're kind of likepart -timers yeah not a lot of
those in the mortgage industry thefolks that do it it's this weird
sort of mortgage cult in canadayeah it's just obsessed with
mortgages and a lot of amazingpeople but it is it's really
really difficult it's difficult tocreate change and it's difficult
to innovate.
And there's a lot of, I think
things we'll get into structuralreasons, cultural reasons that
(03:33):
just make it a really toughbusiness to do.
Maybe we jump into thosestructural reasons.
reasons.
Yeah.
What do you think makes it hard?Cause you've used the word
difficult quite a lot here and Iwould wholeheartedly agree with
you, but you almost say with a bitof excitement and to your point,
yeah, everyone that we've evertalked to on the podcast and
(03:54):
everybody that you and I enactwith on a daily basis, they are.
more than willing to tell you howdifficult it is, but also super
excited to get up every day andcontinue to go at it.
But what are some of thosedifficulties?
So I think certainly one of thedifficulties structurally in
Canada is competition, right?As we know, oligopolistic.
There's six really big players.
They control 90%, 95 % of the
assets in Canada.
And so it's sort of that David
Goliath story that makes it reallydifficult to compete with.
(04:15):
One thing we'll probably touch onat some point is just those
differences between the Americanmarket and the Canadian market.
But in Canada specifically,competition is one, access to
capital, right?The big six control the majority
of the capital, and it makes itrelatively difficult to... compete
when your competitors also haveall of the money.
Another structural issue is justregulatory.
(04:36):
There's a lot of regulatory thingsthat make it, I think,
advantageous for incumbents.
The banks have some regulation
that makes it advantageous forthem to do uninsured lending and a
handful of other things.
It makes it tough for startups.
Compliance, right?There's a lot of compliance
regulation in the Canadianmortgage market that makes it
really tough for new entrants.
And just the general speed at
(04:56):
which policy and regulation movesin Canada, it's very glacial.
And so it hasn't necessarilycaught up with.
open banking and fintech and just,you know, I think the things that
we see moving more rapidly inother countries.
But I'm curious, you were in theUS, you came over to Canada.
What are some of the structuralissues that you've observed in
Canada that are, you know, maybenot present or different in the
(05:18):
US?That's a great question.
a great question.
I think two things come to mind
out of the gate.
Number one is technology.
And number two is a difference inunit economics.
I'll speak to technology first,which is to say that In the U
S., despite these being a lot ofdifferent individual technology
companies running these stacks,there are a few players in the U
.S.
(05:38):
through their own business or
through empowering mortgagebrokers have figured out a way to
tie these different functionstogether, like mortgage brokers,
like the point of sale system thatthe mortgage broker uses, like a
loan operating system that isbeing used to underwrite and
ultimately go on to fund thesemortgages, to the closing of
mortgages through the titlecompanies and things like that.
In Canada, it feels verydisjointed and it's a lot harder
to tie these pieces of technologytogether.
(05:59):
And a consequence of that is it'sa lot harder to deliver a great
client experience.
And I think people feel that as
consumers.
I know that was one of the things
that was really inspiring to mewhen we first started this company
is I had gone through my ownmortgage in Canada and I knew what
it was like over on the U .S.
(06:19):
side because I lived over there.
And it just could not be moredifferent in the way that it felt
going through the process.
The lack of certainty, the lack of
transparency, the lack of theability to do things digitally.
It was very, very frustrating.
So when we started this and
started building on that.
It was exciting that we would make
(06:40):
headway there.
And I believe that we did.
I know that we did, but I stillthink there's a lot of room for
improvement.
And I think it comes from folks
moving together in the samedirection.
And some of it comes fromadvancements in regulation.
Some of it comes throughadvancements in capital and the
willingness to invest.
But I think you can't just say you
better invest in this.
You need to show where the capital
returns come from in order to makeit investable, right?
So I think that technology is abig piece.
(07:01):
And the second thing that makes ithard to invest in is the capital
side, the unit economics of aCanadian mortgage.
And compared to a U .S.
mortgage, what I'll say there is
that on average, let's say as abroker, you're making 100 basis
points on a loan in Canada.
In the U
S., on average, you're makingabout 200 basis points as a broker
on a loan.
As a lender in Canada, you're
(07:22):
making 130 to 150 basis points onaverage in total for the
transaction.
As a lender in the United States,
you're making 340, 350 basispoints.
You can see there are significantdifferences there.
And what that creates ultimatelyis a massive scaling issue.
So you as an individual may beable to start up your own mortgage
brokerage and make a little bit ofmoney.
After, you know, collecting yourhundred ish basis points in a
(07:44):
mortgage, that's fine.
You as a lender might be able to
run a small operation and be ableto collect a little bit of money
on margin.
The hard part is when you try to
like really put the pedal to themetal and scale that business
significantly, the significantgain on sale margin in the U S
allows you to reinvest thatcapital back into the business and
(08:05):
grow that rather quickly.
In Canada, it's just not there.
So it's not to say that you can'tgrow.
It's just that you need to pickone of two paths.
Either A, you need to be capitalabundant and capital patient to
wait for that return.
Or you need to be capital abundant
and super aggressive.
And you just have to accept that
(08:25):
that is going to be a trade -offin order to consistently reinvest.
And I think there's someplayers... you know, taking that
approach right now in Canada.
And I think there's some players
that have been around for a longtime and we've seen them grow over
the course of 15, 20, 25 years.
You got to effectively pick a
lane, but you know, you can'tnecessarily produce the cash flows
to just pour back in reinvestmentinto the business and go rather
(08:47):
fast.
That's a major difference between
the U S and Canada that I'vepersonally observed.
Yeah.
To state simply in the U S you can
be, you know, contribution marginpositive on that first
transaction.
Correct.
And Canada, It's very difficultand most sort of run at that break
even point.
So from a scaling perspective, the
capital intensity is much greateron the Canadian side as a result
of that.
Now, the lifetime values, probably
(09:09):
very similar, like CLV is verysimilar between the two.
You know, some would argue it'spossibly higher in Canada.
Yeah.
And then the retention rates.
And so that is obviously theadvantage.
At the end of the day, you needvery patient capital to be able to
grow.
in canada quickly or like you said
you need to go for that sloworganic growth over 30 years or
something like that right yeah andi think we have that i mean you
(09:30):
look at the likes of firstnational or an mcap or cms now
part of nestle like those were youknow flow deliberate builds just
grow aum every year right slow anddeliberately you add in servicing
you add in all those sort of otherthings to increase the top line
revenue even at their yeah and ithink we have that i mean you look
at the likes of first national oran mcap or cms now part of nestle
(09:53):
like those were you know flowdeliberate just grow aum every
year right slow and deliberatelyyou add in servicing you add in
all those sort of other things toincrease the top line revenue even
at their size, their MUA reallypales in comparison to the big six
still.
Sure.
Yeah.
I mean, I saw that the entirety of
the AUM from the credit unions inCanada combined don't equal that
(10:14):
of National Bank, who's number sixon the list of the big six, as you
mentioned.
Right.
So I think that goes to show thescale.
scale.
Yeah, the big banks are how much
of AUM that they control.
And, you know, another thing to
touch on covered the uniteconomics, the competition side.
And then, of course, there's thecultural side of things, which is
Canadians are generally more riskaverse than Americans.
Factual.
And, you know, Americans, it's
built into them.
You've got the American dream.
bold bets they took on britainlike it's just in them it's in
them from the very start yeah andcanadians more so value stability
yes incrementalism in some aspectsthat has been helpful you look at
2007 2008 canada was less impactedby the global financial crash.
(10:36):
And even, you know, to the extentof 2001, the dot com crash, less
impacted and less Canadians ownstock than Americans do as well.
Right.
We're just we are a more risk
averse culture.
And that lends to big
oligopolistic organizations.
So I think there's both that.
structural and cultural sort ofbehaviors that have led to the
(10:56):
environment that we have.
And as well, even the behaviors of
venture capitalism in Canada, theenvironment is just, there's far
less VC money in Canada.
Venture capitalists in Canada
typically want an unfair advantageand they want to hit on one out of
three.
In the US, the idealism around
venture capital is you're hittingon one out of 10 if you're really
(11:21):
good and more likely one out of100, but it's just an outsized
return on the one out of 100.
And the one out of 100 is a 10
,000x return to offset some of thelosses.
It's a different mindset.
