Jarred Kessler is the Founder & CEO of EasyKnock. EasyKnock is a PropTech platform that offers a way for people to access the capital that’s locked in the value of their homes through sale leasebacks. This is a big issue for folks that don’t have great credit scores because that usually means they can’t get access to mortgages.
Historically, reverse mortgage products have had a bad rap, but EasyKnock is doing its part to right the ship. They do everything they can to help people avoid eviction.
Though they’re building a business, they’re on a bit of a moral crusade and Interplay is proud to be an investor.
In tandem with EasyKnock, Jarred has also helped start a non-profit organization called The Stay Mission, which helps Americans fight evictions and foreclosures.
During our chat we discussed how EasyKnock works and the various products they offer, Jarred’s path from Wall Street to entrepreneurship, the challenges in the overall housing market in America (including whether Fannie and Freddie are doing their job) and much more. Enjoy.
Transcript (this is an automated transcript):
MPD: Welcome Jarred. Thanks for being here today.
Jarred Kessler: Great to be here. Thank you.
MPD: All right. Mind giving us a quick overview of your background, the 30second version. So people know who you are.
Jarred Kessler: Yes. My name is Jarred Kessler. I'm the CEO and co-founder of a company called EasyKnock.
I spent about 20 years in financial services. Before that I spent a year out of college working at MTV as a writer.
MPD: Okay, hold on. Bridge me from MTV to wall street.
Jarred Kessler: So when I was in college, I thought I wanted to be a producer. So I used to write scripts all the time. And I found a guy that went to Tulane that worked for MTV.
And he connected me with a producer of the Tom green show. And I love practical jokes. We play practical jokes all the time at my company. And I started writing situations that Tom Greene would get himself into. And the guy said, I love this. Can you keep sending me ideas? And he used my ideas. He didn't pay me, but he got me a job.
And I worked at MTV for a year and I realized I couldn't pay my rent. So I sold out.
MPD: Got it. So you sold your soul, yeah, we're going to, we're going to come back to wall street a little bit. Can you give everyone listening an overview of EasyKnock?
Jarred Kessler: Sure. So the way I always describe EasyKnock at a very high level, we started at the core with this notion of turning homeowners into renters of their own home, but it just at a more, at a much more specific level.
I in terms of any time there's a crisis. So like we just, we were, we're still in it, but we just lived through a pandemic and there are going to be a lot of unintended consequences of the cares act were people wearing masks, whatever it is, there's always a positive and or negative consequence to everything.
And in 2008, because people were lending also known as subprime to people that couldn't afford to pay their mortgages. Banks and lenders were fined and they were panelized. So what happened is they completely shrunk, their qualifications made it very black and white. So if you have a FICO score under a certain amount, or you're not a traditional W2 worker where you missed a credit card or a mortgage payment, you're shut out of that market.
So you just fast forward 15 years, 14 years later, half the U S housing market. Get access to any of those platforms. So their only choice is to sell their home. There's this massive trapped equity problem going on in the United States. And that's why you see a lot. It's not just because housing prices are going up and speak to people.
Can't get the money out of their homes. So we created a platform where we focus on home ownership, flexibility, and the first product we launched was a product which is known as a sale lease back in the commercial space, which is you're a renter of your own. And our customers can buy back their home.
They can get all the appreciation. We have an evicted anyone in 2021. So we're really passionate about making sure that people are successful and and we're really excited and we're very mission driven. Okay. So
MPD: Let's, let's stop for a second. I think most people listening to this will not be as familiar with this problem or not understand that it's.
So you said 50% of folks don't have a high enough FICO score to get access to the products. You mean mortgage financing. They can't borrow any money against the home that they own.
Jarred Kessler: That is correct.
MPD: Okay. And what percentage of people's wealth, if you kind look at, um, that population is the home, most of their asset base, what is it when you say it's trapped?
Jarred Kessler: So 63% of Americans wealth are sitting in homes. One third of the us housing population does not have a mortgage believer or not. And half the population has 50% or more equity in their home. So I don't know the specific within triangulating, the FICO scores and the equity. But it's it, the us housing market for those folks that are listening that haven't thought about it.
I'm sure it's gonna make sense. When I say it's the biggest asset class in the world, it's the most money floating around, so it's enormous.
