Kevin Kim: You are listening to Lender Lounge with Kevin Kim, a podcast dedicated to helping those in the private lending industry grow, improve and streamline their business. I’m Kevin Kim, partner at Geraci LLP, the nation’s largest private lending law firm. Join me as we chat with the best and brightest in private lending who are eager to share their years of wisdom and best practices with lenders, borrowers, brokers, investors, and more. Subscribe to Lender Lounge on your favorite podcast platform and learn more about Geraci and how we can work with you at geracilawfirm.com. Check out the episode summary for other valuable resources.
Kevin Kim: Hey guys, Kevin Kim coming to you with another episode of Lender Lounge. We are now in season four. We have a little bit of a new setup here. We’re going to use a new online studio and to break off the new season of Lender Lounge, I am privileged to have the new CEO of Kiavi, formerly known as Lending Home. Arvind, welcome to the show.
Arvind Mohan: Yeah, Kevin, thanks so much for having me. Super excited to be on and yeah, looking forward to the conversation.
Kevin Kim: Well, for our audience, please introduce yourself and a little bit about Kiavi and we’ll get into it.
Arvind Mohan: Yeah, perfect. Yeah. My name is Arvin Mohan. I’m the CEO at Kiavi. Kiavi is a technology enabled lender to listed investors. We harness the power of technology and data to offer our listed investors customers faster, simpler process as well as quicker access to capital to enable them to scale their businesses. Our customers are serving the purpose of bringing more move-in ready homes into the market. It’s about 25 trillion of aged housing stock in the country. And especially in this environment where you see like a lack of move-in ready properties, customers are serving a very important purpose and bringing that to market and enabling more people to kind of move into new homes.
Kevin Kim: That’s fantastic. And LendingHome / now Kiavi is definitely a household name, probably number one lender in many, many big markets. But our audience, most of our audience knows Kiavi quite well or has caught up against them or whatever or broker to it. A lot of us don’t know about you Arvin, so give us a little more background. You’ve been at Kiavi for some time now, but now you’re in the role of CEO. Give us some more background about yourself.
Arvind Mohan: Yeah, I became CEO about six months ago.
Kevin Kim: Congratulations. That’s a big deal.
Arvind Mohan: Yeah. But I’ve been fortunate to be with the company for over seven years now. Prior to CEO, I was actually the Chief Operating Officer at the company for a number of years and kind of oversaw a large part of our sales operations as well as our tech teams. My start at Kiavi like seven years ago was actually in the capital side of the business. My background, I was actually an investment bank at Barclays for about ten years and change from 2006 all the way to 2016.
Kevin Kim: Trading desk?
Arvind Mohan: Yeah, in the trading desk. I was in the securitized products trading side. All my focus was what you would call today non-QM, kind of like non-agency kind of mortgage lending and securitized products trading. And I happened to be an engineer by training, studied computer engineering, and actually did a couple of software internships and so forth, but ended up on Wall Street.
Kevin Kim: Oh, cool.
Arvind Mohan: Yeah.
Kevin Kim: So tech background, software background, computer engineering background, goes to Wall Street and works at Barclays at one of the most esoteric mortgage. When did you start at Barclays, then?
Arvind Mohan: Yeah, I started in very early 2006, right before things got really crazy in the financial markets.
Kevin Kim: Okay, so you were there on the ground floor during the meltdown, and then when non-QM started to come about, I’m guessing you were on the ground floor for that when it became, I guess, a curatizable product.
Arvind Mohan: Yeah, exactly. It was like one of the greatest learning experiences. I’m not even sure how to explain to people the things that you learned over that period from college 2007 to 2010/11, but it’s given me a lot of intuitive power, especially when it comes to capital and thinking through kind of market environments. And yeah, I was really fortunate to be part of the offswing as well. As starting in 2012 or so, the non-QM market started to kind of make a presence.
Kevin Kim: So you were there until your transition to what was formerly known as LendingHome. Now Kiavi. So you went from worked at Barclays your entire career, and then your second job was Kiavi.
Arvind Mohan: Yeah.
Kevin Kim: I love that.
Arvind Mohan: Keeps it easy on the resume building.
Kevin Kim: So when did you transition away from Barclays and when did you join Kiavi?
Arvind Mohan: Yeah, so I joined Kiavi summer up to 2016. So basically, Barclays kind of went through, I would say, what you see happen with Credit Suisse right. And their whole executive products, capital, risk, weighting, et cetera. And so Barclays went through that a few years ago back, and I left this part of that when it decided to unwind a lot of their mortgage operations in 2016. And actually, my wife and I just left our jobs at the same time, and my wife’s from California, and we decided that we wanted to move out here. I still live in New York, and we actually moved to the Bay Area with no jobs back in 2016. Yeah, back then, FinTech was kind of a burgeoning asset class, and I really wanted to give back to some of the tech roots that I’ve been part of after being spending ten years on Wall Street and Kiavi was kind of a great opportunity. I talked to Matt, one of the co-founders, when I first started. It was great to see a company innovating on the mortgage side where I could kind of bring in some of my capital talent to help really scale the capital side of the business. And so, yeah, it’s been an exciting journey.