My question that I would ask you,
Chris, around that, which I thinkyou're nailing quite well, is do
(11:44):
we need to change?Because there is an argument to
be... had that, hey, we talk aboutthe US booming.
I mean, look at the GDP numbersright now, right?
The US up over 20 % in GDP percapita, which is effectively a
measure of productivity of theentire economy over the last 10
(12:06):
years.
Canada disparaging stats somewhere
between negative 1 .5 % to maybe 0.5 % gain over a 10 -year period.
So inflation is going up in everyway.
Your dollar is effectively worthless.
House prices have certainly...
risen, right?
Like we're feeling it.
We're feeling it at the grocery
store.
We're feeling it everywhere.
We're not producing more as asociety.
So maybe I'm framing that toomuch.
But my question is like, well,that playbook of protectionism and
(12:26):
stability versus the US playbookof boom and bust, if you will?
Can we keep playing this game?game?
I think that's a great question.
And, you know, it's certainly a
global question.
It's not just Canada that is
experiencing that problem, right?It's Britain, it's Australia, it's
other countries that have, Ithink, similar values that are
also going through this problem.
It is a global problem for the
(12:47):
most part.
And many countries are sitting
there thinking, like, how do werecreate the success of all of
these unicorn companies, all thesetech giants.
I think tech is important not tojump in and cut you off there.
But if you look at the returns ofthe S and P 500, it's driven by a
handful of technology.
Yeah.
Exactly.
(13:08):
If you look at the GDP growth,
United States, like it's driven bynot too many technology companies
that are pushing the ball forward.
They cannot be said.
I mean, outside of Shopify.
Yeah.
Shopify.
And then it's like the banks that
basically are the largestcompanies in Canada.
Whereas the largest companies inthe U S are.
their tech or their chipproducers.
(13:29):
I mean, Tesla is an automanufacturer, but also very much
in many ways a technology company.
And so, you know, do we need to
change was the question.
I think very much so.
I mean, we can't have another 10years.
You know, you think like webasically lost a decade.
Yeah.
The farther we fall behind, you
know, where is talent going to go?Is talent going to stay here or
(13:51):
are they going to go to placesthat are growing and that are
innovating?Where is money going to go?
Right.
And so obviously there's change
that needs to be made.
And I think it does come down to a
lot to the culture of the countryand what it is that we value,
because you can value stability toan almost detrimental level, which
(14:12):
is, I think, what is happening.
And when you talk about like risk
mitigation, sometimes there is aappropriate amount of risk.
And I always use this example of agrocery store, right?
A grocery store can have zerotheft.
They can lose zero dollars totheft if they hire two security
guards that stand at the entranceand the exit and they pat every
single person in and out of theentryways.
(14:35):
There's no way for a store to losemoney on theft.
Is that the appropriate amount oftheft or loss for that business?
Probably not, right?There's some level of theft that
is just acceptable and for thewhole better.
Right.
And so I think the problem is
there's such an aversion to riskthat it's become detrimental and
it's slowed everything that likeour slowness to implement things
like open banking, our slowness toimplement things like, you know,
(14:57):
employment verification throughthe CRA, like just like very basic
things have been proven in othercountries.
Digital signatures.
Digital signatures.
Like it took COVID.
for anyone to accept digital
signatures in the banking world,which is crazy.
And so you almost need likepandemic level events to drive any
form of regulatory or behavioralchanges in the country.
And there just needs to be agreater acceptance and a greater
(15:18):
tolerance to risk and a greatercomfortability around failure and
allowing businesses to fail.
We as a society value social
security so much.
Right?
Yes.
And again, from the last podcast,
you and I talked a lot aboutphilosophy.
Friedrich Nietzsche has a quote,which is sympathy for all results
and tyranny for thee.
At some point, you are going to
stifle the innovation, thecreativity, the productivity of a
(15:40):
country if you are so worriedabout saving absolutely everyone.
So let me piggyback off that alittle bit into the mortgage space
right now.
me piggyback off that a little bit
into the mortgage space right now.
People will say, why can't a
company with super deep pocketsjust enter the Canadian space
today and stand up a lender andjust do a better job lending money
(16:01):
than the people that exist?You're saying, hey, the banks,
they own all the market share whenit comes to the lending.
Well, if somebody else had abillion dollars and they wanted to
lend out a couple hundred milliondollars of mortgages annually or
something like that, there'sinsured, there's uninsured.
Why can't they just take theirmoney and... deploy it in really
(16:22):
uninsured where the rubber meetsthe road.
Can you maybe speak to that?that?
So obviously the majority ofmortgages are uninsured.
So 80 something percent.
You're independently wealthy.
So you've got, you know, that'scorrect.
hundreds of millions of dollars,and you are looking at investing,
you're looking at standing up abank or a lender in Canada, and
(16:44):
you're looking at doing so in theUnited States.
And so you think, okay, well, itcosts somewhere around $50 to $100
million most likely to stand abank or a lender in Canada.
Subsequently, it's going to cost,depending on the state, somewhere
around $10 to $15 million to formthat same company in the US.
So right off the bat, your capitalrequirements just to become a bank
(17:09):
or to get a charter, it'ssubstantially more.
In Canada, over the last coupleyears, I think 10 years, we've
issued a handful of bank charters.
The US has issued hundreds.
I think it's like one in the last10 years.
One, yeah.
The US, they're like Tic Tacs, not
really.
But there's literally hundreds
that have been issued in the sametime period.
So right off the bat, it takesmore money.
It's far more difficult to getbecause there's a limited quantity
(17:30):
that they issue.
And then second to that, there is
this sort of unfair advantagethat, especially in uninsured
mortgages that these big six have,where the amount of money that
they have to set aside when theylend these uninsured mortgages is
substantially less than the amountof money that you would have to
set aside if you were lending inthe uninsured space.
To be clear, default risk,capital.
Cost of risk, exactly.
(17:51):
The cost of risk is much higher.
If you're putting aside more moneythat you're not earning as great a
return on, putting aside moremoney that you're not earning as
great a return on, then thatdramatically affects your margin.
And if it just, offsets yourmargin by 30 basis points, 50
basis points, that's a margin thatyou can't pass back in price, i
.e.
you can't give a better rate.
(18:13):
Therefore, you cannot match therate that a Schedule I bank is
willing to offer on that mortgagebecause they just have better
access to capital than you do,period.
It's structural.
You can't beat it.
And here's the trouble.
These things are typically buried
on page 396 of some regulatoryframework.
Subsection B. So exactly.
The average person in the mortgage
industry doesn't understand this,right?
Let alone trying to explain thisto the consumer such that they
(18:35):
would like get up in arms.
Like, you know why you can't get a
better rate on your mortgage?Because someone 15 years ago made
this requirement and it gave thema regulatory moat around their
business model at the disadvantageto the consumer.
And sorry, Mr. Mrs. Client, that'sjust the way it has to be forever
now.
And that's a lot of.
what I think is beneath thesurface of our industry.
(18:58):
It's not that people don't want toinnovate.
I think, yeah, some of it iscultural.
I think that Canada has a lot ofwork to do there.
I mean, I've talked to a lot ofpeople in the industry.
There are a lot of forwardthinkers.
They're excited.
They want change.
I mean, the people who runmortgage companies primarily are
dreamers who want to change.
A lot of the consumers that
actually get involved in andaround this stuff, they want to
see change.
They want to see innovation.
(19:19):
Trying to even get everyone aroundthe same table to come together
and understand what the problemis.
is even difficult as a startingplace.
Would you agree?100%.
And Musk has become a relativelycontroversial person today.
But early days of Tesla, when hewas super obsessed about making
this very simple, very beautifulvehicle, he didn't want to
include... like the safetydisclosure that they forced them
to put on the dashboard orsomething like that.
(19:40):
The visor.
Yeah.
Yeah.
The warning labels on the visor.
Yeah.
And he was like, well, that's
dumb.
Why is that there?
It doesn't do anything.
But at some point, someone in the
government decided that that was anecessity.
And he was like, I'm just notgoing to do it.
Right.
And people would be like, well,
you have to do it.
It's like, why do I have to do it?
(20:02):
And who said I have to do it?And he just continuously asks why.
The just continuously asks why.
And you need people like that.
And eventually it's changed.
Similarly, I think, you know, if
you think back the original iPhoneup into, I don't know which one,
let's say seven or eight orsomething on the back, it would
have the recycling information.
And it was hideous.
(20:22):
And Steve Jobs hated it.