MPD: Okay. And so can you, you mentioned you guys are mission-driven. Would you expand on that a little bit? What is the.
Jarred Kessler: Yeah. Um, I'm sure everyone, at some point in their lives, when they were going through elementary school or high school studied the animal kingdom and we're all mammals, uh, human beings are mammals. So we have an innate thought process to eat food, drink water, nurture our children and provide shelter. And. Our mission is focused on the shelter aspect is if we can keep people in their home and they don't have to sell their home, because if you can't, if you can't get access to what you were just describing, mark, which is a mortgage well reverse mortgage, we're a refi.
These are all lending products where you're able to afford staying in your home by either getting the money out of your home through a home equity line of credit or buying a new home. If you can't get that, you have to sell your home. In this day and age between the qualifications to rent and the inventory, meaning how much there's not a lot of places to go.
A lot of people are stuck and they don't they, they have no choices. So we, number one, we help people stay in their home. Number two, we treat middle-class Americans with the best customer experience possible. Three is we focus on transparency and for our mission is to provide people with choices that have only bad choices.
So easy knock helps people that are in forbearance. It helps people that want time, people that want cash. And on top of all that, I'm sure we'll talk about it. We created a nonprofit called the state mission, which is focusing on people, helping people that just life got in the way they got. They lost their job.
They weren't lazy. They didn't, they weren't irresponsible. And going back to the first point, I made taking someone stuff out of their home and putting it to the front sidewalk is one of the most humiliating things. And if you, if people have not been through that before and I lock come, lucky enough, I haven't been through that, but I've seen it.
It's terrible. So part of our mission is to decrease. That outcome and help people stay in their homes and there's a huge epidemic.
MPD: So here's the thing, you know what I think about the reverse mortgage product, where you go to someone who owns a home, you buy it, are you giving them a financial structure and you allow them to stay in.
And I'm, I know I'm using the terms a little loosely here. That's been historically known as a predatory category. It's the context or the connotation of that has been taking advantage of people who are in financial distress, the way you're talking about it. It's a little bit more of a Robin hood story of helping people.
How do you reconcile those two? What are you guys doing?
Jarred Kessler: The thing I would say, which is going to surprise you, mark, is because some people perceive us as competing with their reverse mortgages is I actually think it's a good product. The reverse mortgage there's actually only 50,000 done a year in the United States.
The biggest problem, why the reverse mortgage business actually got a bad reputation was someone's parent lives in a home. They pass away and the children are expecting to get some money out of the home and when the person dies and they find that they don't get any money, it's usually the children that have complained about the reverse mortgage.
The people living there actually didn't have a problem with it. And there's like tasks and there's transparency. But when you're dealing with people's homes, it's always a challenge to avoid the noise and the reputation risk around it. But what we do is we say, Even if you don't understand it, which we give a task.
So people understand that we get plain language disclosures. The person will always receive in our transaction, all the upside, where they can buy it back. They pay market rent. We pay the taxes, insurance and HOA, and we do everything in our power to avoid eviction. So we help people sell their house if they can't sell it and we'll give them money to transition.
In the history of our company, we're an eighth of the national average. We've only had to evict eight people out of over thousands of homes that we've bought.
MPD: Okay. So why do customers come to easy knock? I know you've got a few different products. Could you take a minute and just in plain English, explain those, the products you guys are offering in the market?
Jarred Kessler: Absolutely. So the, our flagship product is a product called sell and sell. And it's exactly what it sounds like. You sell your house and you stay. So we buy someone's home at fair market value. We have a meeting of the mind. So mark, you were selling your house. We would have a conversation about what you think your house is worth.
And we'll, we'll have a meeting of the minds. We get an appraisal inspection and we give the consumer a lease and they pay fair market rent, which means we look at a third party data. And we look at what the market rent for that specific home and that specific areas. And they pay us rent. We pay the taxes, insurance nature.
The customer will receive up to 75% of the home value day. One that does not mean we're buying the house at a 25% discount. So if someone has a hundred thousand dollar house, we'll give him 75,000 in cash day one, we pay off their mortgage and now they're renting. So the question is what happens to the rest of the money in the future?
They call us up and they say, I don't want to buy back my home and I don't want to continue to rent. Then they can confront for as long as they want. They come to us and they say, I want to sell it. We give them control of the sale process because the customer gets the difference between the next sale price and the day one cash.
