I have now pared down my UPST exposure to a more reasonable 12% and I still think there’s a lot to like about this company despite the questions raised by jonwayne and others. One question I haven’t seen raised on this board, however, relates to mortgage. Mortgage is of course the 100lb gorilla when it comes to lending, and so the biggest potential contributor to TAM, but I was given pause by this exchange toward the end of yesterday’s call. It sounds like there are lots of uncertainties when it comes to Upstart’s ability to have a meaningful mortgage business. This seems like the type of uncertainty Saul likes to avoid when it comes to stock picking.
I have pasted the exchange below and the link is at the bottom.
Matt Schindler – Bank of America Merrill Lynch – Analyst
Yes. Hi Guys. I just wanted to talk a little bit about what you guys mentioned about longer-term, about how you could use your platform on other loan types. Obviously, personal loans and auto loans are sold in the ABS markets.
If you are better than – you can prove you’re better than FICO, great, you’re going to get a premium on that. You’re going to be able to sell your loans better in that you can get funded well. But when you mention things like homes and mortgages, basically sold entirely into GSE s, how could your system work in that world where Fannie Mae is basically deciding who gets a mortgage?
Dave Girouard – Chief Executive Officer
Hi Matt, this is Dave, it’s a good question. And let’s just say mortgages are funded in lots of ways first of all, and some are qualifying some are not qualifying. The GSEs rules can change over time. So there’s just a lot of – there’s a lot of ways this market could go.
But having said that, if people don’t have access to a reasonably priced mortgage today at all, we certainly think there’s an opportunity to serve them better. And again, whether funding is from bank balance sheets, whether it’s from securitization markets, whether it’s from GSEs, or whether it’s some combination of those things is certainly something we’ll look at over time, but we feel very confident given what we do and who we are that better underwriting somebody who wouldn’t otherwise fit easily into a qualifying mortgage using the models that most mortgage originators use today. There’s a very large number of people who aren’t well-served by that market, and we think we can – together with our bank partners build a better product, and that’s what we expect to do.
https://www.fool.com/earnings/call-transcripts/2021/11/09/up…