He hated it.
Like, why do I have to put how torecycle this device in symbols
that no one really understandswhat they are.
Right.
But someone at some point said
that you have to do it.
And even getting that to change
was years.
Sure.
It took years.
And so many conversations are just
to change something that simple.
And that's in the US where things
do move, you know, although theymove slow, you know, relative to
Canada, they move pretty quick.
(20:43):
I think from a government
perspective, especially from abanking or financial regulation
perspective in Canada, stuff justmoves so slowly.
We really need people that arejust going to, you know, make the
change, just do it.
And maybe get their hand slapped
or just a bigger, you know, morevoices at the table to say like,
(21:04):
hey, it's become too difficult ortoo ridiculous to originate, you
know, mortgages.
And we need to do something about
it.
I don't know what the solution is
to that.
I'm curious if you've got any
ideas.
I think it's just about carrying
the torch forward.
carrying the torch forward.
If you study history and you wereto study the way that empires fall
and ultimately regimes gettoppled.
It's historically not one majorevent.
(21:26):
It is usually a series of events.
And oftentimes, these things don't
even happen in a single person'slifetime.
The reason why this mission for mefeels so dear is because I've been
doing it for going on 13 years nowin the finance industry.
And I was pushing the ball forwardin the United States, came over
here.
over five years in Canada now of
being in the mortgage business.
I've lived in Canada for well over
(21:46):
a decade.
And I've always just figured that
I am one person in a massivemission, right?
And the mission is to makehomeownership more accessible to
consumers.
And I know that in order to do
that, you need to remove fear.
You need to remove uncertainty.
You need to improve theexperience.
You need to have hardconversations about what it takes
to unlock homeownership as areality for a lot of people.
(22:07):
So it's bigger than just the nextmortgage and it's bigger than just
me.
So it's working with people like
you and then ultimately growingthe team that we had in Canada to
over 100 people.
And it was so infectious the way
that every single person on ourteam got around the idealism of
homeownership being accessible toCanadians.
Look, we existed in a time whenhomes were rising, like at one
(22:30):
point, 2020 to 21, like homes arerising like 30 % year over year.
It was insane.
And younger people were just
getting more desperate anddisparaged by the day.
They're thinking like, there's nopossibility that I can possibly
own a home at some point.
But if it's not us, one it's not
us, then who?Right.
And that's the way that I thinkabout it.
(22:50):
If there aren't a group of peoplewho care, who will take the torch,
run with it.
And then if they ultimately have
their light blown out, thatsomebody else goes and relights
that torch and continues pushingforward.
That is what society needs.
I don't think I would have been
able to do that over the last fiveplus years, knowing how
(23:14):
challenging this market is withouta whole team of people around me
picking me up when things gotreally hard.
That said, I do want to talk aboutthe power of a team.
a little bit, because I think onething we did incredibly well over
five years at Rocket MortgageCanada is build great culture.
I mean, when I think about myjourney here, at no point, was
(23:34):
there a single day even?There was no Sunday scaries where
I was sitting on my couch on aSunday night and dreading the week
ahead.
I never circled the block.
When I pulled up to the office, Itypically would drive very fast
with a smile on my face to theoffice every single day because I
(23:56):
just want to be around the people.
I want to feel the energy.
I want to be a part of themission.
It felt so clear.
What are some things that you
observed that created that so wecan maybe touch on the team a
little bit?Yeah, I think one of the main
things that sort of garneredeveryone and pushed everyone in
the same direction was we were allconvinced that we were going to be
(24:23):
number one.
Right.
And we fought and we played withthe intensity that we were going
to win.
You know, I'm a competitive
person.
You're a competitive person.
You know, if you get a bunch ofcompetitive people together, all
they want to do is win.
Right.
And we're not playing for secondor fourth or fifth place.
I've observed, you know, some aredoing or that complacency sort of
(24:43):
sets in after a little while.
You know, you've got a lifestyle
business.
It's making some money.
We were always sort of gunning forwinning whatever that looks like
on day one.
Yeah.
And so that was exciting.
And then just working with A
players, people that enjoyed.
not only working with one another,
spending time with one another.
They enjoyed joking around and
just like having a good time atwork, but they were also
(25:04):
incredibly intense when it wasnecessary.
It was just fun.
It was such an enjoyable.
place to show up every single day.
I was in Chatham, about an hour
away from the office.
I was still driving in on a
regular basis because I had to,because I wanted to.
And I wanted to feel the energywas energizing to be here.
And that is, of course, the resultof the culture and the people that
we had very intentionally broughtin to the business.
(25:26):
And everyone that walked in theoffice felt it, all of our lending
partners.
our legal partners, everyone that
walked in there like, oh, wow,this feels different.
Yeah.
And that was definitely a source
of pride, I think, for us as well.
We started the conversation
talking about learnings and thinkthe greatest learning in all of it
was the importance of the culture.
And it's that thing that you hear
in business school, you got to payattention to the culture, pay
attention to the culture, but noone actually knows what it looks
(25:47):
like.
No one can define it.
No one can define it.
No one really like tells you that.
No one can you that.
actions to take, you know, to
create this culture, it reallyjust has to be set and defined by
that founding team and thencontinuously reinforced with
behavior in you of the saying, Iwon't take it.
I'll let you talk about, you know,the culture piece.
(26:09):
You've got an equation for it, Ithink.
Well, it's actually not for me.
It's from Danny Meyer.
It's my favorite quote around therestaurant tour.
I don't think Danny Meyer wouldappreciate that.
But your culture is the sum of thebehaviors that you celebrate minus
the behaviors that you tolerate.
I always try to figure out a
formulaic way to explain how it isand how that gets created.
(26:31):
But ultimately, that's just it.
It's like what gets recognized
inside of your culture and what issimply not tolerated.
You know, nobody wants to runaround being the bad person who's
saying, Hey, that's not toleratedhere, but somebody has to be for
sure.
Truthfully, like you have to
protect it.
In the beginning, that can be a
little bit uncomfortable forpeople when you go around and say,
(26:54):
Hey, that's not how we do thingshere.
And maybe it's like, you don'tlike the way they took care of a
client.
Hey, I listened to that call.
And that's just not the way thatwe take care of our clients.
That's unacceptable.
People will go, wow, I never got
that kind of feedback before.
And it can be subtle, but guess
what?They're either going to fix it or
(27:14):
they're just not going to be apart of it anymore.
The reward piece, I think mostpeople understand and do an okay
job with.
Everyone loves a great job.
Yeah, rewarding the rightbehavior, but it's the tolerance
of intolerable behavior thatpeople, I think, struggle with.
And if you have an internal policyto respond to emails quickly.
and several days has passed, noone wants to be that person that
(27:37):
replies all and says, hey, can youget an update on this?
Yeah.
If it's happening multiple times,
you do.
You do have to, at times, sort of
publicly intolerate that behavior.
People, they won't learn.
It's the same as Pavlov's dogs.
There's negative reinforcement,
positive reinforcement.
It requires both.
I don't think you can just rewardyour way to a really good culture.
one No, there's something to besaid for this day.
There's something to be said for,you know, replying all that email
(28:00):
and say, Hey, still waiting onyou.
And that tells the other, youknow, 12 people on that email
thread that, okay, like whenthey're asking for something and
three days has gone by, clearlythere's some internal clock going
with them.
They want to let you know that
three days was not the answer thatthey were looking for.
They were probably looking forsomething faster than that.
And then you're just kind of liketraining it into the culture.
(28:20):
That's why culture is not what yousay.
It's not even what you write down.
It's what you do.
It's how you act.
You know, it's really the founder,
the founding team, et cetera, thatare like setting that for the
whole organization as it getsbuilt out.
They're not listening to what yousay.
They're watching what you do.
Right.
So I often will say the fact thatlike, Hey, if you want your team
(28:43):
to be on time, be on time.
The second you start showing up
late, your team will show up late.
I think one thing that we're just
highly intentional about from thevery beginning was we made our
culture fun.
But we also we made it very clear
what we were trying to achieve andwhat it was going to take to get
to where we were going.
And that we were OK if I think it
was Frances Hinojosa, who I had onthe show and love what she said,
just like, you know, if I need toput you in a canoe and just kind
(29:04):
of like give you a little nudge tohelp you swim up the stream
because you can't stay hereanymore.
That's OK.
Right.
I'm going to put you down theriver a bit.
And like, that's great for you.