So in the example, if someone sells that home in six months for 200,000, they'll get 200,000 minus 75. Plus we charge usually about a fee of about 3% of the cash we give the customer. So they get all the. They also combine back a home for the cash. We give them plus that small fee, or they can continue to rent.
So that's selling stay. And if you understand that, which I understand, I speak fast cause I'm from New York. So I apologize to everyone listening. The other, the, the moveability is a one-year version of sound state. So moveability is our product. That's a non lending bridge product. So someone that's thinking about buying a future home, and I'm sure a lot of people have been in this position.
One, you don't know how to time the buying and selling. And two, you don't have money for your future home because you're all your, money's your cash it asset rich and cash constrained. And three, the number one reason, most mortgage companies turn down people is it's called a contingency issue, which means you have to qualify to have a certain debt to income ratio.
And by having two mortgages, you can't qualify for that. So we come in and we buy the house, we pay off the first mortgage. Now they can qualify for a mortgage on their future home. They have the money and they don't have to move in with their in-laws in between. They can just rent their own. And then our third product is just a full sound lease back where you don't value the optionality of buying back and selling.
You just want more cash. And that product's called release. Those are our three flagship products. We recently bought a farm sale lease back business called farmland finder. So we're moving geographically. We're in all 50 states, but now we're going to have a presence in rural America, too.
MPD: Very cool. Is there a housing site?
That's most applicable for this, a certain price point. Is there a certain price point you get banned? You try to play with
Jarred Kessler: them. Yeah. So the average home in the United States, it's crazy a year ago. It was 270,000. Now it's 300,000. And that's pretty much our average. So our sweet spot is along the lines of the average American.
We're not playing in a lane of the upper echelon of America. Sure. We do. We've bought $2 million homes before, but they're edge cases. We've mostly focus on middle-class Americans.
MPD: Got it. Yeah. That's the the handiwork of inflation driving those prices up. So you guys are having a lot of, you built a business, obviously, but you're having a lot of positive social impact.
Is there a metric you guys use internally? To try to quantify how many people you've helped or the kind of positive impact you've had as an organization.
Jarred Kessler: Yeah. First of all, if we had to evict people we, uh, you in numbers that are average or above average, we would, we view ourselves as failing because we took a situation and made the situation worse.
Of course, we're gonna unfortunately have to evict certain people. But we, we try to be the best in class with that. So that's one, two is we look at our reviews when someone ends their journey with us. So they bought back their house where they sold it. And we look at our reviews there and we're running out of 4.8 out of five review there.
And then the third one, which is helpful is we track their credit score. We're not a credit repair company, buffet paying off a mortgage reporting rep to the credit agencies and giving them money to hopefully pay off their bad choices. Um, that put up then at six, a more successful place. And I believe on average, we our customers increased their FICO score by about 50 points.
And then, yeah, and then third is they get the outcome that they desired. Some people want to buy back. Some people are buying time. Um, that's how we that's how we measure it. The other one, which is just locking the market right now is our average appreciation of our customers on the back end.
It has been very significant. I don't know what the latest number is. I don't want to give a wrong number, but you could just imagine that if we would have just bought their house homes outright, they would have not participated over the last two years in this boom in the market. And if the housing market starts to go down on a 15 year high, you're just, if you're asset rich and cash constrained, you're just hoping, but we, what we allow people to do.
Is get some of the money out of their house up to 75%, so they can almost hedge themselves versus the macro environment.
MPD: Okay. So this whole thing is a very clever financial structure that I think creates a better set of solutions for the folks in your customer set. And it's not a surprise. You're the guy doing it.
You're a banker by background. If I, if I'm right. Who did Goldman Morgan Stanley credit Suisse and Cantor Fitzgerald, how did you land on solving home loans and this particular strategy?
Jarred Kessler: So I've always had an entrepreneurial bug. So when I was a, in 2000, whatever the year was that Enron in the early two thousands had their accounting scandals for those that.
That are not familiar with it. There, there was this big wave of accounting scandals in the early two thousands. And Ron was one of the biggest companies in the country and it collapsed. So you started seeing these wave of bankruptcies and bond holders were getting their bonds converted into equity, but at that time equity funds and fixed income funds were not talking to each.
