Automated Excellence and Adaptive Automotive

WEBVTT

1
00:00:02.879 --> 00:00:07.320
You are listening to Leaders in Lending
from Upstart, a podcast dedicated to helping

2
00:00:07.360 --> 00:00:13.000
consumer lenders grow their programs and improve
their product offerings. Each week, here

3
00:00:13.039 --> 00:00:17.559
decision makers in the finance industry offer
insights into the future of the lending industry,

4
00:00:18.039 --> 00:00:22.800
best practices around digital transformation, and
more. Let's get into the show.

5
00:00:26.440 --> 00:00:29.600
Hello and welcome to Leaders in Lending. I'm your host, Drew Megory,

6
00:00:29.640 --> 00:00:33.759
and this episode features my conversation with
Jared Dreyer, the vice president of

7
00:00:33.759 --> 00:00:38.759
Consumer Lending and Centralized Deposits at Westera
Credit Union in Denver, Colorado. In

8
00:00:38.799 --> 00:00:42.799
this episode, Jared and I first
discussed was Stara's approach to building its own

9
00:00:42.880 --> 00:00:48.280
in house automated decisioning engine, followed
by an interesting conversation about the adaptive auto

10
00:00:48.320 --> 00:00:51.600
space. I hope you enjoy this
week's topics, and without further ado,

11
00:00:51.719 --> 00:00:55.920
here's my conversation with Jared. Hello, Jared, welcome to the podcast,

12
00:00:56.000 --> 00:00:58.479
and thank you for making the time
to join me today. Thank you so

13
00:00:58.600 --> 00:01:02.159
much for having me. It's a
plaasure to be here. Thanks. So,

14
00:01:02.280 --> 00:01:06.200
as we typically do on the podcast, let's start our conversation by by

15
00:01:06.280 --> 00:01:07.920
rewinding a little bit. I don't
know about you, Jared, but for

16
00:01:08.040 --> 00:01:12.959
me as a child, a career
in the financial services space definitely was not

17
00:01:14.079 --> 00:01:15.959
something that was top of my mind. So can we start by giving the

18
00:01:17.000 --> 00:01:19.400
listeners a bit about your journey and
how you got to West Era, And

19
00:01:19.480 --> 00:01:23.079
on top of that, what's the
day to day like as the VP of

20
00:01:23.079 --> 00:01:26.319
Consumer Lending and Deposits. Sure happy
to and like you were just saying,

21
00:01:26.359 --> 00:01:30.120
that wasn't my intent either. You
know. I went to college to do

22
00:01:30.640 --> 00:01:34.439
biology as my undergrad and wanted to
study sharks in their natural environments out in

23
00:01:34.480 --> 00:01:38.280
the ocean. So I went to
school in San Diego and decided to come

24
00:01:38.280 --> 00:01:41.319
back to Denver, where my family
was, and I got into mortgage lending

25
00:01:41.680 --> 00:01:46.040
and was quickly recruited by Wells Fargo
and they wanted me to run some of

26
00:01:46.040 --> 00:01:49.280
their retail branches, and so I
got into the retail side of the business

27
00:01:49.640 --> 00:01:53.560
and did that for a few years
until they merged with Wacovia, at which

28
00:01:53.599 --> 00:01:57.879
point I jumped over to Belco just
because I really liked the credit uni movement

29
00:01:57.920 --> 00:02:00.640
and wanted to be a part of
it. I had some family members that

30
00:02:00.719 --> 00:02:02.760
were part of it historically, so
I knew a lot about credit unions,

31
00:02:04.120 --> 00:02:06.560
and I wanted to be a part
of that environment. So I came over

32
00:02:06.599 --> 00:02:09.039
to Belco, did retail there for
a few years, and then actually led

33
00:02:09.080 --> 00:02:14.759
some of the retail team, and
then because of my background in lending with

34
00:02:14.879 --> 00:02:17.960
doing mortgages and then also teaching a
lot of the branch managers how to underwrite

35
00:02:17.960 --> 00:02:23.120
loans because we did have decentralized underwriting
over at Belco at that point in time,

36
00:02:23.639 --> 00:02:28.360
I was able then to transition my
career over into consumer lending at Belco

37
00:02:28.840 --> 00:02:34.319
and really loved the opportunity of building
new products and services and helping better serve

38
00:02:34.360 --> 00:02:38.479
our members through the different lending opportunities
that we had. And I found it

39
00:02:38.560 --> 00:02:42.719
a challenge to try to grow our
portfolios while at the same time look for

40
00:02:42.800 --> 00:02:46.439
new areas of origination that maybe others
wouldn't be in at that point in time

41
00:02:46.520 --> 00:02:49.560
either, and so we did a
lot of cool, unique things at Belco.

42
00:02:50.240 --> 00:02:53.120
From there, Westair had an opportunity
because they had actually shut off consumer

43
00:02:53.199 --> 00:02:58.599
lending back in twenty nineteen with a
new executive team and the executive staff that

44
00:02:58.639 --> 00:03:00.639
came on board, so they asked, Hey, will you come over here

45
00:03:00.719 --> 00:03:05.680
and help us rebuild the consumer lending
platform. We'd like to start kind of

46
00:03:05.759 --> 00:03:08.000
from scratch, and the good news
was it wasn't completely from scratch, but

47
00:03:08.039 --> 00:03:12.599
they said, we'd like to start
over and really make sure that we're mitigating

48
00:03:12.680 --> 00:03:15.599
risk but also helping our members with
the types of financing that they need.

49
00:03:15.960 --> 00:03:20.639
And so I jumped at the opportunity
to kind of build something from the ground

50
00:03:20.719 --> 00:03:23.639
up. And I really love the
team over here and the leadership, so

51
00:03:23.879 --> 00:03:28.080
it was an easy move. And
I've been very happy coming over to west

52
00:03:28.120 --> 00:03:30.919
Era and really love what I do
because I've had that opportunity. So I've

53
00:03:30.919 --> 00:03:36.800
gotten into some new types of origination. I've stood up some new software as

54
00:03:36.840 --> 00:03:40.280
well as we've automated our decision engine
to industry high standards, and we've had

55
00:03:40.319 --> 00:03:43.960
a lot of fun doing it,
and we've been able to grow. Now.