Kevin Kim: So let’s kind of get into the history of lending home, because even myself, I live and breathe this industry. We’ve all known about LendingHome, now Kiavi. We have all known its presence in the market in the past three years. You guys are clearly top three lender in almost every market, number one lender in a lot of markets, but there’s not a lot of intel about your guys’ history, right? So I know you guys were founded in like ‘13 or ‘14, but give me a little bit of the history of the company because I don’t even know that much about LendingHome as it first started. My understanding was that I understood that it came out during the FinTech P2P lending kind of when that really started take off. And that was when I started at Geraci. I remember watching that crowdfunding becoming such a big thing. And personally, I probably got confused because there were a lot of companies that had lending in the name, like Lending Club and LendingHome. So give me a little bit of the history there as kind of the company’s, I guess, ascent to grandeur.
Arvind Mohan: Yeah, no, look, it’s been an evolution, I would say. Look, I think when the founders first started the company back in 2013. Kind of late 2013, I started early lending in the summer of 2014. The thesis was really more around tackling the mortgage loan origination process and then kind of like trying to figure out how to efficiently fund it through a capital marketplace where kind of the P2P stuff comes in. And as they were building out a lot of our technology, I don’t know if your listeners know, is pretty much in-house and in-grown technology that had been developed since kind of the founding of the company. And the founders, as they were developing the technology and launching it into the market, they decided to first start out with the kind of property investor space. One of the co-founders here, Matt, they recently exited a startup, and I think they were being offered opportunities to invest, right? Hey, you can earn like 12%, 11% returns. And so they’re really curious about, one, the sector, but also the application of what they were building in this kind of property investment market. And so they actually started lending to kind of real estate investors for the purposes of fix and flip back in 2014 while they were also developing in parallel, kind of a consumer mortgage oriented, kind of traditional owner occupied business. And so that business started out in 2015 or so. And so for a period of like three to four years, the company had two essentially arms to it. One focused on property investors and the other one focused on the consumer mortgage side. And I’ll say around like 2018 is when the company made a decision to divest the consumer mortgage out of the business. It’s obviously a very hyper competitive market there. And what we had found out was the way we had approached the property investor market. A very digital-first kind of online experience in what was back then definitely like a hyper-fragmented market, extremely offline, really allowed us to kind of scale in this market. I’m not sure any other company has had that opportunity to scale across kind of like a national footprint. And so we decided that we had something here. We had customers that were onboarding and scaling. And in addition, an important aspect of the company was the fact that we built our in house tech as well as like our online funnels. We were able to capture a lot of kind of structured data information and really started to nurture from a modeling, data analytics, machine learning perspective how we thought about scaling the risk around this product as a lender. And so some of these factors just started to come together right around 2018, which is, I would say, like when the company went from being this kind of multifaceted mortgage origination shop to more focused on the property investor market.
Kevin Kim: That explains so much because I remember thinking about you guys early. I was doing some homework and looking at our kind of our records too, because we’ve been around since ‘07, like wait a minute, that explains it. Right? I wasn’t that privy to a lot of the activities because half the business was doing consumer. So that explains a lot. So I’m hearing 18, you guys doubled down in private lending in RTL, BPL Strategies. Now, Kiavi is very well known for its capital markets capabilities and one of the very few that have successfully done multiple, multiple securitizations. Did that start in ‘18? When did that start for you guys? Like going to capital markets and doing bond raises?
Arvind Mohan: Yeah, it was basically early 2019. We started laying the foundations for it in late 2018. And then we did our first securization in early 2019, because I remember because we priced our deal the day before my second kid was born. So it was great to get that done, but it was great to introduce this asset class to a whole set of new investors that were essentially securities buyers and not like known buyers. And I remember even when I did that roadshow to first introduce the company of the product. Right. I think I probably touched like 50, 60 different accounts. And there was a big chasm in terms of understanding of, hey, what is this product relative to a lot of the people in the mortgage investment space come from the non-QM kind of traditional consumer market?
Kevin Kim: Even in ‘18, it was hard to understand, you’re saying.
Arvind Mohan: Yeah, it’s a relatively new asset class and it’s still developing. I would say we just did a deal in February and we still get questions about kind of basic fundamentals. And look, it’s an investment. Right. The way I think about it is an investment in the future of the business and kind of growing the audience there.
Kevin Kim: Yeah, I want to get back to that a little bit later. I wanted to ask the next question about technology because at its foundation, when LendingHome was first founded and even until today, as Kiavi, the FinTech component of the business is a big piece of the conversation. And this is kind of forgotten and not talked about as much in our space and FinTech as a I guess strategy has shifted a lot too, because it was initially thought of as a means of disruption, but now it’s being used as an enhancement. For you guys, describe the technology. What’s the thesis around the technology itself and how it’s evolved over the past few years.