So I decided I was going to create this business called distressed equities were predit focused equities, where I was going to take all the research from the fixed income world. And I was going to marry their liquidity and getting equity with equity mutual funds that wanted that. And now I had research, so I didn't have to really hire anyone.
I just was leveraging the internal resources and I built a desk and every bank on wall street adopted that. And that was like my first taste of breeding a business that was within. And when I was at Goldman, I created the first private exchange distribute shares publicly. So this is before Facebook and all these companies were trading pre IPO shares.
So the first customer that it was Apollo and then Oak tree, which are big private equity firms for those people that are not familiar. So I started realizing that you put an idea together, if you have the right resources or money and you can do it. Anything is possible. So I always had that bug and I realized in wall street, I saw numbers, but I didn't see people and intrinsically, it bothered me a lot.
And I watched rooms that were full of people get replaced by servers in equities. It was like a melting ice cube. And I fought it and I said to myself, real estate is about 500 times the size as financial services. And about 25 years behind in terms of innovation. So I started paying attention. I wrote a book on real estate technology, and that's what forced me into starting to think about the the prop tech space, which is now obviously a very hot space in the market.
MPD: What's the name of the book? We'll link to it in the show notes.
Jarred Kessler: It's called death of a real estate salesman. And just about how technology is, if you don't get on board and embrace it, you're going to fall behind. It's not a knock on real estate agents.
MPD: Okay. Th the play you're doing requires access to a huge sum of capital.
You're talking about buying thousands of homes, for people listening, how much capital have you guys raised at this point? And then I want to talk to you about that process and helping other entrepreneurs think about it.
Jarred Kessler: Yeah. Um, we've raised close to a hundred million dollars in equity for the operating company.
And so that's when you hear about startups raising money, that's pretty much in line with what you would think about it. And then when you're in a business that's balance sheet intensive, so they, that you'll hear this term opco and propco, so the opcos to run your business, to pay for marketing it's to pay people and your propco is to fund your properties when you're buying.
So it's almost a balance sheet to buy homes. So on the balance sheet side, we. We've probably had commitments of over 500 billion. So you'll see companies when they announce a raise on tech crunch or Crunchbase or any of these other platforms, you see these big raises, but it's very misleading because a lot of times folks don't separate out the equity raise and the debt raise.
So we raised probably a hundred million in equity and we probably have gotten lines of over 500 million in debt. So it sounds like. But that, that side is just commitments and, we've used a lot of it, but it's completely different.
MPD: Totally. That is a trick that a lot of people do they'll work.
They'll say the tech crunch article or the article about your company. It's not the journalist's fault necessarily. They may not know is you'll say you've raised $600 million in that scenario when you've raised a hundred. For those listening, the twist on this is when the company's product is capital and that's the core thing they're doing.
They need to have borrow a bunch of money to deliver the product. And that's what will screw up kind of those those numbers. And it sure sounds impressive when you're meeting the other entrepreneurs at a party and you see they've raised 150 million, but even if only 10 of that's equity, which is I think the real measure of the investment that businesses getting.
But I do want to talk to you about the the balance sheet side. This is the capital you're using as a product, borrowing it. You gotta pay it back and you're trying to generate a yield. That seems like a huge barrier for the average entrepreneur. How did you navigate getting $500 million behind you?
What was your approach? How'd you think about it? I know you're from wall street, so it's a natural for you as probably more comfortable than it may be for average, the average folks. But I think it would be interesting for people to get some tips on that.
Jarred Kessler: Sure. The biggest challenge of all, this is the chicken before the egg.
So banks where people are provide balance sheet, the less traction you have, the higher your cost to capital is. So you either have to be willing to take a loss because you're going to be upside down between how much you have to pay on a monthly basis or annual basis for your day. And how much your customer is willing to accept your product.
So if you think about it, you really, a lot of people never get the chance because they can't price it properly because they're always priced to be more expensive. So figuring out that balance is really challenging. So you either have to sell someone on the dream and give them warrants or tell them that you'll be committed for a long time.
But just, if you don't do any of that, you're just, you're going to be at a disadvantage. Number two is it's really, you just have to constraints, breed, creativity. So you have to find people that are resourceful and smart and have ins at these banks. And it's much different than if your audience is listening to people that are usually doing you know, decks on startups.