56
00:03:44.039 --> 00:03:47.360
Of course, with COVID and with
the recent recession and liquidity concerns,

57
00:03:47.520 --> 00:03:50.919
it's been a little bit of a
challenge. So like you were asking,

58
00:03:51.000 --> 00:03:53.919
day to day, you know,
we're watching all those numbers and trying to

59
00:03:53.919 --> 00:03:58.159
do our best to balance serving our
members' needs as well as keeping the credit

60
00:03:58.319 --> 00:04:00.759
union financially sound. So we've had
to lever and d lever some of the

61
00:04:00.759 --> 00:04:04.400
stuff that we're doing. But I
really love that because it's very strategic,

62
00:04:04.400 --> 00:04:08.639
and it's very tactful, and it's
a lot of fun to do. So

63
00:04:08.680 --> 00:04:11.400
I've got a great team that I'm
working with over here, and I just

64
00:04:11.479 --> 00:04:15.560
love every day coming in and working
with them and finding these opportunities to help

65
00:04:15.599 --> 00:04:17.600
our members succeed. Thank you for
that. That is awesome. I would

66
00:04:17.600 --> 00:04:20.920
have liked to hear the path to
becoming a shark expert as well, if

67
00:04:20.959 --> 00:04:25.639
you could have funneled into the part
of your career, but I think that

68
00:04:25.680 --> 00:04:29.600
would have kept you overly busy compared
to how busy you probably already are.

69
00:04:29.639 --> 00:04:31.160
But thank you for that. One
thing I wanted to touch on though,

70
00:04:31.199 --> 00:04:35.000
that you started to talk about there
is around the decisioning engine, and something

71
00:04:35.040 --> 00:04:40.319
I found interesting when we spoke prior
is, especially since I work in the

72
00:04:40.319 --> 00:04:45.560
space of automation within lending, is
that Westara has automated their own decision engine.

73
00:04:45.639 --> 00:04:48.160
Right so Jared on this topic,
can we at least start by talking

74
00:04:48.160 --> 00:04:53.879
a bit about the reasoning as to
why wes Stara decided to build this engine,

75
00:04:53.959 --> 00:04:57.120
and then we can expand from there, sure, definitely. So when

76
00:04:57.120 --> 00:05:00.120
I came on board, Westerair was
currently only automating about eight percent of the

77
00:05:00.160 --> 00:05:04.879
decisions that were coming in through our
LOS and we use rcs through origins and

78
00:05:05.240 --> 00:05:09.480
it's a great system. It's built
with Boolean logic, and you know,

79
00:05:09.519 --> 00:05:12.879
I'll talk about that more as we
talk about how we design this engine.

80
00:05:13.120 --> 00:05:15.879
But when I came on board,
I knew that we were making inconsistent decisions.

81
00:05:16.199 --> 00:05:18.600
So you know, you may have
one member that's trying to get an

82
00:05:18.639 --> 00:05:24.480
AUTO in their specific situation and another
member that may look alike, and one

83
00:05:24.519 --> 00:05:28.519
may be approved, one may be
denied based on some outside factors or just

84
00:05:28.639 --> 00:05:31.279
a difference in underwriter. If they
got one underwriter who is a little bit

85
00:05:31.319 --> 00:05:35.319
more lenient versus someone who's a little
bit more conservative, there's a difference there.

86
00:05:35.639 --> 00:05:40.600
And I knew by automating our decision
engine we would have more consistent and

87
00:05:40.720 --> 00:05:44.480
fair decisions. But in addition to
that, we really wanted to get back

88
00:05:44.519 --> 00:05:47.560
into the indirect auto space here in
the Denver metro area because that had been

89
00:05:47.600 --> 00:05:51.399
turned off in twenty nineteen. And
in getting into the indirect auto space,

90
00:05:51.720 --> 00:05:56.879
you need to be very consistent with
your decisions. The dealers want to see

91
00:05:56.920 --> 00:05:59.959
the same decisions time and time again. So if they have that look alike

92
00:06:00.279 --> 00:06:03.319
customer that comes into their dealership,
they want to have that loan get approved

93
00:06:03.319 --> 00:06:06.759
time and time again as long as
it meets our criteria, and they don't

94
00:06:06.800 --> 00:06:11.959
want to be going back and forth
with the underwriters all day, rehashing deals,

95
00:06:12.000 --> 00:06:15.279
trying to get something to work.
So I knew automation was going to

96
00:06:15.319 --> 00:06:19.480
be key to growing those dealer relationships
and growing that volume of loan originations through

97
00:06:19.480 --> 00:06:23.399
the indirect network. And like I
said, since it had been turned off,

98
00:06:23.439 --> 00:06:26.279
we were at zero, and we
quickly over the next couple of years

99
00:06:26.319 --> 00:06:30.160
were able to grow it to the
ballpark of about twenty five to thirty million

100
00:06:30.199 --> 00:06:33.399
a month in new originations, and
they've performed very, very well. So

101
00:06:33.720 --> 00:06:38.759
it's been awesome to see the growth
and to see the great opportunity out there.