Arvind Mohan: Yeah, sure. The technology itself for us, I kind of see it as like a few different prongs. One, it’s really about from a pure software perspective, it’s really about how do you scale the customer experience as you yourself as an company scale. Right. What I mean by that is if you were my only customer, I could give you the best attention and customer experience. Right. And I’m going to kind of keep developing and growing that. But as I add more and more customers across more and more regions and markets, what technology allows me to do is really map and scale that experience across a wider audience at bigger scale. The other aspect of technology is really more about how we use data to empower our processes and really tackle what customers want from us. Right. Ultimately, when I think about the private lending space, a lot of it to me is still like our biggest competitor is cash. Right. That is our biggest competitor. It’s like private money, it’s country club money. It’s not like the big lenders in the market. It’s really cash. And what we want to do through technology is really mimic that experience. Right. We have a phrase here called “easy as cash”. Can we make our processes as easy as cash such that we can be almost a hyper-local partner to the different investors in the market, and be smart about the hyper-local nature of real estate investing.
Kevin Kim: The foundational aspect though, the big disconnect in that issue, that raises the number one issue I see because I work with a lot of private money lenders still and these guys are just they see a deal, they like it, they do it right. There’s no 1003, there’s nothing going on there. There’s no application, there’s no appraisal. It’s a very loose process. But as a company that’s reliant on capital markets and underwriting strictures and operating strictures, how do we get closer and closer to that gap? That’s a very interesting challenge to have as a company.
Arvind Mohan: Yeah. And that’s exactly where in the middle of right. It’s really like providing our institutional investors and institutional quality underwriting, but then flipping that switch and for our customers, providing a private lender experience. And the intersection of that is, I would say, where both our technology from an experience perspective, but really a lot of our data analytics and models come into play. For instance, it can be an example, since you mentioned it, right. One of the things we have developed over the last five years is our own after renovation valuation model, right? And that’s something we have successfully launched internally, developed internally, given customers the ability to kind of close properties with our own internal valuations, which we can give instant feedback, right. It’s all about giving them the confidence at that point of purchase.
Kevin Kim: And on the securitization side, too. You’re not going to run into any problems on the institutional side?
Arvind Mohan: No. So we’ve taken that message. We’ve gone to institutional investors, and with institutional investors, it’s all about building that trust factor and giving them context their process and why this process matters. And so one of the things we’ve been able to do with our securitizations, with our institutional investors is really not just sell an asset at a particular return, but also sell a process. At Kiavi, we’re using our technology and data to create the right process for our customers and then packaging that in the right institutional framework and structure so that our institutional investors are comfortable that we’re doing the right things, which is our goal. Right. We wanted the right things by both counterparties, but on one side we’re building trust, the other side we’re building experience and process.
Kevin Kim: I want to transition a little bit and ask more about you, because you got a very interesting story to tell. Because my understanding Carnegie Mellon computer engineering background, so very common, prestigious school. A lot of my friends study computer engineering at Berkeley, computer science. They’re not doing what you’re doing. Right. So how did you end up on Wall Street, of all places, from Carnegie Mellon studying for CE?
Arvind Mohan: Yeah, no, it’s interesting. I would say it was kind of an interesting period back in 2004, 2005, I did do a couple of software internships and a lot of my friends were kind of going to New York and going to Wall Street, and I was like, oh, do I want to sit in a cubicle again? This is back then when they had cubicles for coders and code all day, or do you want to go to Wall Street and check out a trading desk? And there’s much more like a high energy environment. And like I said, a lot of my friends were going to New York, and it’s a decision I just ended up making that, hey, this is something I want to check out and I’m interested in. I had no idea what a mortgage was prior to the summer of 2005 because I grew up in apartments.
Kevin Kim: Are you from the East Coast originally, or where did you grow up?
Arvind Mohan: No, I kind of grew up all over the place, and I was born in India. Then my dad moved out to seek better opportunities. So we kind of grew up in Oman and then Dubai for a large part of my life.
Kevin Kim: Okay. All over the world.
Arvind Mohan: My parents kept traveling, and I came to school here in Pittsburgh. That was my first introduction to the United States.
Kevin Kim: Right. What’s one hell of an introduction. Great campus.
Arvind Mohan: Yeah. That’s kind of how I ended up on Wall Street. Didn’t have a particular, I would say, axe for mortgage securities trading.
Kevin Kim: Silicon Valley wasn’t knocking on your door? Because I went to school in the Bay, so every kid that was anything remotely close to computer science was immediately whisked away to Palo Alto. It wasn’t a question back then, but I guess in New York, Wall Street is there and math is math.
Arvind Mohan: Right? Yeah. They were hiring pretty heavily in the quantitative side, and it was just alluring and something different. I’ve been coding for, like, five years and just wanted to check out a different lifestyle and world, and yeah, it was just a great fit and a big learning. I think what made it more interesting was, like, the learning process and the education that I got by being in that seat for that period of time right in the world.
Kevin Kim: And you transitioned to LendingHome in ‘16 and on the capital market side and give us a little more of the journey as from, I’m guessing, VP of Capital Markets or investment. And then your journey to the position of CEO, because that’s quite the story as well. We very rarely see we talked about this before we started the podcast. Very rarely do I see national lending operations have someone from capital markets be their CEO. Number one. It’s a retail shop. Right? And there are a few aggregators and table funders that have that, but we’re a retail shop. Very, very rare. And then second on top of all that, is it’s an internal hire? Very rarely do we ever see that, too. I didn’t know that about you were inside the business since ‘16. So tell us more about kind of the rise of Arvind inside the company.