You're going to land just fine and
you're going to do great in yourlittle canoe.
(29:25):
I need you to paddle off becausethis isn't the place for you.
And we were really, reallyprotective of that.
But I think that if anybody, youknow, were to sit here with us
reflecting, they would say thatalthough it is painful to build
and build and build culture thatway, it's the right thing.
And the A players start to likereally show through that process.
(29:47):
And the people who care the most,they're just so passionate about
the way that which we protect it,the way that which we approach the
mission.
ultimately and have fun with each
other.
I think most importantly, it's
like business is hard enough.
Life is hard enough.
But if you can spend 40 to 50 % ofyour waking hours at a job, then
you better be working with peoplethat you like.
And you better be feeling likepart of something bigger than
(30:07):
yourself, especially in thisindustry where it's so difficult.
The problem is so complex and it'sso difficult.
Yes.
And to just constantly chip away
and try things and, you know, onething doesn't work you try nothing
it doesn't work if you aren'tsurrounded by people that you
enjoy people that are like thereto kind of like laugh it off but
then also encourage you tocontinue to push along we would
never have gotten you know, a 10thof his work has never gotten out
(30:28):
of the starting block because youquickly realize how hard it is.
because you quickly realize howhard it is.
You start digging into the dataand you realize that, you know,
the first contact rate of theanswer rate of a client is 30 %
higher.
If you call within the first five
minutes, as opposed to within thefirst hour.
Right.
So it's like, well, how do I now
go out and build a system in whichwe call every client in the first
(30:48):
five minutes?And then you're like, okay, that's
pretty good.
But what happens if we call a
client in the first five secondsafter they submit a lead
application to us?Oh, that makes us even that more
hard to compete with and makes oursystem that much better.
It increases our conversion rate.
And then you go out and, you know,
I think at the beginning, you'relike, you're trying to get 10 %
better month over month.
And then you're building on that
and you're like, you're trying toget 1 % better.
(31:08):
Then you're trying to get 1 %better every day.
0 .1%.
But after so long, you've gotten
so refined, you're playing down tothe decimals of constant
improvement.
And that's a really, really,
really hard thing to do to wake upevery morning and try to
consistently just chip away toimprove your business.
We never lost that spirit andexcitement up until...
The last day, what excites meabout our team, as I think about
it, the culture that was built,you know, culture is loosely used,
(31:30):
but what it means beyond just likethe way that people interact with
each other, it's like, it's theexcitement they show about the
work itself, the mission itself.
They will take that and they will
go and apply that across themortgage industry.
And I think about that torchagain, as I mentioned, those
people will carry this RockyMortgage Canada torch across
Canada.
And otherwise, perhaps globally,
and they will continue to push forinnovation inside of the places
(31:51):
that they're at or starting theirown.
that they're at or starting theirown.
And there will be that there willbe a really interesting ripple
effects of, you know, people thatwere on the team, very talented.
You know, everyone is sort ofgoing to different homes now in
different places in the industry.
And I think you'll see a ton of
these ripple effects of those sortof X, you know, Rocket Mortgage
(32:16):
Canada team members that are.
looking for inches and obsessing
about finding a better way insideof these other Canadian
businesses.
And I think continuing to root for
the smaller guys and pushing forjust a better experience for
Canadians.
And I root for... you know, the
wealth symbols of the world and,you know, Pine and Nesto and some
of these other, you know, new agemortgage companies.
Sure.
They're continuing.
They're going to continue tochallenge and bring up the like
(32:37):
the aisle of mortgage brokering.
Facebook chat.
So for those people that don'tknow, there's sort of an I Love
Mortgage Brokering group where alot of mortgage brokers are there.
And there was definitely anoutpouring of support, but there's
also the opposing side that wassort of, you know, they were
talking about, oh, I expectedthis.
You know, I saw this one comingabout the conversation on the wind
down with Rockmore Canada.
And it's like, let's not root for
entrepreneurial companies that aretrying to innovate and trying to
(32:58):
make things better and creatingmore competition in the
marketplace.
Like we should be all rooting for
that.
A hundred percent.
And anyone rooting against that, Idon't know.
Who are they rooting for then?They are rooting for the
protectionism of what they thinkis their business built over time
and a threat.
the protectionism of what they
think is their business built overtime and a threat.
to their business, but theycouldn't be more wrong.
There's enough mortgages in thiscountry to have a robust system.
(33:19):
And there's certainly a lot ofspace for innovators.
And I love what you said aboutrooting for others, all those
companies and many more companieslike them rooting for every single
one of them to continue pushingbecause Chris, you, me, our team,
we know how hard it is to be inthe arena.
We know how hard it is to beentrepreneurial.
We know how hard it is to innovatein a space that is structurally
(33:40):
designed to hold back innovators.
And to anyone who is going to
continue to carry that torch,ourselves included, because we're
far from done, you best believethat, I seriously wish them well.
And I root for them.
And I really don't pay much
attention to the haters, if youwill.
Those people will always feel thatway.
I really just try to focus on thepeople who are wishing the best
(34:02):
for other human beings.
I think about humans first and
foremost, and we are humans, ourteam are humans, and ultimately
they're going to want to do someincredible things.
And I think the industry should bethankful that people are bold
enough, brave enough to putthemselves out there, get into the
arena, fight the battle, and tryto make this thing better every
single day for people, ultimately.
100%.
With that, is there anything youwant to say to the folks that have
(34:24):
supported the business, your fans?Fans, I wouldn't say that.
But yeah, just thank you.
It's been an incredible,
incredible journey.
I mean, just the fact that you and
I are even sitting here talkingright now on a podcast called
Lending Thoughts.
A couple of years ago, I told you
(34:45):
I wanted to do this.
It took some time to put it
together.
I kept putting it off, putting it
off.
And then one day I was like, let's
just get it done.
Let's just make it happen.
And in a matter of no time,basically, I was able to stream
this together.
Just that attitude from me to you
to every other person in thecompany, like that's a culture.
That is an attitude.
That is a mindset that exists in
(35:06):
our people.
And I cannot thank everybody
enough from the people inside ofthe walls of Rocket Mortgage
Canada to the people outside ofthe walls who helped us and
supported us every single step ofthe way.
We're excited about what we'redoing.
Just keep pushing.
Keep pushing because it's going to
take.
great people.
So thank you for everything thatyou've done, but please, please,
(35:28):
please don't stop.
Boom ski.
Thank you.
Thank you for listening to thisepisode of Lending Thoughts,
(00:02):
sponsored by Rocket Pro.
Today, I'm joined again by my
friend and colleague, ChrisColasanti, the vice president of
Rocket Pro, as well as data andanalytics here at Rocket Mortgage
Canada.
Chris and I are going to talk
about some of the lessons learnedfrom our journey.
So you're not going to want tomiss that.
We talk about culture, of course,because we can't help ourselves.
And we talk about the importanceof people carrying the torch
(00:24):
forward on this innovative journeyfor mortgage and fintech and
finance in Canada.
So thank you very much for
listening in.
Chris.
Thanks for joining me today.
It's my pleasure.
(00:44):
The only two -time guest of theLearning Thoughts podcast.
And you want to know why?Why, I began?
Because your first episode with mewas the most listened to episode
in the history of LearningThoughts.
I'm not surprised.
No?
I'm not at all surprised.
But you are humble.
I'm very humble.
Listened to the podcast.
The only podcast I've listened to,actually, was just mine.
Well, I had to boost the numbers.
So, uh...
Yeah, here we are.
(01:04):
Incredible.
I'll let the others know you saidthat.
So appreciate you joining.
And I want to have a healthy
discussion with you about RocketMortgage Canada.
I also want to have a healthydiscussion about the state of the
mortgage market and who knowswhere it evolves into maybe some
conversation about the macro sideof things, frankly, unscripted.
We're going to kind of take it inwhatever direction it goes.
But I definitely want to startwith what I think is important.
(01:27):
obviously coming to a wind downphase of our business here in
Canada.
And that comes a lot of questions
about what we're going to do next.
We'll save some of those.
But I think the important thing istrying to capture the lessons at
the end of the day.
I think that it is only a loss or
it is only failure if you do notlearn, right?
I think the John C. Maxwell quoteis, sometimes you win, sometimes
(01:47):
you learn.
I think that while in the end, you
cannot definitively say we won, Ican definitively say that we We
learned a lot and I want to try tocapture some of those things.
Is that okay with you?A hundred percent.