102
00:06:39.120 --> 00:06:42.199
That's great, and automation, of
course is something that is top of

103
00:06:42.199 --> 00:06:45.720
mind, and in credit unions as
an industry as a whole, have always

104
00:06:45.759 --> 00:06:48.199
been the ones that have been kind
of in the background and didn't automate or

105
00:06:48.199 --> 00:06:53.160
they're not up to the most recent
piece of technology. So when you guys

106
00:06:53.199 --> 00:06:56.680
were thinking about this automation piece.
How did you leverage? Did you say,

107
00:06:56.680 --> 00:06:59.560
Hey, let's get a room filled
with engineers to build this. Did

108
00:06:59.560 --> 00:07:01.639
you out like what was that kind
of transition of Hey, we want to

109
00:07:01.680 --> 00:07:04.079
do this, but how are we
going to ASCU? Sure? So,

110
00:07:04.480 --> 00:07:09.000
the team had already met with one
of our credit bureau reporting agencies and they

111
00:07:09.000 --> 00:07:12.319
had done a deep dive for us
and they had some recommendations on what we

112
00:07:12.360 --> 00:07:15.079
could do. But coming over from
Belco, I had the privilege of working

113
00:07:15.079 --> 00:07:19.720
with Cuddle back then so Are and
it was actually CUDC before Cuddle purchased them

114
00:07:19.959 --> 00:07:25.079
and then transferred over to Origins.
But with CUDC we had Tom Helmers who's

115
00:07:25.120 --> 00:07:28.920
now at Grow Credit Union down in
Tampa, and he and I worked together

116
00:07:29.040 --> 00:07:32.480
on a decision engine for Belco where
we used a custom score and so taking

117
00:07:32.480 --> 00:07:35.879
the learnings I had from that,
what I told the team at Westara was,

118
00:07:36.000 --> 00:07:40.519
Hey, without needing to pay for
this or going through a third party

119
00:07:40.560 --> 00:07:44.480
provider out there, we can actually
build it ourselves. And I told the

120
00:07:44.480 --> 00:07:46.639
team it's going to take a lot
of work, it's going to take a

121
00:07:46.639 --> 00:07:49.160
lot of time, and so everybody
needs to be very patient, but we're

122
00:07:49.160 --> 00:07:53.199
going to be able to build it
ourselves. And I've shared this with other

123
00:07:53.240 --> 00:07:56.279
people in the industry, you know, through the CUNA Lending conference, or

124
00:07:56.600 --> 00:08:00.480
I did a white paper actually for
QUNA on it. What I've told people

125
00:08:00.600 --> 00:08:03.079
is is exactly what I just said. It takes a lot of time and

126
00:08:03.120 --> 00:08:05.279
it takes a lot of work,
but it is totally worth it. So

127
00:08:05.439 --> 00:08:11.160
to build it out, we did
a five year regression analysis of data from

128
00:08:11.199 --> 00:08:15.800
twenty thirteen to twenty eighteen. And
the reason we picked those years is because

129
00:08:15.839 --> 00:08:20.000
in twenty twenty one, those loans
at all seasoned at least a minimum of

130
00:08:20.040 --> 00:08:22.560
three years, and most charge offs
happened between twelve and day eighteen months.

131
00:08:22.560 --> 00:08:26.959
So we knew that the data we
had was clean and that we knew what

132
00:08:26.079 --> 00:08:30.560
was performing and what wasn't. And
we were able to take all this data

133
00:08:30.600 --> 00:08:35.440
for five years and break it into
FYCO classes, into loan to value classes,

134
00:08:35.840 --> 00:08:39.240
debt to income, unsecured to income, and payment to income groupings.

135
00:08:39.559 --> 00:08:43.720
And what we did is we did
heat maps, So where were we normally

136
00:08:43.759 --> 00:08:46.399
approving the loans, where were we
normally declining them, and then what was

137
00:08:46.440 --> 00:08:50.840
the ultimate disposition? Did they perform
or did they not? And by doing

138
00:08:50.840 --> 00:08:54.159
an overlay of all these heat maps, and like I said, it was

139
00:08:54.159 --> 00:08:56.240
a lot of work because we did
this product by product. So we started

140
00:08:56.279 --> 00:09:01.039
with autos because that's where we wanted
to go to first, into unsecured after

141
00:09:01.080 --> 00:09:03.080
that, and then we even did
home equity, and home equity had its

142
00:09:03.120 --> 00:09:07.320
own challenges on top of it,
but we layered these heat maps on top

143
00:09:07.360 --> 00:09:11.120
of each other and were able to
draw rule sets by saying, Okay,

144
00:09:11.159 --> 00:09:15.320
so we like this Fiico band,
but we want to start cutting off our

145
00:09:15.360 --> 00:09:18.960
DTI at this point, are cutting
off our LTVs at this point, And

146
00:09:18.000 --> 00:09:24.039
we wrote those rule sets into our
cos and our automation went through the rough.

147
00:09:24.080 --> 00:09:26.399
So when we first turned it on, our autos were at seventy percent

148
00:09:26.440 --> 00:09:31.879
automation for both approvals and declines combined, and our unsecured products were over sixty

149
00:09:31.960 --> 00:09:35.840
percent. Our helocks, like I
said, we had some challenges, and

150
00:09:35.879 --> 00:09:39.080
that's just because when you're dealing with
the credit Euros, you don't always know

151
00:09:39.159 --> 00:09:41.399
which mortgage is tied to which property, especially if there's multiple out there.