You have a deck that has a story, your problem, your solution. Your con your mode, your revenue all of your management team. Like it's pretty much the standard deck when you're going to investment banks and you're pitching the balance sheet. It's funny. I always laugh when I see it. They're like they go through and they're just skipping through all that stuff.
They don't care about the story. The page they go to is the Excel spreadsheet from what is your unit economics? What's your proforma, what's your number. That's all they care about. So that's what you have to focus on and you have to convince them that they're not going to lose their money. And they're going to make money on this.
And so I was lucky enough because as mark said as you said, mark that I had the experience, so I knew how to talk and I knew what, what they needed and what would get them comfortable. And I do think it's a big challenge. So my advice is for people that are struggling with that is find someone that understands it and them.
MPD: Okay, but you mentioned the chicken and egg dynamic. So how did you break the chicken and the egg cycle here? You haven't been out proving out the product yet. You've got a story around you and in economics, how did you get your first banking relationships behind you to fund this?
Jarred Kessler: So the, the, the first person that funded our business was I was a fellow entrepreneur that had a fund.
You go to the fishermen, not the fish. And you find the people that understand your business. And unfortunately, if they don't understand it, you're putting a square peg in a round hole. So I went to someone that understood what we were doing and he said, wow, I really believe in what you're doing. And I think that if I give you money over a long period of time, I can make a lot of money because.
I think you're going to be successful and we're going to really ramp this up and I want to put my money to work. So I found someone and look, it took me like 500 calls and I found so on that ran a fund. I think it was like a $500 million fund. And he's I'm going to give you $10 million. It sounds like a lot, but these are the buy homes and it's debt.
So they're collateralized where they're backed by the asset. It's not like when you're doing a venture investment, if the company dies, there's nothing. In, in a debt investment, based on an ad on asset based lending, that's what it's called. You can you have a lot more opportunity to make people comfortable as long as they understand the risks and whatnot, but the pickup backs to your question, mark is the traction thing is, is, was one of the hardest things we had to overcome.
And the way you do it is you have to, you have to figure out incentives for people to give you a little bit of a break on that. Okay.
MPD: So then the first backer comes in, you start doing some deals and was that enough to get and get momentum and, put a proper spreadsheet together, real numbers and start getting larger banks.
Jarred Kessler: No. So we did like 10 deals and then he's I, you know, our, we don't understand this business. Totally. We don't, what's your legal framework, you're blazing a new trail. So he was like, sorry, we gotta move on. So I was like, they basically caught us off. And then I had a week and I locked myself in our inner room and I called another 500 people.
And I found someone who's now one of my board observers and he helped get the flywheel going, but we didn't take a straight. Everything is a zigzag. It's never a straight line to success. So with this partner, he helped get us to credibility. I call borrowed credibility, and then we got the big, the big guys involved once we started getting traction there.
MPD: Okay. And now when you're dealing with the banks, right? I know the texts been around for awhile. How familiar, comfortable, acclimated, or are they to start up coming in? Trying to do asset based lending, borrowing, from a product they already understand, they understand homes, right?
How high is that mountain to climb to get them up to speed. And then
Jarred Kessler: so five years ago, tomorrow is actually our five-year anniversary. It was impossible. It's, it's every, Everyone is accepting that the FinTech and PropTech revolution is real now. And because of that, they no more can deny it.
And because they can't deny it, they have to pay attention to it. And because they're paying attention to it, they're going to give you the benefit of the doubt and believe it, if you give a credible enough story. So I think it's gotten significantly easier. I don't think they understand. The a lot of folks at the banks.
I don't think they totally understand the, they just want to see the results. The way I was explaining it is balance sheet partners, debt partners, and private equity folks. They believe in the now and venture investors believe in the dream in the future. And I think they're getting closer to balancing those two, but they're not there yet, but they're significantly better than they were five years ago.
MPD: Okay. So what tips do you have. For, I've also two questions here. I got what's the, what are the tips for navigating the stage? Once you get them at the table, you've got, you had your sponsor supports you, you found a second sponsor. You get to the big banks, how do you keep them engaged? Get them across the line.