Arvind Mohan: Yeah, sure. I’m happy to. Yeah. So I joined really it was called Director of Investor Development, which basically, as I mentioned, they hired me to go sell their loans, essentially. And for me, having worked on Wall Street for ten years, I had established a lot of contacts on kind of the investment side of the world and was an opportunity to kind of introduce and learn about this new asset class and learn about FinTech in general, was my goal, was to understand what all the FinTech hype was really all about. And so I started there. But what I really loved when I actually dug in was and I think this is true of the private lending space in general. It has this kind of opaqueness to it, as well as from, I would say, like an institutional perspective. There is no framework. It’s not like you have specific guidelines or conformity. It’s essentially a greenfield in innovation on how to lend to this audience. And that was what I think was super interesting to me. Sitting in my capital seat, I was talking externally to investors. What I saw was like a complete lack of understanding of the product in some sense. Not to say like, people didn’t understand the product, but a lot of people came from a non QM background, right? And they think about this very differently. People aren’t used to seven month mortgages, right? The concept of seven month mortgage doesn’t really exist. And what I spent a lot of my time on actually was internally at the company understanding, hey, why do we do things the way we do things, right? Why is our credit derived this way? Have you thought about this and really start to build some of those connecting blocks between the customer and the investor. And I would say that interest and that desire got me a lot more involved in the operating company, essentially. So coming from the capital background, I kind of knew, okay, this is how investors think. This is how investors in general think and kind of understand the product. How does the sausage really get made, right? And how do customers think the sausage gets made and how they see it in their day to day lives? I’ve actually spent a lot of time both internally with the company as well as talking to a number of customers, understanding, hey, what are your pain points? How does business operate from your perspective? And so I grew from then eventually running capital markets to running capital markets, and like our credit. I kind of think credit and capital go together. If you have good credit, your capital life is very easy. But credit, again, is the lifeblood, right? So capital is the fuel, and credit is how you channel that fuel to your customer. From a credit perspective, really, that was an opportunity for me to even get one level deeper in understanding process and process optimizations and what data and other information advantages we had so we can actually design. Going back to some of my original comments, what is the right process from a customer’s perspective? Right? How do we drive the best customers to lending home back then? But then Kiavi, because once you get the best customers and you keep them, you start to build a really strong portfolio in this space and it becomes less and less opaque from my seat. And so when Matt transitioned out of the company and Michael, the former CEO, moved up, I moved into the COO role in kind of late 2020 and started to oversee sales and operations and BizOps alongside my capital and credit functionalities.
Kevin Kim: Interesting way to look at it because very rarely do I meet a COO or someone who’s been in the co seat, think of capital and its importance as it pertains to the operations of a lending business. Because obviously massively important, but you’re viewing it as a way of it’s a process and procedure issue of the way capital integrates into that. And also the lending process is a very interesting perspective because you’re bridging so many different gaps because most people in the shoes of a COO are really concentrated on the let borrower experience and how the loan closes and the internal operations and the HR. They’re never really thinking about the intersection between Capital and Credit, like you said. Right? So that’s really, I guess, to me, very novel to see that internally inside of a company now that you’re CEO of the company. Kiavi is number one in many, many markets and you guys are top market shareholder. I think you guys hold, I know at least 7 to 8% of the market. Tell me more about kind of what you’re excited about now and what are some initiatives that you’re pushing as CEO of the company.
Arvind Mohan: No, for sure, yeah, it’s probably three things I would highlight, I think. One, while we’re a leader in the fix and flip side, we still have a lot of opportunity to continue to grow our lending product suite. We’ve launched our rental single asset product, we’ve launched our rental portfolio product. And we think there’s more opportunities for us to continue to expand within even just the kind of property investor, short term lending universe, as well as kind of for kind of products geared towards landlords. And we’ve also historically been, I would say, much more of a direct lender and we see opportunities for us to continue to scale in certain markets. I think the whole last mile problem exists even in this market. Once you get to the local markets, how do you get that next customer? We have some ideas around there in terms of acquisition channels and innovating a little bit around, continuing to grow our addressable borrower base. And second, it’s really, again, going back to the core technology and data, right. We still see a lot of opportunity to continue to innovate in this space. We’re scratching the surface of how we think about using our machine learning tools in production and continuing to work with our investors to give them an idea of, hey, the right process gets you the right customer and really continue to drive that positive selection in our portfolio. And lastly, look, I think the success is not just like me, alright? It’s a team effort and I want to continue to work with our leadership team or senior leaders of the company and really continue to bring them along. I think one of the beauties of Kiavi that I’ve seen after Barclays or a financial services company is, you have a big diversity of people and diversity of talent at this company. There aren’t many lenders that have engineers and designers and product managers working alongside sales executives, right? And underwriters. And so kind of bringing folks together to see across the commonalities to drive for our customers that’s I would say, the third prong of what excites me.