152
00:09:41.559 --> 00:09:45.600
But we were able to automate twenty
five percent of those as well, so

153
00:09:45.960 --> 00:09:50.000
We've got some really cool automation built
into our system now. So to expand

154
00:09:50.039 --> 00:09:52.679
off that kind of a two prong
approach here is one a lot around the

155
00:09:52.720 --> 00:09:58.279
decision, right is there anything in
regard to automation piece full end to end,

156
00:09:58.440 --> 00:10:03.639
So applicant goes through either branch experience
online experience, the decision happens in

157
00:10:03.679 --> 00:10:07.720
there as told Hey, yes you
qualify or know or is it just simply

158
00:10:07.759 --> 00:10:11.840
the decision engine. And then second
to that is you started talking a bit

159
00:10:11.879 --> 00:10:16.399
about we started with auto went to
the personal loan space. Helock. Are

160
00:10:16.399 --> 00:10:20.039
you doing this today for just those
three asset classes or is it expanded across

161
00:10:20.080 --> 00:10:24.000
all? Yeah, great question.
So to answer your first part, the

162
00:10:24.320 --> 00:10:26.679
member does get communicated to their decision
based on how they apply. So if

163
00:10:26.720 --> 00:10:30.360
they do it through our online channel, they are of course going to get

164
00:10:30.360 --> 00:10:33.960
that response online. We actually stood
up a relationship with a loan Star so

165
00:10:35.000 --> 00:10:37.559
we do point of sale lending through
rcs as well. In those cases,

166
00:10:37.840 --> 00:10:41.399
not only do they do the application
through the lone Star system, they get

167
00:10:41.440 --> 00:10:46.120
a text response, as does the
contractor that they're working with, and they

168
00:10:46.120 --> 00:10:48.720
can go full end to end from
application all the way through closing digitally,

169
00:10:50.120 --> 00:10:52.919
So that's a really cool feature that
we've been able to deploy to them where

170
00:10:52.919 --> 00:10:56.440
we can do closings through DocuSign and
send all those out. So for the

171
00:10:56.759 --> 00:11:01.399
second part of the question as to
what asset classes we're doing today, Yeah,

172
00:11:01.440 --> 00:11:05.279
we started with auto, our personal
unsecured group, and our home equity.

173
00:11:05.600 --> 00:11:07.200
Since then we grew, like I
was saying earlier, we stood up

174
00:11:07.240 --> 00:11:11.759
Loan Star point of sale lending,
so we have now contractor loans for solar

175
00:11:11.120 --> 00:11:15.480
home improvement, and we also did
a west Era energy efficient loan. We

176
00:11:15.519 --> 00:11:20.159
have added those three also to this
space now and we really look at them

177
00:11:20.159 --> 00:11:22.519
like an unsecured loan for the most
part, even though we can do a

178
00:11:22.600 --> 00:11:26.320
UCC one filing and we've automated those
pieces as well. The really cool thing

179
00:11:26.360 --> 00:11:31.519
though is solar. Since we work
with the state and the Colorado Renew Project

180
00:11:31.519 --> 00:11:35.360
here for our state of Colorado,
we have set guidelines on what they want

181
00:11:35.440 --> 00:11:37.039
those loans to look like, and
you know who they want us to be

182
00:11:37.080 --> 00:11:41.120
able to help. So we have
fully automated our renew program to one hundred

183
00:11:41.120 --> 00:11:45.440
percent, so all the decisions are
made by the system. We don't even

184
00:11:45.480 --> 00:11:48.159
have an underwriter look at it unless
there's something that pops up like a fraud

185
00:11:48.159 --> 00:11:52.559
alert or a mismatch like on a
social Security number. And if we get

186
00:11:52.559 --> 00:11:54.919
one of those types of alerts,
then of course, yeah, the underwriter's

187
00:11:54.960 --> 00:11:58.120
going to take a peek at it
and validate all the information they can.

188
00:11:58.279 --> 00:12:01.720
But if everything comes through clear and
pass all the fraud checks, those loans

189
00:12:01.720 --> 00:12:03.759
are decisioned and ready to move forward
right away. That's awesome. And you

190
00:12:03.799 --> 00:12:07.159
often hear, especially on the home
equity align or even the mortgage product,

191
00:12:07.320 --> 00:12:11.840
the amount of time that that takes
and then the real time that you're able

192
00:12:11.879 --> 00:12:16.519
to say yes or no to your
members I'm sure is much appreciated. Yes,

193
00:12:16.639 --> 00:12:20.480
so cus to you your team.
I know that was probably a long

194
00:12:20.639 --> 00:12:24.159
time coming of building this and being
able to supply to your members. So

195
00:12:24.480 --> 00:12:26.960
again, kudos to you. Yeah, thank you. I want to make

196
00:12:26.960 --> 00:12:31.080
a pivot here and talk about something
that I know that you're very passionate about,

197
00:12:31.480 --> 00:12:35.879
and of that passion, I will
preface that most lenders are not willing

198
00:12:35.919 --> 00:12:39.879
to touch this or they probably don't
know too much about it, and this

199
00:12:39.960 --> 00:12:43.840
is being the space of what's called
adaptive auto. Can you first start by

200
00:12:43.879 --> 00:12:48.039
explaining one what adaptive auto is for
those who may not know, and then

201
00:12:48.080 --> 00:12:52.519
why you're passionate about this space.
Sure, So, adaptive auto are handicap

202
00:12:52.559 --> 00:12:56.399
accessible vehicles. So for our members
that are in wheelchairs or have different paralysis

203
00:12:56.399 --> 00:13:00.799
that keeps them from being able to
use gas pedals, brake pedals, and

204
00:13:01.320 --> 00:13:03.480
whatnot, they're able to build these
vehicles so that they can drive them.

205
00:13:03.919 --> 00:13:09.519
And adaptive auto is definitely an underserved
community nationally, so not only in Denver,

206
00:13:09.600 --> 00:13:13.799
but anywhere that you guys live or
any of your listeners live. They're

207
00:13:13.879 --> 00:13:18.399
definitely underserved there. And the reason
they're underserved is a lot of lenders don't

208
00:13:18.440 --> 00:13:20.080
know how to underwrite those deals and
they don't know what to look at.

209
00:13:20.159 --> 00:13:24.240
So let's rewind back in time.
So this is back when I started with

210
00:13:24.320 --> 00:13:26.720
Belco. One of the branches that
I ran, I would drive to work

211
00:13:26.720 --> 00:13:30.480
every single day, and at the
off ramp the exit to get to that

212
00:13:30.559 --> 00:13:33.559
branch was an adaptive Auto dealership.
So it was less than a mile from

213
00:13:33.600 --> 00:13:37.399
our location, and I saw them
every day coming in and I kept thinking,

214
00:13:37.759 --> 00:13:41.360
I wonder who's doing their auto loans
and who's taking care of them?