All right, beautiful.
So maybe let's start with there.
What have you learned aboutmortgages in Canada?
Well, Kim, I knew nothing aboutmortgages when I started five and
a half years ago with thisbusiness.
(02:07):
And I have learned that mortgagesare very difficult.
The mortgage industry is extremelydifficult and that's not to turn
anyone off from it.
It's just to say the truth, which
is that in business school, firstthing you learn in business 101 is
this concept of Porter's fiveforces.
And there are these five forcesthat act on every industry, things
(02:28):
like the threat of new entrance,the buyer power, supplier power.
And when there is a lot of thoseforces acting on the industry,
it's typically less attractive.
And so we often think about.
You know, a quintessentialbusiness example is airlines.
Airlines are not really anattractive industry to go into
because all of the forces are verystrong.
And so it makes it reallydifficult to compete.
And, you know, in our experiencewith Rocket Mortgage Cam, I've
(02:51):
come to appreciate it's a toughbusiness.
You have to be extremelyresilient.
You have to have a lot of grit andyou have to love what you do.
And it's so funny because all thefolks that you've had on this
podcast, the folks that weinteract with on a regular basis,
they're weirdly.
obsessed with mortgages you rarely
run across someone in the mortgageindustry that casually does
mortgages right you've gotrealtors that are in and out of
(03:12):
the market they're kind of likepart -timers yeah not a lot of
those in the mortgage industry thefolks that do it it's this weird
sort of mortgage cult in canadayeah it's just obsessed with
mortgages and a lot of amazingpeople but it is it's really
really difficult it's difficult tocreate change and it's difficult
to innovate.
And there's a lot of, I think
things we'll get into structuralreasons, cultural reasons that
(03:33):
just make it a really toughbusiness to do.
Maybe we jump into thosestructural reasons.
reasons.
Yeah.
What do you think makes it hard?Cause you've used the word
difficult quite a lot here and Iwould wholeheartedly agree with
you, but you almost say with a bitof excitement and to your point,
yeah, everyone that we've evertalked to on the podcast and
(03:54):
everybody that you and I enactwith on a daily basis, they are.
more than willing to tell you howdifficult it is, but also super
excited to get up every day andcontinue to go at it.
But what are some of thosedifficulties?
So I think certainly one of thedifficulties structurally in
Canada is competition, right?As we know, oligopolistic.
There's six really big players.
They control 90%, 95 % of the
assets in Canada.
And so it's sort of that David
Goliath story that makes it reallydifficult to compete with.
(04:15):
One thing we'll probably touch onat some point is just those
differences between the Americanmarket and the Canadian market.
But in Canada specifically,competition is one, access to
capital, right?The big six control the majority
of the capital, and it makes itrelatively difficult to... compete
when your competitors also haveall of the money.
Another structural issue is justregulatory.
(04:36):
There's a lot of regulatory thingsthat make it, I think,
advantageous for incumbents.
The banks have some regulation
that makes it advantageous forthem to do uninsured lending and a
handful of other things.
It makes it tough for startups.
Compliance, right?There's a lot of compliance
regulation in the Canadianmortgage market that makes it
really tough for new entrants.
And just the general speed at
(04:56):
which policy and regulation movesin Canada, it's very glacial.
And so it hasn't necessarilycaught up with.
open banking and fintech and just,you know, I think the things that
we see moving more rapidly inother countries.
But I'm curious, you were in theUS, you came over to Canada.
What are some of the structuralissues that you've observed in
Canada that are, you know, maybenot present or different in the
(05:18):
US?That's a great question.
a great question.
I think two things come to mind
out of the gate.
Number one is technology.
And number two is a difference inunit economics.
I'll speak to technology first,which is to say that In the U
S., despite these being a lot ofdifferent individual technology
companies running these stacks,there are a few players in the U
.S.
(05:38):
through their own business or
through empowering mortgagebrokers have figured out a way to
tie these different functionstogether, like mortgage brokers,
like the point of sale system thatthe mortgage broker uses, like a
loan operating system that isbeing used to underwrite and
ultimately go on to fund thesemortgages, to the closing of
mortgages through the titlecompanies and things like that.
In Canada, it feels verydisjointed and it's a lot harder
to tie these pieces of technologytogether.
(05:59):
And a consequence of that is it'sa lot harder to deliver a great
client experience.
And I think people feel that as
consumers.
I know that was one of the things
that was really inspiring to mewhen we first started this company
is I had gone through my ownmortgage in Canada and I knew what
it was like over on the U .S.
(06:19):
side because I lived over there.
And it just could not be moredifferent in the way that it felt
going through the process.
The lack of certainty, the lack of
transparency, the lack of theability to do things digitally.
It was very, very frustrating.
So when we started this and
started building on that.
It was exciting that we would make
(06:40):
headway there.
And I believe that we did.
I know that we did, but I stillthink there's a lot of room for
improvement.
And I think it comes from folks
moving together in the samedirection.
And some of it comes fromadvancements in regulation.
Some of it comes throughadvancements in capital and the
willingness to invest.
But I think you can't just say you
better invest in this.
You need to show where the capital
returns come from in order to makeit investable, right?
So I think that technology is abig piece.
(07:01):
And the second thing that makes ithard to invest in is the capital
side, the unit economics of aCanadian mortgage.
And compared to a U .S.
mortgage, what I'll say there is
that on average, let's say as abroker, you're making 100 basis
points on a loan in Canada.
In the U
S., on average, you're makingabout 200 basis points as a broker
on a loan.
As a lender in Canada, you're
(07:22):
making 130 to 150 basis points onaverage in total for the
transaction.
As a lender in the United States,
you're making 340, 350 basispoints.
You can see there are significantdifferences there.
And what that creates ultimatelyis a massive scaling issue.
So you as an individual may beable to start up your own mortgage
brokerage and make a little bit ofmoney.
After, you know, collecting yourhundred ish basis points in a
(07:44):
mortgage, that's fine.
You as a lender might be able to
run a small operation and be ableto collect a little bit of money
on margin.
The hard part is when you try to
like really put the pedal to themetal and scale that business
significantly, the significantgain on sale margin in the U S
allows you to reinvest thatcapital back into the business and
(08:05):
grow that rather quickly.
In Canada, it's just not there.
So it's not to say that you can'tgrow.
It's just that you need to pickone of two paths.
Either A, you need to be capitalabundant and capital patient to
wait for that return.
Or you need to be capital abundant
and super aggressive.
And you just have to accept that
(08:25):
that is going to be a trade -offin order to consistently reinvest.
And I think there's someplayers... you know, taking that
approach right now in Canada.
And I think there's some players
that have been around for a longtime and we've seen them grow over
the course of 15, 20, 25 years.
You got to effectively pick a
lane, but you know, you can'tnecessarily produce the cash flows
to just pour back in reinvestmentinto the business and go rather
(08:47):
fast.
That's a major difference between
the U S and Canada that I'vepersonally observed.
Yeah.
To state simply in the U S you can
be, you know, contribution marginpositive on that first
transaction.
Correct.
And Canada, It's very difficultand most sort of run at that break
even point.
So from a scaling perspective, the
capital intensity is much greateron the Canadian side as a result
of that.
Now, the lifetime values, probably
(09:09):
very similar, like CLV is verysimilar between the two.
You know, some would argue it'spossibly higher in Canada.
Yeah.
And then the retention rates.
And so that is obviously theadvantage.
At the end of the day, you needvery patient capital to be able to
grow.
in canada quickly or like you said
you need to go for that sloworganic growth over 30 years or
something like that right yeah andi think we have that i mean you
(09:30):
look at the likes of firstnational or an mcap or cms now
part of nestle like those were youknow flow deliberate builds just
grow aum every year right slow anddeliberately you add in servicing
you add in all those sort of otherthings to increase the top line
revenue even at their yeah and ithink we have that i mean you look
at the likes of first national oran mcap or cms now part of nestle
(09:53):
like those were you know flowdeliberate just grow aum every
year right slow and deliberatelyyou add in servicing you add in
all those sort of other things toincrease the top line revenue even
at their size, their MUA reallypales in comparison to the big six
still.
Sure.
Yeah.
I mean, I saw that the entirety of
the AUM from the credit unions inCanada combined don't equal that
(10:14):
of National Bank, who's number sixon the list of the big six, as you
mentioned.
Right.
So I think that goes to show thescale.
scale.
Yeah, the big banks are how much
of AUM that they control.