Kevin Kim: That actually raises interesting question. I don’t know the answer. I wasn’t sure about this. Kiavi has always been a retail lender. You’ve always been a direct lender. But did it have a wholesale arm or a correspondence type arm before or does it currently have one or I don’t know much about that part of the business.
Arvind Mohan: Yeah, sure. Historically, when we started out, it was a little bit more like 50-50 between better broker channel. It was all like non-delegated broker brings to the customer and we underwrite it. And we have grown mostly through the direct side of the business, directly acquiring customers. This is again where we use a lot of our data analytics to target customers very efficiently and convert them. But I think more recently, as you’ve seen kind of more stress in the market over the last year, we’ve started to see more broker participation in our funnels. And so the broker volume has gone up. Historically, it’s been like 5 to 10%. I think it’ll get closer to 15% to 20% this year. So we have an 80% direct, call it 20% kind of broker driven. But all the underwriting is again done in house by Kiavi.
Kevin Kim: Right. Like LendingHome, and now Kiavi has never been in the TPO kind of business. Okay, that clears a lot of the air up, because a lot of folks kind of assume that when you’re a national shop, you have both. Right.
Arvind Mohan: I think it’s one of the advantages for us and why we’ve been able to scale and grow and keep our customers and keep them happy and also learn, right? And develop a really solid footing with our capital partners.
Kevin Kim: Well, let me ask you this. So product wise, for a long time, especially since probably like I would say before 2020 even, Kiavi has been known for the longest time as being a DSCR player, one of the largest DSCR lenders in the country. And while we knew you guys to Fix and Flip currently for you guys, what is the ratio of your guys’ origination volume and where are you concentrating kind of focus? Is it more on DSCR rehab both? I’d like to know more about that.
Arvind Mohan: I would say try to grow both those products. I think Fix and Flips continues to remain like our primary core product. It’s about 80% to 85% of our volume on a monthly basis and then the DSCR products, the rest call it 20% of our volume. But we are making efforts to kind of grow on the DSCR side even more. It’s a little bit of a challenging market today. With kind of where prices are cap, rates are. But one of the investments we’ve made more recently and we’ve launched and starting to scale is more on the portfolio side.
Kevin Kim: You guys used to do a lot of those, those bigger portfolio loans back in 1920, and we’re trying to bring that back now?
Arvind Mohan: Yeah, so we’ve been basically incubating the product with some of our top customers, just kind of learning what works. And now we have a full, dedicated team addressing the portfolio product as well as it’s on our website. So you can go ahead and apply for a portfolio product and we’re going to continue to kind of expand. Right now we have a portfolio DCR underwrite product and we’re going to kind of continue to move into the NOI underwrite phase as well, so we can address kind of larger portfolios.
Kevin Kim: What kind of challenge does it present to the operation? Because to the audience who are initiated, a portfolio loan is basically one giant loan cross collateralized tape of properties. And so, I mean, for you guys, it must be a much more complex process and lift. What are you guys trying to do on that side to make it easier?
Arvind Mohan: Yeah, look, our strategy there has really been to run that as its own vertical. I think that was kind of our simplest go to market and not entangle it inside our entire kind of like technology offering.
Kevin Kim: Separate channels, separate resources and people.
Arvind Mohan: Exactly. And for us, the advantage really is from a customer acquisition perspective, we can offer the best competitive, I would say fix and flip product in the market and a lot of times kind of the bridge product right, is the funnel to the portfolio product. And that’s our play there. We already have a lot of the top customers borrowing from us and we kind of see this as a continuation of that journey and going to continue to help them grow passive income.
Kevin Kim: Great. And so I guess from a growth and scale standpoint, one of the questions that I had when doing my research about Kiavi was has Kiavi been, I guess, privately held or independent this entire time? Or is there an institutional capital partner that’s kind of in the past 3 or 4 years now, a lot of the national shops have been bought and sold by some of the institutional investment Predium new res. A lot of these players are in the space now owning lenders. Did Kiavi ever have that happen during the past, during its lifecycles? In ‘18 or I guess ‘13?
Arvind Mohan: No. So we’ve actually been fully private. We’re actually a fully VC funded company. And so we have.
Kevin Kim: The technology aspect.
Arvind Mohan: Right. We haven’t attached ourselves. We’re probably the last large independent lender out in the market not attached themselves to like yeah, a lot of that is due to like our execution of the capital side or and how we have set up, like our funding models, running the business profitably.
Kevin Kim: That’s great. And VC hasn’t come. You guys were smart about your VC, it sounds like, because that can be a double edged sword for a lot of these FinTech companies. We’ve seen a lot of that happen over the past few years, recently, too. VC funded organizations, both on this side and on real estate, have suffered because they overdid it on the VC and they were not able to meet the obligations they’re set out to do. So kudos to you guys. That’s great.I’ve talked to you more about kind of where we’re headed right now, right? Because you’ve been in the space for a long time, both on capital and operations at a household name private lending organization. Currently we’re in early July of 2023. This episode is going to air a little bit later than this. We’ve had some tough times past year, haven’t we?