215
00:13:41.360 --> 00:13:43.799
So I drove over and I asked, and they said, unfortunately, no

216
00:13:43.840 --> 00:13:46.320
one. They said, we can't
get anyone to do loans for us.

217
00:13:46.639 --> 00:13:52.679
It's really up to the purchaser,
the customer to find their own financing for

218
00:13:52.720 --> 00:13:54.720
this type of deal. And they
said most of them are doing home equity

219
00:13:56.159 --> 00:13:58.480
or trying to get money put together
from friends and family to buy a vehicle

220
00:13:58.799 --> 00:14:03.720
so that they can be just even
their daily basic needs. A lot of

221
00:14:03.759 --> 00:14:05.799
times, you know, they may
have a child who's disabled and they need

222
00:14:05.799 --> 00:14:09.600
to get them to the school,
or may be an adult who's trying to

223
00:14:09.600 --> 00:14:11.399
take care of their family and they
may live on their own, but they

224
00:14:11.440 --> 00:14:16.759
just don't have reliable transportation to even
get to the grocery store and back.

225
00:14:16.840 --> 00:14:18.600
So at that point in time,
I realized, Hey, this is what

226
00:14:18.639 --> 00:14:22.519
a credit unions for. We need
to be able to help the members of

227
00:14:22.559 --> 00:14:26.440
our community and help them thrive.
And so what I did is I started

228
00:14:26.480 --> 00:14:28.559
talking to our lending team at Belco
about it, and I said, what

229
00:14:28.679 --> 00:14:33.559
makes the difference between an adaptive auto, so a vehicle that has a lift

230
00:14:33.639 --> 00:14:37.159
built in or some wheelchair assistance,
versus a truck that has a lift on

231
00:14:37.240 --> 00:14:39.360
it, you know, to lift
it up higher so they can put the

232
00:14:39.360 --> 00:14:43.679
bigger wheels on, or maybe the
bigger exhaust. And I said, when

233
00:14:43.720 --> 00:14:48.919
we look at those vehicles that have
those aftermarket customizations, we'll go into the

234
00:14:48.279 --> 00:14:54.559
KBB or we will go into NAD
eight and we'll adjust the value for those

235
00:14:54.639 --> 00:14:56.679
upgrades that they've done. And unfortunately, you know, you don't have the

236
00:14:56.720 --> 00:15:01.159
adaptive equipment listed. But I asked, what's the difference between this, and

237
00:15:01.200 --> 00:15:03.080
they said, really, there's nothing. So I came back and said,

238
00:15:03.080 --> 00:15:07.200
okay, so if we have an
invoice and the invoice says that you know,

239
00:15:07.200 --> 00:15:11.039
they put fifteen thousand dollars into this
vehicle to put the lift in and

240
00:15:11.080 --> 00:15:13.240
the joysticks or whatever they needed to
do so they could operate it, I

241
00:15:13.279 --> 00:15:16.000
said, why wouldn't we add that
to the value of the vehicle and they

242
00:15:16.039 --> 00:15:20.799
said, we certainly can. And
so we started looking at individual deals just

243
00:15:20.840 --> 00:15:24.360
as a one off, and through
working with that local dealer that was just

244
00:15:24.399 --> 00:15:28.159
a mile away from my branch,
they started sending their customers over to us

245
00:15:28.159 --> 00:15:31.320
at Belco into my location. And
because we had decentralized underwriting and I had

246
00:15:31.360 --> 00:15:35.600
authority, I was able to work
on some of those deals and don't get

247
00:15:35.600 --> 00:15:37.240
me wrong. It wasn't a lot. It was maybe one or two deals

248
00:15:37.240 --> 00:15:41.559
a month at the most, but
we would be able to find financing for

249
00:15:41.600 --> 00:15:45.679
them and help those members into those
vehicles. So fast forward now that I'm

250
00:15:45.679 --> 00:15:48.639
over at west Era and we regrew
our indirect group and started working on that.

251
00:15:50.000 --> 00:15:52.600
We started looking at a wider scale
of how do we help these dealers

252
00:15:52.919 --> 00:15:56.960
across the whole state of Colorado.
And in Colorado, none of them are

253
00:15:58.039 --> 00:16:00.559
on an indirect platform just because they
don't do enough deals to justify it,

254
00:16:00.919 --> 00:16:04.440
and they'll say no one understands how
to underwrite them. So we partnered and

255
00:16:04.519 --> 00:16:07.279
used our lone Star partnership and said, hey, we've got a retail point

256
00:16:07.279 --> 00:16:11.240
of sale platform we can give you
that you can use in your dealership.

257
00:16:11.240 --> 00:16:15.000
You can submit an auto loan directly
to us, and we'll treat you like

258
00:16:15.039 --> 00:16:18.399
any other dealer. So we'll pay
you a dealer flat on these and we'll

259
00:16:18.480 --> 00:16:22.960
give you the same kind of income
that you'd get if you worked for an

260
00:16:22.039 --> 00:16:26.759
AutoNation or a bigger franchise store out
there, and these deals will come straight

261
00:16:26.759 --> 00:16:30.440
to us. You'll get an immediate
decision and we can fund them through ACHT

262
00:16:30.519 --> 00:16:36.120
you and the member can close by
DocuSign and they said that they loved it,

263
00:16:36.159 --> 00:16:40.759
So we got that turned on and
we're now helping three different franchise dealers

264
00:16:40.799 --> 00:16:45.440
out there that have multiple locations that
do adaptive auto and they absolutely love it.

