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<\/figure>\n<\/div>\nThe title insurance space isn’t generally known for placing outsized bets on technology. But for First American, its shrewd investments in rising proptech companies are a core business strategy.<\/p>\n
As of Sept. 30, First American had deployed<\/a> $292 million into 16 different venture-backed proptech companies, including Offerpad<\/a><\/strong>, Orchard<\/a><\/strong>, Roofstock<\/a><\/strong>, Side<\/a><\/strong> and Pacaso<\/a><\/strong>. By the end of 2021, the firm said it had invested in 20 proptech companies and its venture investments had produced $355 million in gains.<\/p>\n The man spearheading these venture investments is Paul Hurst, who was promoted to chief innovation officer<\/a> at First American earlier this month. As CIO, Hurst will be responsible for identifying opportunities to innovate through strategic venture investments, partnerships, and mergers and acquisitions. In addition, He will continue to serve as the managing director of the company\u2019s venture investing arm.<\/p>\n We caught up with Hurst to talk about his new role and why the firm is looking to invest in commercial real estate tech startups and mortgage tech firms. Here is how Hurst, via email, responded to our questions. This interview has been edited for length and clarity. <\/p>\n BH:<\/strong> When we spoke last fall, First American had invested in 16 different proptech startups and now, if I am not mistaken, that number is up to 20. Can you tell me a little bit about some of these new investments and why they stood out to you?<\/em><\/p>\n Hurst: Over the first few years of our venture investment activities, we predominantly invested in new models for engaging customers and stakeholders in the residential purchase market. This included companies such as Offerpad, Side, Roofstock, Orchard, Pacaso, Sundae<\/strong> and Properly<\/strong>. These investments help us to understand what these customers and the stakeholders around them are likely to want from us in the future, enabling us to adjust existing products and services to meet those needs or create entirely new products and services. Since we now have good coverage across those segments, our more recent investments have primarily focused in two areas \u2013 mortgage technology and commercial real estate.<\/p>\n Over the past few years mortgage technology venture investing has been dominated by point-of-sale systems. The newer opportunities are focused on loan origination systems, capital markets pricing and mortgage servicing. Two examples of investments we have made in this space are Vesta<\/a> <\/strong>and Polly<\/a><\/strong>. By investing in and partnering with companies like these, we can understand what the mortgage infrastructure of the future may look like and how title and settlement services will interact with that infrastructure.<\/p>\n The second area we have been focused on is commercial real estate. In general, I would say that venture investment in commercial real estate technology currently trails residential in terms of the number of companies funded and amount of capital invested. We are now seeing some of the innovative business models we have invested in on the residential side emerge in the commercial real estate arena. One example of this is Lev<\/a><\/strong>, a company that facilitates commercial real estate lending, starting with small- and medium-sized transactions. We\u2019re working closely with the Lev team to explore synergies with our commercial platform, ClarityFirst.<\/strong><\/p>\n BH:<\/strong> What kinds of proptech investments is First American interested in these days?<\/em><\/p>\n Hurst: On the venture investing side, the two areas I just mentioned continue to be a focus. We\u2019re identifying and investing in new mortgage technology companies and capitalizing on the recent interest of entrepreneurs and venture investors in commercial real estate. More broadly, we are always looking for investment opportunities where we can leverage our position in the real estate ecosystem to innovate and provide value to our customers. An example of this is mortgage servicing, where we can both drive innovation and benefit our customers through strategic investment.<\/p>\n Within First American, we have already invested heavily in and will continue to focus on three key areas — digitizing and automating the settlement process, making \u201cinstant\u201d title decisions, and expanding our title plant and property data leadership, which fuels title and settlement automation and decisioning.\u00a0We\u2019ll continue to make sustained, significant investments in First American\u2019s operations to automate processes, extend our leadership in data breadth and quality, and create products to continually streamline and improve the experience for our customers and all parties involved in real estate transactions.<\/p>\n BH: A goal I frequently hear from many in the real estate industry is this idea of streamlining the real estate transaction experience and making it more like an Amazon<\/strong> checkout. Is this something you are thinking about?<\/em><\/p>\n Hurst: While I understand the concept of putting everything under one roof – brokerage, mortgage, title and settlement – to create the \u201cAmazon of Real Estate,\u201d I do think this overlooks the reality that a real estate transaction is far more complicated than ordering groceries, household items or toiletries. It\u2019s one of the largest financial transactions consumers will ever make in their lives and there are many interdependent parts of the purchase process.<\/p>\n Through our venture portfolio and our own internal investments, I have seen firsthand that each component of the transaction is being innovated on extensively and often the people making the largest investments in these innovations are not the vertical integrators, but rather the leading players in the respective segments. So, I think the right analogy for the real estate transaction is not really Amazon, but rather more akin to Shopify<\/strong>, Stripe<\/strong> or Square<\/strong>. That is, consumers will get the streamlined check-out experience they have come to expect, but it will be delivered by an ecosystem of embedded brokerage, mortgage, title and settlement companies and the technology they use.