Arvind Mohan: Yeah, look, it’s been challenging and look, I wouldn’t say, like, Kiavi has not been immune to everything. I think we’ve just done a better job of building resilience in our models and so we can kind of continue to service our customers. The really important thing for me and for the company in general is making sure that we are a reliable partner, right? We kind of view us as a partner to our customers. All the data we have, all the technology, it’s all for want if we can’t give our customers capital when they need it. I think a lot of things we do is like, hey, let’s innovate on these things, make the process simple, but ensure that we’re always there to deliver for our customers and be that reliable partner for them.
Kevin Kim: With capital markets just turning upside down and the bond market pretty much becoming very challenging to price anything, have you guys had to make any hard pivots at all from a capital sourcing standpoint? Or have your investors been able to stick by you and continue to do more securitization?
Arvind Mohan: Yeah, so far in touch with our investors have stuck by us. We continue to diversify our channels and as we grow, the business continue to establish new capital partners. The securitization program is always going to be a core part of our business. We want to be in front of our customer, in front of those institutional investors, and kind of show them what we’re doing through the cycle, through this market. Look, it’s fine. You’re not going to do every deal, the best spread or the best price, but again, this is the long game, right? You’re building institutional relationships and channeling capital to you as kind of like the leading lender in the space, which we can then channel back to our customers.
Kevin Kim: Has there been any challenges or speed bumps in your way caused by a lot of the disruption in the space? Not necessarily from interest rate standpoint or inflation related, but there’s just been a lot of disruption in the space, right? Bank troubles, regional bank troubles. There’s been a lot of volatility when it comes to different operators in the space. One that was a primary competitor of yours is no longer around, and other aggregators going away and all these strange events happening in our sector that impact our sector. How have you guys been affected by that and how have you weathered it?
Arvind Mohan: Yeah, no, good question. I guess there’s a lot to dig in there because lots happened over the last 12 months.
Kevin Kim: A lot happened. Let’s start with the banks. I mean, when the banks had, with the regional banks, we had SVB happen, we had a few other regional banks get in trouble. Did that impact you guys at all?
Arvind Mohan: I would say luckily we have set ourselves up with real top-tier investment banks in the business. And so our partnerships there are extremely strong. Those partners have been with us one for the last call it like 5-6 years, and the other for the last almost like 8 years, almost since the founding of the company. And so they have seen the evolution of the company through COVID, through the pandemic, through the cycle over the last 12 months. And they’re extremely supportive of how we’re running the business, our discipline. And so that’s been actually really nice to have. Right. Like one less thing to kind of worry about from my perspective. And also the beauty is for us, having set up these securitizations, having set up a good depth of institutional capital, we are able to show them the liquidity that we have in the markets. Right? Like things go on, things go off. And that’s what warehouse lines like, right? I like to see things rotate out and that’s kind of what we’re after too, right? It’s about the velocity of the business for us. And so from a banking crisis perspective, we’ve been kind of so far relatively immune. We kind of could, on the flip side, almost see this a little bit of an opportunity as kind of more production leaks out into the private lending market relative to kind of back balance sheets, I think, like macroeconomically, you know, the other things, right? I probably kind of bucket it as kind of like the three events from a customer perspective at least, right. That we’re trying to manage through. One is obviously, as you mentioned, pricing capital markets remain extremely volatile, which means things are going to remain expensive for a little bit longer. And then you’ve seen housing velocity slow down quite a bit and so that makes finding new opportunities obviously a little bit more difficult because of the lock-in effect. And then the flip side, when you go to sell properties while there’s demand, affordability kind of plays in, right. You’re kind of seeing disparate impacts of that across the country. So it’s kind of this little like triple whammy. But so far what we’re seeing is our customers are pretty well positioned. People are definitely scaling down the level of business they’re doing, but they’re still active. They’re smart about the decisions they make. And in some sense, they’re better positioned than the consumer, right? Because they have purchasing power, they have the logistical and labor capabilities to fix up a property. There was a journal article the other day talking about people awarding fixer-uppers because it’s expensive. And so there are mitigating factors to these things. But yeah, the environment definitely is still very much volatile.
Kevin Kim: And has there been any challenges faced in the market specific? Right? So we had the I mean, it’s all public knowledge now, right? It’s July 6th today. Recently we had the announcement that Pierce Street is filing BK. Recently, Rock 360 purchased what was left of Civic from the bank, from PWB. A lot of crazy things happening in our sector, righ? And so have you guys felt any pain during these volatile times? Have those events affected you guys at all?
Arvind Mohan: Yeah, for sure. I think, for example, we had to downsize the company a little bit in the second half of last year. We’re probably early, but we kind of saw the signs and we’ve adjusted both from a credit perspective as well as kind of like a cost-structure perspective to ensure that we can have good runway and visibility and give our teams the confidence that there’s going to be less flux in the system. Even though the world outside is volatile, kind of the world inside is, hey, let’s keep our heads down, focused and execute on a roadmap, and things will be fine. I think from less so from an M&A perspective, a lot of the stuff that we have developed, we’ve tried to do it very organically. But if there are opportunities where there are bolton for products that we don’t have today, I think what we can offer is our technology and scalability relative to kind of inserting a new product into our product mix. And so those are things we’ll kind of keep an eye out for.