265
00:16:45.519 --> 00:16:48.799
So it's it's been really awesome to
do. We definitely want to grow

266
00:16:48.840 --> 00:16:52.960
that program, but we're definitely doing
the crawl walk run and we're kind of

267
00:16:52.000 --> 00:16:56.840
in the walk stages now we can
close remotely, so that's awesome. One

268
00:16:56.879 --> 00:16:59.919
thing I wanted to touch on too
is you said that not many people know

269
00:16:59.879 --> 00:17:02.759
how to underwrite this. Yes,
can you talk a little bit about the

270
00:17:02.799 --> 00:17:08.119
differentiation besides LTV using KBB or NADA
and such, of how to underwrite this

271
00:17:08.200 --> 00:17:12.000
type of asset class in correlation to
all other type of consumer lending. Yeah,

272
00:17:12.279 --> 00:17:15.200
So talking to these dealers that do
adapt to auto, they said,

273
00:17:15.240 --> 00:17:21.000
every single finance company that they've worked
with has always used just the basic KBB

274
00:17:21.160 --> 00:17:25.920
or NADA value and they come in
over the LTVs that are allowed at that

275
00:17:26.039 --> 00:17:29.119
financial institution. So whether it's a
credit union or bank, a lot of

276
00:17:29.200 --> 00:17:32.680
them start capping out anywhere from you
know, one hundred and twenty percent LTV

277
00:17:32.759 --> 00:17:36.359
one forty one fifty and they just
can't do the deal. And they said,

278
00:17:36.440 --> 00:17:40.480
you know, hey, we're financing
a sixty thousand dollars Honda Odyssey minivan

279
00:17:40.960 --> 00:17:44.920
that's five years old and you know, kbb on it is thirty thousand dollars

280
00:17:44.960 --> 00:17:48.559
and we just we can't get the
deal done anywhere. And it's because they

281
00:17:48.599 --> 00:17:52.480
aren't adding in those additional add ons, you know, the pieces that were

282
00:17:52.759 --> 00:17:56.279
manufactured and built for that van that
increase its value. And because they don't

283
00:17:56.279 --> 00:17:59.440
add those in and they don't have
the box to click, you know,

284
00:17:59.480 --> 00:18:03.440
when they're going through their automated los
to say yeah it's got the spoiler or

285
00:18:03.480 --> 00:18:07.000
yeah it's got the running boards or
whatever. They don't have the adaptive equipment

286
00:18:07.039 --> 00:18:08.440
there, so they just don't ever
add it in or think about it,

287
00:18:08.720 --> 00:18:11.880
and then it doesn't meet their LTV
criteria, so it gets kicked out.

288
00:18:12.279 --> 00:18:15.559
So what we do is we get
an invoice on every single deal that we

289
00:18:15.599 --> 00:18:19.799
do with them, and we will
add dollar for dollar the equipment, so

290
00:18:21.039 --> 00:18:23.359
maybe not the labor, but we'll
add the equipment dollar for dollar into the

291
00:18:23.440 --> 00:18:27.079
value of the vehicle. And the
best part is when we started doing this

292
00:18:27.160 --> 00:18:30.799
years ago, both west Aara and
Belko asked the same question, is whatever

293
00:18:30.880 --> 00:18:34.240
happens if we do, unfortunately have
to repull one of these vehicles. You

294
00:18:34.279 --> 00:18:37.319
know, we can't sell it at
auction. What does that look like?

295
00:18:37.799 --> 00:18:41.119
And every single Adaptive dealer has they've
come to us begging, hey, if

296
00:18:41.160 --> 00:18:45.519
you ever get one of these vehicles, please bring it back to us because

297
00:18:45.559 --> 00:18:48.720
we can resell it and we can't
find them at auction. So we've got

298
00:18:48.759 --> 00:18:51.960
a source that we can take them
to to offload the vehicle if we need

299
00:18:52.000 --> 00:18:53.720
to. Now, at the end
of the day, we haven't needed to.

300
00:18:53.880 --> 00:18:57.359
I think that this asset class is
actually very very safe and very low

301
00:18:57.440 --> 00:19:03.839
risk because these families need these vehicles
to survive. I've not had one ever

302
00:19:03.920 --> 00:19:06.799
even go delinquent. And I say
that knock on wit at the same time

303
00:19:06.799 --> 00:19:10.119
that I say that, But I've
been doing this for years and I've never

304
00:19:10.160 --> 00:19:12.759
had one delinquency because they need these
vehicles. So I don't think we would

305
00:19:12.799 --> 00:19:17.079
ever get into the position where the
Credit Union would have to repossess one.

306
00:19:17.240 --> 00:19:18.519
But if we did, we do
have an outlet by taking it back to

307
00:19:18.559 --> 00:19:22.960
the dealer if we needed to,
And that makes total sense. In that

308
00:19:22.000 --> 00:19:26.200
same regard, though, let's think
about like in the auto industry as a

309
00:19:26.200 --> 00:19:29.119
whole. They might not be going
delinquent, but they may get in an

310
00:19:29.160 --> 00:19:32.440
accident or have other type of itsues
such as job lost, debts, so

311
00:19:32.480 --> 00:19:33.799
on and so forth. Can you
talk a little bit about, like is

312
00:19:33.839 --> 00:19:37.200
there ancillary products that also come a
part of a debt of mode as well.

313
00:19:37.319 --> 00:19:41.000
Yeah, so just like any of
our other autos, we can sell

314
00:19:41.279 --> 00:19:44.759
any of our gap products, We
can sell our debt protection products onto these

315
00:19:44.839 --> 00:19:47.960
loans as well. When we do
those adjustments, like I said, adding

316
00:19:48.039 --> 00:19:52.039
that equipment is just the same as
having those additions onto a truck or you

317
00:19:52.079 --> 00:19:53.880
know, the running boards, things
like that. So it's all part of

318
00:19:53.920 --> 00:19:56.680
the vehicle. It's all documented,
We have it all in the file and

319
00:19:56.759 --> 00:20:00.240
because of that, we get an
accurate LTV and the coverage applies to that

320
00:20:00.319 --> 00:20:03.759
vehicle just like it would any other. So we definitely recommend those products.

