Transcript of HomeAdvisor Technologies, Inc. Teleconference
March 16, 2000
Good morning and thank you for standing by. Welcome to the Microsoft conference call. At this time, I would like to introduce Mr. Tom Pilla, Manager of Corporate Communications. Sir, you may begin.
Good morning and welcome to the call. Many of you probably have seen the press release issued earlier today on the wire, as well as on the Microsoft PressPass Site. For those of you that haven’t, Microsoft today announced the formation of HomeAdvisor Technologies, a new company that will revolutionize the way homes are bought and sold. The company’s main goal is to save consumers and industry professionals time and more importantly, money.
At the heart of HomeAdvisor Technologies is groundbreaking software that will simplify real estate transactions and help brokers streamline their businesses to better serve their customers through online and traditional real estate and mortgage channels.
The new company is a joint venture between Microsoft, Chase Manhattan, Freddie Mac, GMAC-Residential Funding Corporation, Norwest Mortgage and Bank of America and will be comprised of three distinct divisions to help deliver lower cost mortgages to consumers faster than ever before possible.
I’m joined here today by Microsoft President and CEO, Steve Ballmer; Leland Brendsel, Chairman and CEO of Freddie Mac; Denis O’Leary, Executive Vice President, Chase Manhattan; Bruce Paradis, President of GMAC-Residential Funding Corporation; Jeff Drayer, Managing Director of Risk Management for Norwest and Daniel Holmes, President of Bank of American Mortgage, as well as Bryan Mistele, who will serve as the CEO of HomeAdvisor Technologies and also Paul Tuttle, President and CEO of Tuttle Decision Systems.
It’s my pleasure to welcome you all to the conference and express my enthusiasm about the partnership represented in the new company that we’re forming in conjunction with Chase Manhattan, Freddie Mac, GMAC, Norwest and Bank of America.
I’m going to comment first from just a Microsoft strategy perspective to put things in a little bit of context for those I’ve talked to before. And then I want to talk specifically about the ambitions that we have for HomeAdvisor Technologies.
First of all, I think the best way to think about what we’re doing today is setting up a new company that is going squarely after the largest business to business and one of the largest business to consumer marketplaces in the world, which is the marketplace for real estate and mortgages and we’re super enthusiastic about that.
Second perspective I give you is from the perspective of our strategy and our online businesses, where we’ve made a strong emphasis on our core MSN portal to bring consumers into the Internet world and provide valuable services, but also to give some of the more specific industry vertical efforts, sort of a life and entity of their own. As much as Expedia has been spun up as now a public company and as we have encouraged investment in our car buying business, Car Point through Ford Motor Company. So in the home business, the work that we’ve been doing in our HomeAdvisor site as part of MSN becomes essentially an independent company with ownership from the companies represented here today.
And thirdly, from an MSN perspective, while Microsoft is now a minority owner in this home business-to-business-to-consumer marketplace, our partner in doing this on MSN is HomeAdvisor Technologies and really integrating HomeAdvisor into the MSN experience, driving traffic, helping consumers from an MSN through HomeAdvisor perspective with this process is an important one. It joins the work that we’ve done with Web MD Healtheon, Car Point and Expedia as some of the important business-to-business-to-consumer marketplaces available on MSN.
If you just think about the charter mission of HomeAdvisor Technologies, it’s pretty exciting. We’re trying to do a leading Web site to help consumers with the full set of needs that they have in taking care of their home, finding a home, buying a home and getting a home, financing a home. And particularly, we’re putting our energy in technology expertise into one of the thorniest and most complicated parts of that, which is the mortgage process. And rather than just put a Web site that just had sort of nice information for consumers about homes, we need to provide real service.
So one of the real missions of the partnership that we’re announcing today, leveraging technology that we acquire from Tuttle Systems into this company, technology from Freddie Mac and a number of our other partners, is streamlining the mortgage process, taking cost and complexity out. Taking time out so you can close a mortgage in ten days perhaps, instead of thirty days. Taking perhaps the $2,000 out of the cost of the mortgage over the life of the mortgage and passing that on as savings to consumers. Making sure that we can guarantee best rate to a consumer on a mortgage that’s appropriate to them.
And generally, not just using the Internet in a soft way, but in a very hard way to reengineer what are some fairly complicated document flows and financial information flows that have to happen to close a home mortgage.