And, you know, another thing to
touch on covered the uniteconomics, the competition side.
And then, of course, there's thecultural side of things, which is
Canadians are generally more riskaverse than Americans.
Factual.
And, you know, Americans, it's
built into them.
You've got the American dream.
bold bets they took on britainlike it's just in them it's in
them from the very start yeah andcanadians more so value stability
yes incrementalism in some aspectsthat has been helpful you look at
2007 2008 canada was less impactedby the global financial crash.
(10:36):
And even, you know, to the extentof 2001, the dot com crash, less
impacted and less Canadians ownstock than Americans do as well.
Right.
We're just we are a more risk
averse culture.
And that lends to big
oligopolistic organizations.
So I think there's both that.
structural and cultural sort ofbehaviors that have led to the
(10:56):
environment that we have.
And as well, even the behaviors of
venture capitalism in Canada, theenvironment is just, there's far
less VC money in Canada.
Venture capitalists in Canada
typically want an unfair advantageand they want to hit on one out of
three.
In the US, the idealism around
venture capital is you're hittingon one out of 10 if you're really
(11:21):
good and more likely one out of100, but it's just an outsized
return on the one out of 100.
And the one out of 100 is a 10
,000x return to offset some of thelosses.
It's a different mindset.
My question that I would ask you,
Chris, around that, which I thinkyou're nailing quite well, is do
(11:44):
we need to change?Because there is an argument to
be... had that, hey, we talk aboutthe US booming.
I mean, look at the GDP numbersright now, right?
The US up over 20 % in GDP percapita, which is effectively a
measure of productivity of theentire economy over the last 10
(12:06):
years.
Canada disparaging stats somewhere
between negative 1 .5 % to maybe 0.5 % gain over a 10 -year period.
So inflation is going up in everyway.
Your dollar is effectively worthless.
House prices have certainly...
risen, right?
Like we're feeling it.
We're feeling it at the grocery
store.
We're feeling it everywhere.
We're not producing more as asociety.
So maybe I'm framing that toomuch.
But my question is like, well,that playbook of protectionism and
(12:26):
stability versus the US playbookof boom and bust, if you will?
Can we keep playing this game?game?
I think that's a great question.
And, you know, it's certainly a
global question.
It's not just Canada that is
experiencing that problem, right?It's Britain, it's Australia, it's
other countries that have, Ithink, similar values that are
also going through this problem.
It is a global problem for the
(12:47):
most part.
And many countries are sitting
there thinking, like, how do werecreate the success of all of
these unicorn companies, all thesetech giants.
I think tech is important not tojump in and cut you off there.
But if you look at the returns ofthe S and P 500, it's driven by a
handful of technology.
Yeah.
Exactly.
(13:08):
If you look at the GDP growth,
United States, like it's driven bynot too many technology companies
that are pushing the ball forward.
They cannot be said.
I mean, outside of Shopify.
Yeah.
Shopify.
And then it's like the banks that
basically are the largestcompanies in Canada.
Whereas the largest companies inthe U S are.
their tech or their chipproducers.
(13:29):
I mean, Tesla is an automanufacturer, but also very much
in many ways a technology company.
And so, you know, do we need to
change was the question.
I think very much so.
I mean, we can't have another 10years.
You know, you think like webasically lost a decade.
Yeah.
The farther we fall behind, you
know, where is talent going to go?Is talent going to stay here or
(13:51):
are they going to go to placesthat are growing and that are
innovating?Where is money going to go?
Right.
And so obviously there's change
that needs to be made.
And I think it does come down to a
lot to the culture of the countryand what it is that we value,
because you can value stability toan almost detrimental level, which
(14:12):
is, I think, what is happening.
And when you talk about like risk
mitigation, sometimes there is aappropriate amount of risk.
And I always use this example of agrocery store, right?
A grocery store can have zerotheft.
They can lose zero dollars totheft if they hire two security
guards that stand at the entranceand the exit and they pat every
single person in and out of theentryways.
(14:35):
There's no way for a store to losemoney on theft.
Is that the appropriate amount oftheft or loss for that business?
Probably not, right?There's some level of theft that
is just acceptable and for thewhole better.
Right.
And so I think the problem is
there's such an aversion to riskthat it's become detrimental and
it's slowed everything that likeour slowness to implement things
like open banking, our slowness toimplement things like, you know,
(14:57):
employment verification throughthe CRA, like just like very basic
things have been proven in othercountries.
Digital signatures.
Digital signatures.
Like it took COVID.
for anyone to accept digital
signatures in the banking world,which is crazy.
And so you almost need likepandemic level events to drive any
form of regulatory or behavioralchanges in the country.
And there just needs to be agreater acceptance and a greater
(15:18):
tolerance to risk and a greatercomfortability around failure and
allowing businesses to fail.
We as a society value social
security so much.
Right?
Yes.
And again, from the last podcast,
you and I talked a lot aboutphilosophy.
Friedrich Nietzsche has a quote,which is sympathy for all results
and tyranny for thee.
At some point, you are going to
stifle the innovation, thecreativity, the productivity of a
(15:40):
country if you are so worriedabout saving absolutely everyone.
So let me piggyback off that alittle bit into the mortgage space
right now.
me piggyback off that a little bit
into the mortgage space right now.
People will say, why can't a
company with super deep pocketsjust enter the Canadian space
today and stand up a lender andjust do a better job lending money
(16:01):
than the people that exist?You're saying, hey, the banks,
they own all the market share whenit comes to the lending.
Well, if somebody else had abillion dollars and they wanted to
lend out a couple hundred milliondollars of mortgages annually or
something like that, there'sinsured, there's uninsured.
Why can't they just take theirmoney and... deploy it in really
(16:22):
uninsured where the rubber meetsthe road.
Can you maybe speak to that?that?
So obviously the majority ofmortgages are uninsured.
So 80 something percent.
You're independently wealthy.
So you've got, you know, that'scorrect.
hundreds of millions of dollars,and you are looking at investing,
you're looking at standing up abank or a lender in Canada, and
(16:44):
you're looking at doing so in theUnited States.
And so you think, okay, well, itcosts somewhere around $50 to $100
million most likely to stand abank or a lender in Canada.
Subsequently, it's going to cost,depending on the state, somewhere
around $10 to $15 million to formthat same company in the US.
So right off the bat, your capitalrequirements just to become a bank
(17:09):
or to get a charter, it'ssubstantially more.
In Canada, over the last coupleyears, I think 10 years, we've
issued a handful of bank charters.
The US has issued hundreds.
I think it's like one in the last10 years.
One, yeah.
The US, they're like Tic Tacs, not
really.
But there's literally hundreds
that have been issued in the sametime period.
So right off the bat, it takesmore money.
It's far more difficult to getbecause there's a limited quantity
(17:30):
that they issue.
And then second to that, there is
this sort of unfair advantagethat, especially in uninsured
mortgages that these big six have,where the amount of money that
they have to set aside when theylend these uninsured mortgages is
substantially less than the amountof money that you would have to
set aside if you were lending inthe uninsured space.
To be clear, default risk,capital.
Cost of risk, exactly.
(17:51):
The cost of risk is much higher.
If you're putting aside more moneythat you're not earning as great a
return on, putting aside moremoney that you're not earning as
great a return on, then thatdramatically affects your margin.
And if it just, offsets yourmargin by 30 basis points, 50
basis points, that's a margin thatyou can't pass back in price, i
.e.
you can't give a better rate.
(18:13):
Therefore, you cannot match therate that a Schedule I bank is
willing to offer on that mortgagebecause they just have better
access to capital than you do,period.
It's structural.
You can't beat it.
And here's the trouble.
These things are typically buried
on page 396 of some regulatoryframework.
Subsection B. So exactly.
The average person in the mortgage
industry doesn't understand this,right?
Let alone trying to explain thisto the consumer such that they
(18:35):
would like get up in arms.
Like, you know why you can't get a
better rate on your mortgage?Because someone 15 years ago made
this requirement and it gave thema regulatory moat around their
business model at the disadvantageto the consumer.
And sorry, Mr. Mrs. Client, that'sjust the way it has to be forever
now.
And that's a lot of.
what I think is beneath thesurface of our industry.
(18:58):
It's not that people don't want toinnovate.
I think, yeah, some of it iscultural.
I think that Canada has a lot ofwork to do there.
I mean, I've talked to a lot ofpeople in the industry.