Kevin Kim: So I want to ask you some questions about kind of where we’re headed, because being in your position at one of the nation’s largest private lending shops, you have to have a bunch of data and a bunch of analysts studying where we’re going. Because you just mentioned that you just said it, right? To put it simply, it’s painful right now. Right? It is challenging, but we’re not in the doom phase, right? We’re not in this doom cycle, but it is painful. It has been troublesome. June was better than May. May was better than April, but still, not so hot. Where do you think we’re headed? Because everyone has had their perspectives on this. I’ve heard projections of early summer. Well, we’re past early summer. We’re almost headed into fall. So what do you think? Where are we headed and how much longer for the pain to go on?
Arvind Mohan: Oh, man, yeah, I really wish I had a crystal ball in this one.
Kevin Kim: No one does. Right. But I would like to hear your thoughts on it, at least.
Arvind Mohan: Yeah, so my thoughts are, look, I think if you read the Fed, right, and they seem pretty much hyper focused on ensuring that inflation is actually coming down quite a bit before they even think about cutting rates. And so in the trajectory there is going to continue to disappoint the markets, which probably means kind of like higher rates for longer. Now, I can’t predict how quickly they’re going to react when things break. And I was reading an article the other day that basically said the Fed fund futures were always wrong, right? They underestimate and they overestimate, and they overcorrect and undercorrect. And so I think from my perspective, look, I was in the camp that maybe things will be better going back to last summer by the spring of 2003. Clearly I was wrong about that. But I do think over the next call it 6 to 9 months, you should start to see more clarity. And look, you actually don’t need I would say what the markets want ultimately is like more directional clarity. Hey, where are things going with confidence, right? I think, unfortunately, what we haven’t seen from policy side is that confidence being projected, right. I think being data dependent means every week, looking at the data, even this morning, right, the jobs number, the ADP number came out, and there’s a big sell off in the market and rates moved higher because everybody’s pricing every data point relative to how the Fed is going to react to it, right. So it creates this uncertainty on a daily, weekly, monthly basis. And so until you get out of that cycle and you get to a place where, with high confidence, people can project out what their cost of capital is going to be, what their return hurdles are going to look like, it’s going to be a struggle to get kind of margins compressed and spreads compressed and kind of pricing back into the game.
Kevin Kim: And that perspective is exponentially important when it comes to Wall Street, right? When it comes to institutional investors. If they can’t project, they can’t price, and they’re just going to exclude themselves. At least that’s what I’ve been told. They’re not even going to speculate at all. There’s a point in that.
Arvind Mohan: No, that’s why I think spreads main wide because the margin of safety, from their perspective, effectively needs to be higher and higher. And so that means cost of capital to lenders goes up and makes life more expensive for everyone.
Kevin Kim: Right. There’s been talk about us being closer to when I first joined private lending at Geraci, pricing in California was close to 12%. And there’s been talk like different circles and people have been projecting we may end up back there, and East Coast markets may start seeing 14, 15%. We’re hearing it in tertiary markets like Birmingham, Alabama and so like that, but we’re still not hearing it in New York and Florida. Right. So it’s an interesting perspective. I wish it were the case, but at the same time I don’t even think that’s going to give Wall Street any certainty anytime soon. That’s what we want. So with that uncertainty, right, have you guys been able to continue on the securitization front? Have you diversified capital strategies altogether or how is that playing out for you guys?
Arvind Mohan: Yeah, I think it’s playing out well. Like I said, I think securitizations will remain a core part of our business and we’ll continue to be in the market there doing deals as we grow. I think for us, the way we structure them as revolving securitizations, we’re able to efficiently reinvest and so our customers are executing actually at a pretty good, decent pace. And so we have seen a lot of turnover in our deals and so we can fund our new production without having to go to market as frequently as we expected. We also supplemented with whole loan sales and starting to establish kind of new partner relationships in that space. But again, we will be back in the market and our goal is to continue to execute these deals. That’s an important channel for us and those investors are important investors for us to continue to kind of build trust and relationships with.
Kevin Kim: Going in ‘24 and ‘25. What are some of the key initiatives that Kiavi is working on? Because you guys have continued to maintain strength throughout the past year and you’re growing, it looks like. So what are the initiatives that you’re tackling? I heard portfolio loans being one of them.