If you take a look at the partners that we have in this venture, it’s really a who’s who of the mortgage industry and we feel incredibly good about both the potential of the partners to reach the important customers with their lending services, but also their technology and expertise contributions in a variety of ways.
I mentioned the acquisition of Tuttle Decision Systems into HomeAdvisor Technologies. Tuttle has very sophisticated risk-based pricing to make sure that we know we’re really offering the consumer the right loan at the right price at the right time.
The third element of the HomeAdvisor Technologies strategy is a set of tools for real estate agents so that they can, if you will, use this workbench very productively to manage their listing, help them receive leads off of the Web site and participate in the streamline mortgage process that I just described.
In many ways, I call this like a little bit of Home Store or a lot of Home Store with a little bit of e-loan. But with the mortgage lenders here, our partners and other lenders who want to participate, actually doing the lending process since HomeAdvisor Technologies is really what I would call a consumer and business facing IT systems company, as opposed to a direct lender or other financial participant in this industry.
With that, I’d like to turn things over to the executives from each company who are here today. First, Leland Brendsel. Leland is the Chairman and CEO of Freddie Mac and I’ll let him add his comments.
Thank you, Steve. I’m delighted to be here. Freddie Mac’s mission is to reduce the cost of home ownership, make it easier, faster, better experience so that more people can get a mortgage loan, buy the home of their dreams.
As a strategic partner in this venture, Freddie Mac is making our suite of innovative tools really for the evaluation of a mortgage loan. For the appraisal and valuation of the home that is being purchased, as well as for committing and selling that mortgage into this secondary market to be funded by Freddie Mac. We’re making these innovative tools available on the Internet here to our mortgage lenders as part of this venture.
The real beneficiary of this is going to be the American consumer, the American homebuyer, as Mr. Ballmer has already said. Reduced costs, increased certainty about getting a mortgage loan, knowing what loan they qualify for, knowing what the home is going to be appraised for and ultimately reduced frustration and uncertainty for them and a greater experience. With that, thank you, very much.
We’ll turn things over now to Denis O’Leary now, Executive Vice President of Chase Manhattan. Denis?
Good afternoon. Chase is a leader in the home finance business and we have a strategic interest in its future. We felt our commitment to the customer, along with our commitment to the new economy, made this an exceptional opportunity. We see it as a “dream team” in a major space and an absolutely exceptional opportunity.
It’s a “dream team” from the standpoint of the knowledge, the credibility, the existing business flows and the shared vision of the partners who are at the table today.
It’s a major space from the standpoint that there’s over six million mortgages originated each year and it touches almost every American consumer at some point in their life. Both in their wallet and in their mindset because this one of the most emotionally important transactions that anyone ever does financially.
And finally, it’s an exception opportunity from the standpoint that the current process is paper intensive, it’s time intensive, it’s cost intensive and this business is crying out for transformation.
So we’re committed to this partnership. We think it’s a huge opportunity and we look forward to a very successful launch.
Great. Next is Bruce Paradis. Bruce is the President and CO of GMAC-Residential Funding Corporation.
Thank you, Steve. Usually when you see the letters GMAC, you connect it to auto finance. GMAC has been in the residential business mortgage lending secondary marketing since really, about 1987. So I represent the residential part of GMAC, a company called Residential Funding Corporation.
We are the largest investor in non-conforming mortgages. Typically the types of loans that do not qualify for the GSE purchase, Freddie Mac and Fannie Mae. So we typically traffic in the loans that are either too large or different from the criteria that the GSE’s have.
Really, I’m here from two perspectives. One is an equity investor in this venture and as I look at the people around this table and have worked with Microsoft over the last year and Tuttle even longer. This, as referred to earlier, is a “dream team”. So we’re very committed to be here.
There was also earlier reference to the cost and burden of the process of getting mortgages. A lot of this burden is thrust upon the consumer really from the backend, from the investors in terms of our requirements.As a participant in this business over the last 17 years, we’ve been dedicated to pushing aside a lot of the barriers and we see this as a tremendous opportunity to do that.
So speaking from a non-conforming investor standpoint, we are committed to drive a lot of the burden and cost of this process out. With that, I look forward to doing it with this group. Thank you.
Great. Next will be Jeff Drayer from Norwest. Jeff?