<\/p>\n That is what drives our innovation strategy at First American. We want to \u201cspecialize\u201d and be the digital infrastructure layer for title, settlement and related services in a real estate transaction. That is the vision behind both our internal and external investment strategies.<\/p>\n Brooklee Han: <\/strong>Let’s talk about your new role. What’s different about it from the previous job as managing director of venture investments?\u00a0<\/em><\/p>\n Paul Hurst: In my new role, I\u2019m responsible for evaluating \u2013 together with our business units \u2013 the most promising new spaces for innovation within the real estate and mortgage finance ecosystem. We\u2019re focused on identifying opportunities where we can leverage our strong capital position, nationwide distribution channels, industry-leading data assets, and proprietary technologies, on which we hold more than 30 active patents, to help complement and accelerate our already extensive innovation investments.<\/p>\n I\u2019ll continue to oversee First American\u2019s venture investing arm, but now will also evaluate additional opportunities that could include external partnerships, mergers and acquisitions, and internal product and technology development. The goal is to continually improve our customers\u2019 experience and further strengthen our leadership in the digital transformation of the title and settlement industry.<\/p>\n BH: <\/strong>What PropTech innovation do you personally find really exciting?<\/em><\/p>\n Hurst: I\u2019ve always been particularly fascinated by companies seeking to empower existing real estate, mortgage and title professionals, rather than displace them. While I wholeheartedly believe the real estate transaction experience will continue to become simpler, faster and more transparent, I think there will always be an important role for trusted advisors such as real estate professionals, loan officers and escrow officers in that transaction.<\/p>\n The proptech innovation that excites me is largely focused on automating the rote manual tasks in a transaction \u2013 tasks that can be better accomplished through technology, so that humans can focus more on serving the customer during this important life event. That is a real estate transaction experience that I would be proud to be a part of \u2013 on demand and digital when and where you need it, but with the human touch one would expect when making the largest financial transaction of your life.<\/p>\n BH:<\/strong> Can you talk about where in the real estate process First American is looking to innovate? <\/em><\/p>\n Hurst: There are three areas that immediately come to mind, beyond what I have already mentioned. We\u2019re already making instant title decisions on refinance transactions, and we\u2019re now focused on the more complex challenge of instant title decisioning for purchase transactions. You can\u2019t just risk model your way to making instant title decisions on purchase transactions. This is a space where up-to-date, accurate and extensive data is critical and must be used in combination with risk modeling. With our proprietary data extraction technology, we are the undisputed leader in public record data extraction and aggregation through our Data & Analytics division, and recently furthered our leadership position by adding 1,000 new title plants across the country, bringing our total number of title plants to more than 1,600. Title plants are datasets of records that are critical to underwriting title insurance policies for real estate transactions. Our data leadership will be a competitive advantage for us as we push forward with instant title decisioning on purchase transactions, underscoring the strategic value our data company brings to the title business.<\/p>\n The second is increasing the efficiency with which money moves among parties in a real estate transaction. When people talk about an \u201cinstant close,\u201d they often leave this activity out of the discussion, focusing instead only on escrow and title automation. Escrow fund flows are the critical third leg to the \u201cinstant closing\u201d stool. We are the only underwriter who owns a federally chartered bank, so we\u2019re uniquely positioned to deliver greater efficiency to our customers in this area.<\/p>\n The third is that, while continuing our advocacy and support for our traditional national, super-regional and local title agents, we are placing a keen focus on emerging participants, such as proptechs and other evolving hybrid models, in an effort to help them set up and scale their own services. We have a lot to offer these businesses, not the least of which is the experience and expertise realized through operation of our direct, centralized refinance and commercial businesses through which we close millions of real estate transactions every year.\u00ad\u201d<\/p>\n BH: Can you share developments related to Endpoint?<\/em><\/p>\n Hurst: Digitizing and automating the escrow process is one of the key areas of innovation for us, and Endpoint is a great example of our progress and success in this area. Developed as a stand-alone company, Endpoint is a digital title and settlement company funded by First American that streamlines home closings for real estate agents, buyers and sellers, and empowers proptech companies and investors looking to scale their closing operations. Unlike many of its digital title and settlement peers, Endpoint has been focused on the purchase transaction from the very beginning and it excels in this space.<\/p>\n Launched in 2018, Endpoint has rapidly expanded and is currently operating in 20 markets across seven states. Endpoint\u2019s impressive growth and the increasing number of integrations with proptech companies signal strong demand for a home-buying experience that provides a more digital and integrated closing process without sacrificing the superior service customers expect.<\/p>\n Endpoint has also proven valuable in attracting the next generation of technology talent to First American. The workplace environment and infrastructure created at Endpoint appeals to this talent, and that talent will be critical for us as we further accelerate our innovation efforts in the years ahead.<\/p>\n<\/div>\n<\/div>\n The post Proptech bettor First American looks toward mortgage tech and CRE<\/a> appeared first on HousingWire<\/a>.<\/p>\n