321
00:20:03.960 --> 00:20:07.240
We do get all of our products
through CUNA, and we love our relationship

322
00:20:07.240 --> 00:20:10.880
with CUNA, which is now and
I keep saying CUNA, but it's true

323
00:20:10.920 --> 00:20:15.000
stage they just swapped over their name
recently, but we love our relationship with

324
00:20:15.039 --> 00:20:18.160
them. And they take great care
of our members with those That's great.

325
00:20:18.200 --> 00:20:22.960
That is an interesting asset class.
In another kudos to you your team of

326
00:20:23.039 --> 00:20:26.920
exploring that asset class that many many
people of course need, but you don't

327
00:20:26.960 --> 00:20:30.759
really think about it too much when
you're sitting in your chair. So,

328
00:20:32.039 --> 00:20:34.799
Jared, I think this is a
good spot to transition, as we always

329
00:20:34.799 --> 00:20:38.480
do. I like to close the
podcast out with let's call them three off

330
00:20:38.519 --> 00:20:42.920
the wall questions. Sure, So, the first being what is the latest

331
00:20:44.039 --> 00:20:48.480
either application or piece of technology that
you cannot live without? Sure? So

332
00:20:48.519 --> 00:20:52.559
I'm going to start from a personal
level. I am really big into Internet

333
00:20:52.559 --> 00:20:56.440
of Things and automation even at home, and so I use obviously home Kit

334
00:20:56.559 --> 00:21:02.440
through Apple products, but I really
love Home Assistant. And the reason is

335
00:21:02.720 --> 00:21:04.960
the Internet of Things is so new, and it's so goofy, and you

336
00:21:06.000 --> 00:21:08.400
have so many different products out there. They don't all talk to each other

337
00:21:08.400 --> 00:21:11.799
and they don't all work very well
together. And then things like Apple home

338
00:21:11.880 --> 00:21:17.240
Kit have built in the safety measures
that if you're doing automations when you leave

339
00:21:17.279 --> 00:21:19.519
the house or come home, it's
always asking you to confirm it and do

340
00:21:19.559 --> 00:21:22.960
you really want to open your garage? And it kind of it takes away

341
00:21:23.000 --> 00:21:26.720
the purpose of having the home automation
right to even change things like your thermostat.

342
00:21:26.759 --> 00:21:29.799
Are you sure you want to change
it? Yes, I'm sure I'm

343
00:21:29.799 --> 00:21:33.319
coming home. Using Home Assistant,
I've been able to go in and build

344
00:21:33.319 --> 00:21:37.279
a whole bunch of virtual switches,
and by using these switches, you kind

345
00:21:37.279 --> 00:21:40.880
of bypass what home kit protections are
out there, and so you can just

346
00:21:40.920 --> 00:21:42.680
do a switch that hey, Jared
just came home. It flips the switch,

347
00:21:42.880 --> 00:21:45.880
and then I run automations based on
those switches. So back to the

348
00:21:45.960 --> 00:21:49.920
boolean logic, which is what we
used to build our decision engine, which

349
00:21:49.960 --> 00:21:53.319
is really if this, then that
type of logic. I've been able to

350
00:21:53.319 --> 00:21:56.359
do the same thing and automate almost
everything in my house, and so I

351
00:21:56.400 --> 00:22:00.839
absolutely love it when it works,
and it works eighty five percent of the

352
00:22:00.880 --> 00:22:03.400
time, But that other five percent
of the time I'll troubleshooting and rebuilding it

353
00:22:03.400 --> 00:22:07.319
and making it work. So it's
something that I just I can't live without

354
00:22:07.359 --> 00:22:10.400
anymore. Now when it breaks,
Like do you have full access or do

355
00:22:10.480 --> 00:22:12.200
wife and kids also have full access? But they can't mess with it?

356
00:22:12.279 --> 00:22:15.039
Right? Yep, exactly right,
it's only me I'm the only one who

357
00:22:15.039 --> 00:22:18.480
can go and fix it. And
so, and I keep telling my wife,

358
00:22:18.519 --> 00:22:21.400
if there's something you would like to
have happen, you know, or

359
00:22:21.480 --> 00:22:22.359
that you'd like to do, let
me know. I can figure out a

360
00:22:22.400 --> 00:22:26.839
way to build it. And we
have found really creative ways to kind of

361
00:22:26.920 --> 00:22:30.400
chain the logic to make certain things
happen when you come home, when you

362
00:22:30.519 --> 00:22:33.000
leave here in Denver, when it
snows, you know, we've got some

363
00:22:33.000 --> 00:22:37.519
heat mats outside, stuff like that. And so building this logic into home

364
00:22:37.519 --> 00:22:41.200
assistant has been awesome. That's great. I like that. I definitely like

365
00:22:41.240 --> 00:22:44.559
that. I'm gonna have to look
into it. Fast forwarding question number two.

366
00:22:44.960 --> 00:22:49.200
Hopefully it's not shark oriented or it
maybe if you could switch jobs for

367
00:22:49.359 --> 00:22:53.160
anyone for a day, who would
it be and why, Without a doubt,

368
00:22:53.240 --> 00:22:57.160
it would be a Disney imagineer working
on park rides and the next theme

369
00:22:57.200 --> 00:23:02.039
park iterations. You can see me. I've got some Disney stuff. We

370
00:23:02.160 --> 00:23:06.200
are big Disney fans. We absolutely
love going to the Parts. That is

371
00:23:06.240 --> 00:23:11.880
our go to vacation. And I
really love the imagineer mentality of you know,

372
00:23:11.000 --> 00:23:15.160
yes and and just kind of building
off of things and just imagining what

373
00:23:15.319 --> 00:23:18.640
is possible and how do we solve
for it? And you know, they

374
00:23:18.640 --> 00:23:22.799
come up with some really cool technology. They've come up with some really cool