Thank you. And I would say good morning or good afternoon, depending upon your time zone. As the leading provider of mortgages on a retail basis direct to consumers, we feel that Norwest contributes to this collaboration of industry and technology expertise in representing the needs of the American homebuyer. Our experience will tell us that the primary need the American homebuyer has is to make the process of getting the mortgage loan easier. It should be faster and it should be less expensive.
Now the industry has made significant progress in recent years with faster approvals and reduced documentation requirements, but we need to do more and when we do this, we’ll all win; those lenders, investors, realtors, builders and most importantly, the American homebuyer.
There’s good news here today and you’ve heard some of the highlights. We can make the process easier and we will with the enabling technology that’s been announced here today. At Norwest Mortgage, we’re particularly excited about the possibilities of HomeAdvisor Technologies because these benefits span every homebuyer preference and face-to-face lending through our nationwide sales force to lending directly over the Internet.
We are committed to supporting technologies and systems that will allow homebuyers to choose the option that they like best. What we have here today I believe, is an improvement to the method under which each homebuyer chooses to finance their home.
This collaboration is positioned to benefit everyone in the industry and we’re excited about the future of this.
Great. And now Danny Holmes. Danny is the President of Bank of American Mortgage. Danny?
Since we don’t know whether you’re morning or afternoon, I’ll just say hello. It’s great to be here and part of this team.
Bank of America is excited about this opportunity. As a leader in providing home finance in America today, we’re constantly looking for ways to offer our customers and our clients more choices and more options in how they do business with us.
Our goal for utilization of digital technology is to use it simply to accelerate the execution of our corporate strategy, which we would define as integrating our businesses, rewarding our customers and aligning our resources with customer and client solutions.
Utilization of digital technology is not new to us. We have just signed up our 2 millionth online banking customer. We have over 100,000 customers coming to us each month for online banking. We know that the consumer wants digital and online opportunities and we’re committed to provide that to our mortgage customers and for all of Bank of America for solutions to our customers and clients going forward. We think that these tools that will be derived from this partnership will help us achieve that goal. Thank you.
Great. Next up will be Bryan Mistele. Bryan runs the HomeAdvisor Technologies Group. He’s been working on HomeAdvisor for over two years on behalf of both he and Paul Tuttle from Tuttle Decision Systems. Bryan can comment some about how the platform will be sort of evolved technically and how it will be promoted and distributed. Bryan?
Thanks. As most of you know, we launched about a year and a half ago, HomeAdvisor.com as the complete home buying guide on the Internet. Since then we’ve met with some good success. Three quarters of a million listings already on the site today in relationships with over two thirds of all the top 500 brokers in the country.
What we’re announcing today though goes far beyond that. What we’ve spent the last year, several hundred people across Microsoft, Tuttle and our partners creating, is a business-to-business-to-consumer e-commerce platform to electronically link together the various pieces of the transaction.
More importantly, we spent a lot of time reengineering the process and applying technology to reduce the cost, reduce the rate of the mortgage transaction to the consumer.
Why have we done this? Quite simple. The mortgage transaction in the real estate industry account for about 15% of the gross national product of the country. It is an incredibly complicated transaction. Today, it is primarily paper-based and it takes the consumer thousands and thousands of dollars and months to close a loan. We are fundamentally taking a look at that process, working with these key leaders in the industry to reengineer and automate it.
The platform that we’ve created, the first version will be commercially available within the next several weeks and will be up and running on HomeAdvisor.com first and then at our partners and then we’ll extend this as an open platform to any other participants in the industry to plug into and take advantage of the automated and the streamlined transaction.
I just want to wrap up by explaining the three different operating divisions of the company that we’re announcing.
The first division is around HomeAdvisor.com. This is a business-to-consumer business, primarily focused on advertising and delivering listing and home advisor information to consumers.
The second business is focused around this automated transaction platform that we’ve created. It’s goal is to automate the mortgage transaction and make it as simple to get a mortgage as it is to buy yourself stock on line.
The third business is a set of productivity tools targeted at the real estate and the mortgage professional. These tools will enable the mortgage or the real estate professional to access the platform and take advantage of the streamline transaction for themselves and their customers.
So what you see is just a start. With this new company, we’ll be announcing in the future more partnerships, more innovation and more technology and I think we’ve got a very good and bright future to come.