And also, is there some sort of natural cadence to this? I know in venture, there's an expectation for companies that you raise a fund of a deal of a certain size and you raise your next venture round certain stuff. Venture funds has a similar pattern, venture funds. There's a natural cadence to the evolution of the firms themselves, the fund sizes.
Is there a cadence on the debt side
Jarred Kessler: that you're seeing? Yeah. Yeah. So there is, so basically I'll break it down into five, four. I'm not counting ahead. So a bunch of stages. So stage one is you find someone to believe in you an angel, someone that will get you help you get your first one to 10 deals, whatever the call.
Then stage two is you find a family office where a high net worth individual, and you basically get them to give you a line of credit. And it's always going to be more expensive, right? It's going to be very expensive. Then stage three is you start to go to the banks and you find a banking partner. You do either credit facility where some sort of structure.
Stage four is you actually grow out of that specific partner. And now you got multiple partners with credit facilities. So that's like in my space right now, companies like Zillow and Opendoor, they were getting so big. Zillow just shut down their business yesterday on the I buying, but, open door and all these companies, they have eight to 12 different partners and then the holy grail of everything, which everyone wants to get to is securitization, which.
The cheapest form of capital. You create an offering there where you create a fund where you play almost like a public rate or public structure, and that's the last stage of it. And with every stage as you get more attraction, your cost of capital goes down. So you're
MPD: give us cheaper. Can you take a stab at explaining securitization?
Man, so basically
all you buddy.
Jarred Kessler: I'm trying to think about the best way to think about securitization is if you ever saw the movie, I hate to use this comparison, but if you saw the movie, the big short, the scene, when they explained pack, packaging a product and then selling it out, almost like a security or bond offering, that's what a securitization is.
So there's a certain coupon, but because it's going in that mode, like let's say my cost of capital to borrow right now. Let's, I'm just making up the number of 6% overnight was the securitization that can become two and a half percent. So you work with an investment bank, you have to put all these different parameters in place and reporting structures.
And then you do launch almost like an offering, like a securitization.
MPD: So that's the easiest, the bundle you're bundling a bunch of the homes together, right? The rep the cash flows from those homes into one. And then, because there's diversification in theory, it's a lower risk profile and you get a lower interest rate.
Jarred Kessler: Yeah, exactly. Yeah, exactly. Like I said, if you ever want it, there's I think like the first 15 minutes of the big short, they explain it and they do it a lot better. Adam McKay. Who's the director of the big, short, he does a much better job than I just did.
MPD: Perfect. We're going to link to that in the show notes too.
I'm sure everyone knows the movie though. Okay. I wanna talk about social policy cause. Underlying theme and the way you talk about the business, and I believe deeply that at their core, whether entrepreneurs know it or not, candidly, they're in a, they're in a a little bit of a flywheel where they're incentivized to chase the carrot of what they're doing.
The reason they're chasing the carrot isn't to make them rich isn't to build companies it's to improve society. The mechanism by which we improve society is we make companies the incentive we get, we use to get people to make company. As money other than lifestyle and everything else. So there's a social undertone of your venture that I think is pretty palpable.
I think it's more obvious with this one than some others, but when folks talk about the social issues in America, they go high level. One of the ones that always comes up is housing market. How big picture? Not just the problem. You're tackling. Or is this a, how do you look at the framing of the housing crisis or housing issues in the states?
Jarred Kessler: So six or seven years ago, there was a book. It was a New York times bestseller by a gentleman named Matthew Desmond. And the name of the book is called eviction. And I highly recommend anyone that's interested in housing or just wants to learn. It's actually just a great book. You don't have to be interested in housing and.
In the rust belt and, places like Milwaukee or in in Detroit and in all that radius, that's a big part of the book is just about, there is a huge discrepancy between the haves and the have-nots. And the thing that concerns me the most is the average American. If they're making minimum wage, but rentals were the price of owning a home, goes up.
Unless their wages go up, they're going to there. There's going to be a giant shit storm going in the U S economy right now. And it scares me. It makes me sick because I think there's a lot, there's so many smart people in this country and the thing that surprises me the most, and I'm almost inviting people to compete with us when I say this, but I don't care because I think it's too important is most of the startups in Silicon valley, they're focused on the upper operational.