375
00:23:22.160 --> 00:23:26.599
tricks of you know, how they
do distractions and things like that with their

376
00:23:26.759 --> 00:23:30.319
rides that they have today, and
it just completely astounds me, and I

377
00:23:30.359 --> 00:23:33.000
want to learn more. And so
if I could do anything for a day,

378
00:23:33.119 --> 00:23:36.480
that would one hundred percent be it, And I'd want to learn all

379
00:23:36.519 --> 00:23:38.759
this tips and tricks and all the
secrets that they have going on behind the

380
00:23:38.759 --> 00:23:44.359
scenes. Running trend of more tech
focus and behind the scenes. I like

381
00:23:44.400 --> 00:23:47.000
it. And then I'll close with
with the last one. It doesn't need

382
00:23:47.039 --> 00:23:51.440
to be in the confine of consumer
lending, But what is one bold prediction

383
00:23:51.519 --> 00:23:53.960
for the future? Sure, So
looking forward, you know, if you

384
00:23:55.000 --> 00:23:57.599
would have asked me this about four
or five years ago, I would have

385
00:23:57.640 --> 00:24:03.119
been talking about autonoymous car so on
the cars that were self driving that were

386
00:24:03.119 --> 00:24:04.279
out there, you know, just
doing their own thing, like what Tesla's

387
00:24:04.319 --> 00:24:07.400
been doing. And you know,
there was a lot of rumors about Google

388
00:24:07.599 --> 00:24:12.160
or maybe even like a Facebook company
dropping a huge fleet into these major cities

389
00:24:12.480 --> 00:24:15.880
where they're autonomous and they don't have
anyone driving them, but you could ride

390
00:24:15.880 --> 00:24:19.200
share them and do all that.
I think COVID really derailed all that and

391
00:24:19.279 --> 00:24:22.920
took all the air out of that
opportunity there. So you know, I

392
00:24:22.960 --> 00:24:26.880
know, Apple's still working on a
car. I'm watching that one pretty closely.

393
00:24:26.000 --> 00:24:29.599
Google's working on a car, but
I don't think we're going to see

394
00:24:29.599 --> 00:24:32.720
it on that type of scale.
What I think though, happened at that

395
00:24:32.799 --> 00:24:37.119
same time that COVID happened, was
we saw a real surge in the bitcoin

396
00:24:37.599 --> 00:24:44.640
and the not just the cryptocurrency,
but the blockchain technology and blockchain really started

397
00:24:44.680 --> 00:24:48.039
coming to the forefront. And so
my bold prediction for the future is I

398
00:24:48.079 --> 00:24:52.319
really think credit unions and potentially even
banks, and it may even start with

399
00:24:52.359 --> 00:24:56.759
banks and then move to credit unions
will start to adopt blockchain technology and even

400
00:24:56.799 --> 00:25:02.920
abandon potentially abandoned their core systems.
Because blockchain is verified by you know,

401
00:25:02.960 --> 00:25:08.839
computers worldwide. Every transaction is multi
factor authenticated, but it's verified unanimously across

402
00:25:08.880 --> 00:25:14.119
the world. I think it's more
secure than what we've seen today with core

403
00:25:14.160 --> 00:25:17.799
systems and obviously hackers getting into those, and I think we'll start to see

404
00:25:17.799 --> 00:25:21.000
a move towards that. Now,
will it be a full one hundred percent

405
00:25:21.319 --> 00:25:23.480
you know people are going all in
into that. Probably not, But I

406
00:25:23.480 --> 00:25:29.200
think it'll start easing its way into
things like titles, so anything from like

407
00:25:29.319 --> 00:25:33.720
a auto title to a deed on
a house, and they'll be verifying all

408
00:25:33.759 --> 00:25:37.880
those pieces of paper instead of filing
actual papers with the county. And then

409
00:25:37.079 --> 00:25:41.359
I think from there it'll start moving
in even into core systems and into online

410
00:25:41.400 --> 00:25:45.839
systems to verify transactions. That's an
interesting perspective, and I think it is

411
00:25:45.880 --> 00:25:52.599
going to be a crawl, walk, jog run approach. Yeah, but

412
00:25:52.680 --> 00:25:55.480
that's all going to be determined,
of course. I would think more around

413
00:25:55.480 --> 00:25:59.559
how it's regulated, So it'll be
interesting to see how that space expands.

414
00:26:00.119 --> 00:26:02.480
Well, Jared, again, thank
you for taking the time to join me

415
00:26:02.519 --> 00:26:06.000
today. I really appreciated our conversation. Yeah, thank you so much for

416
00:26:06.000 --> 00:26:10.160
having me. This has been great. Upstart partners with banks and credit unions

417
00:26:10.200 --> 00:26:15.640
to grow households and expand consumer lending
through its leading AI lending platform. Upstart

418
00:26:15.640 --> 00:26:19.839
powered banks and credit unions leverage AI
to offer higher approval rates and experience lower

419
00:26:19.880 --> 00:26:26.519
loss rates while simultaneously delivering the exceptional
digital first lending experience that consumers demand.

420
00:26:26.000 --> 00:26:30.000
Whether you're looking to grow and enhance
your existing personal and auto lending programs,

421
00:26:30.359 --> 00:26:36.079
or you're just getting started, Upstart
can help. Upstart offers an end to

422
00:26:36.200 --> 00:26:40.640
end solution that can help you find
more credit worthy borrowers within your risk profile

423
00:26:41.000 --> 00:26:45.160
with all digital underwriting, verification,
loan closing, and servicing. It's all

424
00:26:45.200 --> 00:26:49.720
possible with Upstart in your corner.
Learn more about finding new borrowers, enhancing

425
00:26:49.720 --> 00:26:55.880
your credit decisioning process, and growing
your business by visiting upstart dot com slash

426
00:26:55.960 --> 00:26:59.480
lenders. That's upstart dot com slash
lenders