Arvind Mohan: Yeah. Maybe I’ll give you three hints into it. So one is kind of like on the product suite side today we do kind of like a lot of fix and flip loans. Like people buying a $250,000 property, our typical loan, sorry, it’s like a $250,000 purchase with like a $50,000 renovation budget attached to it, right? And we see opportunities to continue to kind of grow and scale that into a little bit more larger rehabs. We want to also start to expand more into kind of the infill outtake, urban infill construction space. We’re not going to go start doing horizontal 24 units by any means, but we see an opportunity again within our existing customer base to what I would call like density transactions, really. People taking like single family making it two units or adding an extra unit here or an ADU. And so we opportunities there that are both promoted by a lot of local markets as well as customers see opportunity there from a value add perspective. And so you’ll see us expand in that direction and then as you mentioned, the portfolio part of is going to be a pretty important product for us. We want to continue to invest on the DSCR side, the portfolio side and only there we want to continue to start to build our data advantage and think through how do we more innovatively address this audience, right? And think through that. And the other thing I mentioned earlier was around our acquisition channels again today, we’re like 80% Direct and 20% are done through brokers. And we feel there’s some opportunity for us, without going into a wholesale TPO program, to continue to drive that diversification and really try to get more efficiently in that last mile kind of next property investor customer in our doors. And so those will be kind of initiatives to scale the lending business. And then I think the third thing that we’re exploring and thinking through and obviously kind of slow playing it in this environment is really pushing some of our data advantage out into the market more cleanly. Today we are kind of reactive, right? A customer comes to us, provides us a deal. Here’s what you think, here’s what we think. We do the matching and we make a deal happen. But it’s an opportunity for us to continue to kind of push some of our underwriting models more from an acquisition or disposition perspective for our customers so that they can actually get positive selection even one step higher in the funnel. And if they are buying a quality, say, pre-vetted property.
Kevin Kim: And transition that into a tool for your borrowers on the acquisition side and have them utilize. That’s a good idea. I mean, you guys are already sharing notes anyway, so that makes sense.
Arvind Mohan: Yeah. And so they’ll continue to kind of branch out on the property dimension a little bit more as we expand our lending footprint and kind of customer acquisition channel. And so kind of putting that package together I would say is kind of like our goal over the next 24 months.
Kevin Kim: We’re going to see a Kiavi Prop tech startup pretty soon. Sounds like it. All right, cool.Alright,so we’re going to get into the rapid fire questions. These are more fun questions to get to know about kind of how you are as a professional. So one of the questions I always like to ask is kind of more of an advice question. So, if you had to give a piece of advice that you received and you still use in your career today, what would that piece of advice be?
Arvind Mohan: Control the things that you can control and build the best kind of path forward. And if you worry too much about the things you don’t control, it’s not going to end up as well.
Kevin Kim: Concentrate on what you can control for sure. If you could have 30 seconds with everyone in the private lending industry listening, the entire industry talking mom and pop, to your competitors, to your big borrowers all across the country, what would you tell them?
Arvind Mohan: I would tell them that today the world might be uncertain, but uncertainty breeds opportunity. Be smart, be cautious, but trusted part like Kiavi is here to help you, and feel free to check in. That’s what we’re here for through partnership and to give you a second opinion and then make sure that you can execute and you have the confidence to execute.
Kevin Kim: Abundance mindset. I like it. All right, this is a little more fun one. Is there a unique item that you keep on your desk or, like, your workspace that’s very much for you?
Arvind Mohan: Unique item. I have this pocket knife multi tool thing that I fidget with when I am in meetings. So I have, like, a fidget gadget, and then occasionally whatever toy my kids leave on the table as they go by.
Kevin Kim: That happened to me one time during COVID My my kid left a puzzle toy that little kids play with. You know, the ones you pop?
Arvind Mohan: Yeah, it happens.
Kevin Kim: All right, last question is, can you share with us any go to productivity or time management tip that you use to keep you on top of your game?
Arvind Mohan: Yeah, the one that I’ve used is the Eisenhower matrix. I’m not sure if you’re familiar with it, but it’s kind of like a two by two matrix. Kind of has, like, kind of break your task list by important and urgent, important but not urgent, and then you have not important but urgent, and then not important and not urgent.
Kevin Kim: Quadrant one, quadrant two, quadrant three, quadrant four.
Arvind Mohan: It’s a way to prioritize. And also, I think, for me, in my role, I really delegate and think through, okay, what are the tasks that I should be focused on, and what are tasks or opportunities for leaders in my company, and what are tasks I should not even focus my time on? So it’s a good development tool as a manager as well, because you can kind of then delegate appropriately.
Kevin Kim: Back to the whole thing, focus on what you can control.
Arvind Mohan: Yeah.
Kevin Kim: Very cool. So this is your first podcast, and I think also one of the first speaking gigs you’ve done as CEO of Kiavi, what’s next on the Internet for you? What are you going to be working on from a public standpoint, doing more of these speaking engagements?
Arvind Mohan: Yeah, definitely. I really appreciate you giving me the opportunity on your platform, Kevin, but yeah, look, I think continue to get the name out there. Get the Kiavi brand out there. We have a really good brand in the market and want to continue to stress that we’re here for our customers, we’re here for our investors, and really want to kind of continue to bring capital and innovation into the private lending space. We kind of believe here, real estate is a great wealth building opportunity, and we want to empower more and more people to utilize real estate with confidence as a wealth building tool.
Kevin Kim: It’s good to me. Well, it’s been a great opening episode. Thank you for doing this today for our very first episode of season four of Lender Lounge. Want to thank you and the whole Kiavi team for joining us on this episode. And definitely, everyone, our audience, keep a lookout for Arvind. He’s going to be out there preaching the Kiavi gospel, so hopefully you guys will see him out there. And please tune in for the next episode of Lender Lounge with yours truly, Kevin Kim. This is Kevin Kim signing off.