There are a lot of forwardthinkers.
They're excited.
They want change.
I mean, the people who runmortgage companies primarily are
dreamers who want to change.
A lot of the consumers that
actually get involved in andaround this stuff, they want to
see change.
They want to see innovation.
(19:19):
Trying to even get everyone aroundthe same table to come together
and understand what the problemis.
is even difficult as a startingplace.
Would you agree?100%.
And Musk has become a relativelycontroversial person today.
But early days of Tesla, when hewas super obsessed about making
this very simple, very beautifulvehicle, he didn't want to
include... like the safetydisclosure that they forced them
to put on the dashboard orsomething like that.
(19:40):
The visor.
Yeah.
Yeah.
The warning labels on the visor.
Yeah.
And he was like, well, that's
dumb.
Why is that there?
It doesn't do anything.
But at some point, someone in the
government decided that that was anecessity.
And he was like, I'm just notgoing to do it.
Right.
And people would be like, well,
you have to do it.
It's like, why do I have to do it?
(20:02):
And who said I have to do it?And he just continuously asks why.
The just continuously asks why.
And you need people like that.
And eventually it's changed.
Similarly, I think, you know, if
you think back the original iPhoneup into, I don't know which one,
let's say seven or eight orsomething on the back, it would
have the recycling information.
And it was hideous.
(20:22):
And Steve Jobs hated it.
He hated it.
Like, why do I have to put how torecycle this device in symbols
that no one really understandswhat they are.
Right.
But someone at some point said
that you have to do it.
And even getting that to change
was years.
Sure.
It took years.
And so many conversations are just
to change something that simple.
And that's in the US where things
do move, you know, although theymove slow, you know, relative to
Canada, they move pretty quick.
(20:43):
I think from a government
perspective, especially from abanking or financial regulation
perspective in Canada, stuff justmoves so slowly.
We really need people that arejust going to, you know, make the
change, just do it.
And maybe get their hand slapped
or just a bigger, you know, morevoices at the table to say like,
(21:04):
hey, it's become too difficult ortoo ridiculous to originate, you
know, mortgages.
And we need to do something about
it.
I don't know what the solution is
to that.
I'm curious if you've got any
ideas.
I think it's just about carrying
the torch forward.
carrying the torch forward.
If you study history and you wereto study the way that empires fall
and ultimately regimes gettoppled.
It's historically not one majorevent.
(21:26):
It is usually a series of events.
And oftentimes, these things don't
even happen in a single person'slifetime.
The reason why this mission for mefeels so dear is because I've been
doing it for going on 13 years nowin the finance industry.
And I was pushing the ball forwardin the United States, came over
here.
over five years in Canada now of
being in the mortgage business.
I've lived in Canada for well over
(21:46):
a decade.
And I've always just figured that
I am one person in a massivemission, right?
And the mission is to makehomeownership more accessible to
consumers.
And I know that in order to do
that, you need to remove fear.
You need to remove uncertainty.
You need to improve theexperience.
You need to have hardconversations about what it takes
to unlock homeownership as areality for a lot of people.
(22:07):
So it's bigger than just the nextmortgage and it's bigger than just
me.
So it's working with people like
you and then ultimately growingthe team that we had in Canada to
over 100 people.
And it was so infectious the way
that every single person on ourteam got around the idealism of
homeownership being accessible toCanadians.
Look, we existed in a time whenhomes were rising, like at one
(22:30):
point, 2020 to 21, like homes arerising like 30 % year over year.
It was insane.
And younger people were just
getting more desperate anddisparaged by the day.
They're thinking like, there's nopossibility that I can possibly
own a home at some point.
But if it's not us, one it's not
us, then who?Right.
And that's the way that I thinkabout it.
(22:50):
If there aren't a group of peoplewho care, who will take the torch,
run with it.
And then if they ultimately have
their light blown out, thatsomebody else goes and relights
that torch and continues pushingforward.
That is what society needs.
I don't think I would have been
able to do that over the last fiveplus years, knowing how
(23:14):
challenging this market is withouta whole team of people around me
picking me up when things gotreally hard.
That said, I do want to talk aboutthe power of a team.
a little bit, because I think onething we did incredibly well over
five years at Rocket MortgageCanada is build great culture.
I mean, when I think about myjourney here, at no point, was
(23:34):
there a single day even?There was no Sunday scaries where
I was sitting on my couch on aSunday night and dreading the week
ahead.
I never circled the block.
When I pulled up to the office, Itypically would drive very fast
with a smile on my face to theoffice every single day because I
(23:56):
just want to be around the people.
I want to feel the energy.
I want to be a part of themission.
It felt so clear.
What are some things that you
observed that created that so wecan maybe touch on the team a
little bit?Yeah, I think one of the main
things that sort of garneredeveryone and pushed everyone in
the same direction was we were allconvinced that we were going to be
(24:23):
number one.
Right.
And we fought and we played withthe intensity that we were going
to win.
You know, I'm a competitive
person.
You're a competitive person.
You know, if you get a bunch ofcompetitive people together, all
they want to do is win.
Right.
And we're not playing for secondor fourth or fifth place.
I've observed, you know, some aredoing or that complacency sort of
(24:43):
sets in after a little while.
You know, you've got a lifestyle
business.
It's making some money.
We were always sort of gunning forwinning whatever that looks like
on day one.
Yeah.
And so that was exciting.
And then just working with A
players, people that enjoyed.
not only working with one another,
spending time with one another.
They enjoyed joking around and
just like having a good time atwork, but they were also
(25:04):
incredibly intense when it wasnecessary.
It was just fun.
It was such an enjoyable.
place to show up every single day.
I was in Chatham, about an hour
away from the office.
I was still driving in on a
regular basis because I had to,because I wanted to.
And I wanted to feel the energywas energizing to be here.
And that is, of course, the resultof the culture and the people that
we had very intentionally broughtin to the business.
(25:26):
And everyone that walked in theoffice felt it, all of our lending
partners.
our legal partners, everyone that
walked in there like, oh, wow,this feels different.
Yeah.
And that was definitely a source
of pride, I think, for us as well.
We started the conversation
talking about learnings and thinkthe greatest learning in all of it
was the importance of the culture.
And it's that thing that you hear
in business school, you got to payattention to the culture, pay
attention to the culture, but noone actually knows what it looks
(25:47):
like.
No one can define it.
No one can define it.
No one really like tells you that.
No one can you that.
actions to take, you know, to
create this culture, it reallyjust has to be set and defined by
that founding team and thencontinuously reinforced with
behavior in you of the saying, Iwon't take it.
I'll let you talk about, you know,the culture piece.
(26:09):
You've got an equation for it, Ithink.
Well, it's actually not for me.
It's from Danny Meyer.
It's my favorite quote around therestaurant tour.
I don't think Danny Meyer wouldappreciate that.
But your culture is the sum of thebehaviors that you celebrate minus
the behaviors that you tolerate.
I always try to figure out a
formulaic way to explain how it isand how that gets created.
(26:31):
But ultimately, that's just it.
It's like what gets recognized
inside of your culture and what issimply not tolerated.
You know, nobody wants to runaround being the bad person who's
saying, Hey, that's not toleratedhere, but somebody has to be for
sure.
Truthfully, like you have to
protect it.
In the beginning, that can be a
little bit uncomfortable forpeople when you go around and say,
(26:54):
Hey, that's not how we do thingshere.
And maybe it's like, you don'tlike the way they took care of a
client.
Hey, I listened to that call.
And that's just not the way thatwe take care of our clients.
That's unacceptable.
People will go, wow, I never got
that kind of feedback before.
And it can be subtle, but guess
what?They're either going to fix it or
(27:14):
they're just not going to be apart of it anymore.
The reward piece, I think mostpeople understand and do an okay
job with.
Everyone loves a great job.
Yeah, rewarding the rightbehavior, but it's the tolerance
of intolerable behavior thatpeople, I think, struggle with.
And if you have an internal policyto respond to emails quickly.
and several days has passed, noone wants to be that person that
(27:37):
replies all and says, hey, can youget an update on this?
Yeah.
If it's happening multiple times,
you do.
You do have to, at times, sort of
publicly intolerate that behavior.
People, they won't learn.
It's the same as Pavlov's dogs.
There's negative reinforcement,
positive reinforcement.
It requires both.
I don't think you can just rewardyour way to a really good culture.
one No, there's something to besaid for this day.