Why because people are like to do things that they're familiar with. So they're focused on solutions and fractional ownership for $5 billion homes in San Francisco. But I think is really sexy, is helping people. One of my favorite expressions is success is what you give, not what you take. So I understand that people want to chase money.
And it's a challenge because people are constantly looking at metrics. But there's a scenario where you can do good and make money. And that's what we do. And I'm not trying to promote easy knock. I'm trying to encourage people to think about in that way. So I think housing is an area where there's so many opportunities to help people, whether.
Helping people buy homes, helping people sell homes, helping people manage their finances, helping people improve their credit scores. Because at the end of the day, the one that drives me crazier than anything is the Scarlet letter in 2021 known as the FICO score because that's a rear view mirror in Decatur.
All it does is creates a death spiral and many times it doesn't make sense if mark, if you were. Your if you were to make an improvement on your home and you put everything on your credit card and you maxed out your credit card, even if every month for the last 20 years you paid your credit card on time, your credit score would automatically go down by a hundred points.
But if you max it out because you're getting paid cash from visa or MasterCard, you're just being smart. And you take that example and you explode that to middle-class American that has high credit card. Asset rich cash constrained, no choices. It just perpetuates the situation. Doesn't make it better.
So I think politicians on both sides of the aisle are very focused on the middle class. And I think they're there. They understand that housing is a hugely important thing that people have to innovate on. And technology is just not about AI technology is creating tools or solutions that improves society.
When our grandparents were in school, there was a technology class and they didn't have computers really. And people forget that
MPD: there's a lot there and I want to go through all of it. First piece you mentioned policy, are there policies out there? Partisan, not partisan don't care that you think are fundamentally problematic as it relates to the housing market?
Jarred Kessler: The one that comes to mind the most. Is I think the rental moratorium was there was a horrible policy decision and it's not because I don't think they should have helped people that are facing eviction.
I think they should have focused on the landlords and giving them credits because all they did for the, the tenants is they basically said you have a pause button, but we're not going to what you're going to build up all the rent that you own. And when this moratorium. You're going to probably get evicted from your home because you're never going to be able to catch up.
So I think it was irresponsible and enabled people. I think the intentions were really good. I really do think they were good. But again, unintended consequence, the problem's going to be as this moratorium ends, these people have five months, six months, eight months of rent. What would have been better is from the very beginning to attack it by saying the government is going to pay the landlords and take care of.
For, so the rental assistance was was, uh, was a policy decision and a step in the right direction. But I think that companies like EasyKnock should have more access to cheaper cost of capital through comp like institutions like Fannie and Freddie. And we're. We only have to focus on the private markets because we're keeping people in their homes and that's what Fannie in front of you're supposed to be doing.
So I think there's a lot of room for improvement. There
MPD: are Fannie and Freddie doing.
Jarred Kessler: No, because there, because what I just said if, if they need to be, they need to expand their mandate more than just homeownership. They need to focus on companies like easy knock and other solutions out there that are creating more solutions.
So people can stay in their home longer. If we had access and we had a relationship with Fannie Moore where they were able to help us get the same funding. Some of the big mortgage companies get, we would pass that onto the consumers and they would have very cheap, much cheaper rents. And we would do that.
Honestly, if we were able to, we always pass the cost on to the customers when we're able to save.
MPD: Can you give everyone a quick overview of what Fannie and Freddie do? I think most people probably
Jarred Kessler: don't know. So Fannie and Freddie are known as GSEs. I I'm embarrassed. I don't even know what the GSE stands for, but Basically they're the, there they were this government private agency that helps in lends money to whether it's, think of the biggest mortgage companies, quick and loans were a home, uh, loan Depot, any of these big mortgage company.
They provide capital to these companies. They're there, they're FHA approved and they allow them to basically get really cheap cost of capital through these institutions. So they're almost like the central depository for lending in the homes in the United States. It's equivalent of a Ginnie Mae does for student debt.
And there's a bunch of other agencies, I think they were all created. If I remember correctly during my. My elementary school years during the FDR administration during the new deal, I believe that's when it was graded, but don't quote me on that. Okay.
MPD: And you're the founder of the state mission.
You mentioned that upfront in this conversation. Do you mind giving an overview on that? Because I know that kind of bleeds into your purpose-driven
Jarred Kessler: entrepreneurship. Yeah. So we w unfortunately we're fortunately. I'm not going to be able to help the people that are customers of easy knock, because that would be perceived.
It's just, it's a slippery slope that if we're giving money from a charity to our customers, we're helping ourselves. So unfortunately we cannot pay our customers. But if someone is facing eviction where someone who's pacing for closure, we focus on either charities, more people that we can have. Avoid getting kicked out of their homes.
And when I started the conversation with you earlier, mark, I talked about mammals and shelter. I can't tell you what a horrible thing, a visual it is. Imagine all the stuff in your home, mark is a sheriff knocks on your door. It takes all this stuff and just throws it to the sidewalk. And you have two kids it's heartbreaking.
And what the state mission does is it tries to help those people. We raised them. And we give them money so they can avoid so they can pay their rent or pay their mortgages.
MPD: And D w what's the process here? Can you give me a little sense of the operations people apply? Is there a certain criteria that they
Jarred Kessler: need?
Yeah, so the way we're transitioning. So honestly it was just because of capacity at the company. So we were traditionally. Like Matthew Desmond's foundation, that guy was talking about with the eviction. He had eviction labs and the salvation army and the red cross. And I'm just naming the ones that, that your listeners would know, but there's a bunch of other ones.
We allocate money to those because we didn't have the capacity. But what we're going to start to be doing is we're going to create a process where people can apply. They can tell their story. And we've, uh, we're going to have a committee that's going to allocate money to both external charities and internally to.
To help people. So we're doing a real rebuild on that. We're bringing in a pretty serious board. I'm not able to say who they are, but when we announce it, you it's going to be it's going to be some household names that most of your listeners were now. And we're going to go raise millions and millions of dollars to help people stay in their home.
MPD: Okay. So from a social perspective, we've got your sense of some of the tactical issues and what, um, what you're doing. If you were king, not president. What would you change about the housing market carb lunch can fix anything or would you do
Jarred Kessler: if that's a really good question.
I think I would go back to what I said before, which is I would hope to expand the access to cheap capital, to innovative products beyond mortgage. And support some of these companies that are building, whether it's fractional ownership, which is a shared, shared ownership model by rent to own, which is I help you buy your home.
You become a renter and you can start paying your way to own the home sale. Leasebacks all, you know, all these different types of innovative companies. I think if I was king for a day, I would provide, I would focus on innovation because I think that's the future and that's going to help the most people.
MPD: All right. Now you've been an entrepreneur for a bit. Now you switched out of internal entrepreneurship, on wall street, and you're on your own, your partners and your team for the folks listening who are entrepreneurs are contemplating. It what's one tip. That's not maybe cliche. That you can offer some advice about how to be successful.
Jarred Kessler: Yeah. You Alex benign wrote a book a few years ago. I'm quoting a book again called the third door, and I'm sure a lot of your, your listeners have read the book. And the premise of the book is when you go to a nightclub, there's everyone that waits in line. And then the second door is.
The billionaires and the athletes, they get to go through the velvet rope. And then there's the third door, which is you run through the back alley. You go through the window, go through the kitchen and you get it. And I think that the only tip I can tell people is whatever people say, how hard it is.
It's going to be 10 times harder, whatever you think your idea is at the beginning, it's never going to be the right idea and you have to be unconventional. And you have to find, you have to go through that third door and you have to find bar credibility. You have to be tenacious, but the most important skill set someone has to have when they're running a startup more than intelligence.
And this is what I think most investors in Silicon valley in the startup world get wrong is they're almost like academic snobs. They want the people that went to Harvard or Yale. And I think being scrappy and having. And if you don't have that and you want to learn how to have it more, Angela Duckworth has a great book on that.
So my advice is figure out how to get your grit game up.
MPD: Karen, always great talking to you. Thanks for
Jarred Kessler: being here. Thank you, mark.
MPD: Thanks to Jerry for being on obviously a huge fan of the mission over at EasyKnock. I think it's an important social construct is where I asked you to help out the podcast. If you liked what you heard, please hook us up with a five star review, a or share with a friend. All of that helps the podcast be discovered.
You can find me on Twitter at MPD to hear more of my conversations with innovators, subscribe on YouTube, Facebook, or any major podcast platform. Just search for innovation with Mark Peter Davis.