There's something to be said for,you know, replying all that email
(28:00):
and say, Hey, still waiting onyou.
And that tells the other, youknow, 12 people on that email
thread that, okay, like whenthey're asking for something and
three days has gone by, clearlythere's some internal clock going
with them.
They want to let you know that
three days was not the answer thatthey were looking for.
They were probably looking forsomething faster than that.
And then you're just kind of liketraining it into the culture.
(28:20):
That's why culture is not what yousay.
It's not even what you write down.
It's what you do.
It's how you act.
You know, it's really the founder,
the founding team, et cetera, thatare like setting that for the
whole organization as it getsbuilt out.
They're not listening to what yousay.
They're watching what you do.
Right.
So I often will say the fact thatlike, Hey, if you want your team
(28:43):
to be on time, be on time.
The second you start showing up
late, your team will show up late.
I think one thing that we're just
highly intentional about from thevery beginning was we made our
culture fun.
But we also we made it very clear
what we were trying to achieve andwhat it was going to take to get
to where we were going.
And that we were OK if I think it
was Frances Hinojosa, who I had onthe show and love what she said,
just like, you know, if I need toput you in a canoe and just kind
(29:04):
of like give you a little nudge tohelp you swim up the stream
because you can't stay hereanymore.
That's OK.
Right.
I'm going to put you down theriver a bit.
And like, that's great for you.
You're going to land just fine and
you're going to do great in yourlittle canoe.
(29:25):
I need you to paddle off becausethis isn't the place for you.
And we were really, reallyprotective of that.
But I think that if anybody, youknow, were to sit here with us
reflecting, they would say thatalthough it is painful to build
and build and build culture thatway, it's the right thing.
And the A players start to likereally show through that process.
(29:47):
And the people who care the most,they're just so passionate about
the way that which we protect it,the way that which we approach the
mission.
ultimately and have fun with each
other.
I think most importantly, it's
like business is hard enough.
Life is hard enough.
But if you can spend 40 to 50 % ofyour waking hours at a job, then
you better be working with peoplethat you like.
And you better be feeling likepart of something bigger than
(30:07):
yourself, especially in thisindustry where it's so difficult.
The problem is so complex and it'sso difficult.
Yes.
And to just constantly chip away
and try things and, you know, onething doesn't work you try nothing
it doesn't work if you aren'tsurrounded by people that you
enjoy people that are like thereto kind of like laugh it off but
then also encourage you tocontinue to push along we would
never have gotten you know, a 10thof his work has never gotten out
(30:28):
of the starting block because youquickly realize how hard it is.
because you quickly realize howhard it is.
You start digging into the dataand you realize that, you know,
the first contact rate of theanswer rate of a client is 30 %
higher.
If you call within the first five
minutes, as opposed to within thefirst hour.
Right.
So it's like, well, how do I now
go out and build a system in whichwe call every client in the first
(30:48):
five minutes?And then you're like, okay, that's
pretty good.
But what happens if we call a
client in the first five secondsafter they submit a lead
application to us?Oh, that makes us even that more
hard to compete with and makes oursystem that much better.
It increases our conversion rate.
And then you go out and, you know,
I think at the beginning, you'relike, you're trying to get 10 %
better month over month.
And then you're building on that
and you're like, you're trying toget 1 % better.
(31:08):
Then you're trying to get 1 %better every day.
0 .1%.
But after so long, you've gotten
so refined, you're playing down tothe decimals of constant
improvement.
And that's a really, really,
really hard thing to do to wake upevery morning and try to
consistently just chip away toimprove your business.
We never lost that spirit andexcitement up until...
The last day, what excites meabout our team, as I think about
it, the culture that was built,you know, culture is loosely used,
(31:30):
but what it means beyond just likethe way that people interact with
each other, it's like, it's theexcitement they show about the
work itself, the mission itself.
They will take that and they will
go and apply that across themortgage industry.
And I think about that torchagain, as I mentioned, those
people will carry this RockyMortgage Canada torch across
Canada.
And otherwise, perhaps globally,
and they will continue to push forinnovation inside of the places
(31:51):
that they're at or starting theirown.
that they're at or starting theirown.
And there will be that there willbe a really interesting ripple
effects of, you know, people thatwere on the team, very talented.
You know, everyone is sort ofgoing to different homes now in
different places in the industry.
And I think you'll see a ton of
these ripple effects of those sortof X, you know, Rocket Mortgage
(32:16):
Canada team members that are.
looking for inches and obsessing
about finding a better way insideof these other Canadian
businesses.
And I think continuing to root for
the smaller guys and pushing forjust a better experience for
Canadians.
And I root for... you know, the
wealth symbols of the world and,you know, Pine and Nesto and some
of these other, you know, new agemortgage companies.
Sure.
They're continuing.
They're going to continue tochallenge and bring up the like
(32:37):
the aisle of mortgage brokering.
Facebook chat.
So for those people that don'tknow, there's sort of an I Love
Mortgage Brokering group where alot of mortgage brokers are there.
And there was definitely anoutpouring of support, but there's
also the opposing side that wassort of, you know, they were
talking about, oh, I expectedthis.
You know, I saw this one comingabout the conversation on the wind
down with Rockmore Canada.
And it's like, let's not root for
entrepreneurial companies that aretrying to innovate and trying to
(32:58):
make things better and creatingmore competition in the
marketplace.
Like we should be all rooting for
that.
A hundred percent.
And anyone rooting against that, Idon't know.
Who are they rooting for then?They are rooting for the
protectionism of what they thinkis their business built over time
and a threat.
the protectionism of what they
think is their business built overtime and a threat.
to their business, but theycouldn't be more wrong.
There's enough mortgages in thiscountry to have a robust system.
(33:19):
And there's certainly a lot ofspace for innovators.
And I love what you said aboutrooting for others, all those
companies and many more companieslike them rooting for every single
one of them to continue pushingbecause Chris, you, me, our team,
we know how hard it is to be inthe arena.
We know how hard it is to beentrepreneurial.
We know how hard it is to innovatein a space that is structurally
(33:40):
designed to hold back innovators.
And to anyone who is going to
continue to carry that torch,ourselves included, because we're
far from done, you best believethat, I seriously wish them well.
And I root for them.
And I really don't pay much
attention to the haters, if youwill.
Those people will always feel thatway.
I really just try to focus on thepeople who are wishing the best
(34:02):
for other human beings.
I think about humans first and
foremost, and we are humans, ourteam are humans, and ultimately
they're going to want to do someincredible things.
And I think the industry should bethankful that people are bold
enough, brave enough to putthemselves out there, get into the
arena, fight the battle, and tryto make this thing better every
single day for people, ultimately.
100%.
With that, is there anything youwant to say to the folks that have
(34:24):
supported the business, your fans?Fans, I wouldn't say that.
But yeah, just thank you.
It's been an incredible,
incredible journey.
I mean, just the fact that you and
I are even sitting here talkingright now on a podcast called
Lending Thoughts.
A couple of years ago, I told you
(34:45):
I wanted to do this.
It took some time to put it
together.
I kept putting it off, putting it
off.
And then one day I was like, let's
just get it done.
Let's just make it happen.
And in a matter of no time,basically, I was able to stream
this together.
Just that attitude from me to you
to every other person in thecompany, like that's a culture.
That is an attitude.
That is a mindset that exists in
(35:06):
our people.
And I cannot thank everybody
enough from the people inside ofthe walls of Rocket Mortgage
Canada to the people outside ofthe walls who helped us and
supported us every single step ofthe way.
We're excited about what we'redoing.
Just keep pushing.
Keep pushing because it's going to
take.
great people.
So thank you for everything thatyou've done, but please, please,
(35:28):
please don't stop.
Boom ski.
Thank you.
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On Purpose with Jay Shetty
I’m Jay Shetty host of On Purpose the worlds #1 Mental Health podcast and I’m so grateful you found us. I started this podcast 5 years ago to invite you into conversations and workshops that are designed to help make you happier, healthier and more healed. I believe that when you (yes you) feel seen, heard and understood you’re able to deal with relationship struggles, work challenges and life’s ups and downs with more ease and grace. I interview experts, celebrities, thought leaders and athletes so that we can grow our mindset, build better habits and uncover a side of them we’ve never seen before. New episodes every Monday and Friday. Your support means the world to me and I don’t take it for granted — click the follow button and leave a review to help us spread the love with On Purpose. I can’t wait for you to listen to your first or 500th episode!