Five questions with raj date managing partner at fenway summer

Five Questions With Raj Date, managing partner at Fenway Summer

Date: June 24, 2020

Before founding Fenway Summer LLC, a hybrid advisory and venture investment firm focused on U.S. consumer finance, in 2013, Raj Date pursued a long, varied career in and around U.S. financial institutions as a senior policymaker, bank executive and on Wall Street.

Raj was the first deputy director of the U.S. Consumer Financial Protection Bureau (CFPB), following a stint as interim leader of the new agency. Before his time in public policy, Raj was a managing director in the financial institutions group at Deutsche Bank Securities; senior vice president for corporate strategy and development at Capital One Financial; and a consultant in the financial institutions practice at McKinsey & Company. He has also served as an attorney in both private and government practice.

How do you bring to bear the consumer protection mandate you had while serving as acting Director of the Consumer Financial Protection Bureau to the products and services offered by Fenway Summer?

I liked to describe the CFPB mission as helping to make the consumer finance markets actually work for the American people. That meant ensuring a competitive market where everyone follows the same rules; that meant trying to make disclosures simple and transparent so people can actually understand what they’re buying; that meant enabling consumer-friendly innovation, to provide better, cheaper, more reliable access.

I’d like to think that Fenway Summer takes the spirit of that mission and combines it with a fast-moving, aggressive, creative private-sector mindset. We want to develop great products that actually serve consumer needs. We want to enable our customers to really understand what we offer, and choose the product that’s right for them. We want to enable our customers to live better financial lives. And we want to win — in terms of growth and market share and returns to our investors – we want to win when our customers win.

Fenway Summer recently announced the merger of Ethos Lending, which will originate non-qualified mortgages as well as agency-conforming loans. How might your underwriting engines differ from larger, more established mortgage lenders?

The key for us in the non-qualified market will be to efficiently calibrate and price for risk, whether that’s credit risk, rate risk, or – importantly – the ability-to-repay liability under Dodd-Frank’s Title XIV. We’re still in our early days, but I think our approach to underwriting will be distinct in some important ways.

Maybe most important are the quite real benefits of specialization. We can be very focused in designing analytics and processes that work backwards from a handful of core questions: How can we be confident that this borrower, at the time of the loan, has a reasonable ability to repay? How can we verify that the facts we’re relying on to make that decision are, in fact, true? How can we document our thinking and our fact base, in case something goes wrong later? How can we do all this and still make this a satisfying, or even pleasant, experience for the borrower and broker? And, finally, how can we do all this using technology so that we can keep unit costs well managed?

Those are tough questions, but they’re a little easier when it’s your main focus. And, perhaps paradoxically given the scale-intensive nature of the mortgage business, it actually helps to be starting from scratch. We’re not burdened by old technology; we’re not burdened by legacy liabilities; we’re not burdened by outdated ways of thinking. Building anything new is tough. But sometimes it can really be an advantage.

As acting director of the CFPB, you literally had to build a regulatory agency from the ground up. That’s obviously a huge task, but did the job pose any challenges that surprised you?

Well, first, I wasn’t really the acting director. My title was something like Special Advisor to the Secretary of the Treasury for the Consumer Financial Protection Bureau. It rolls right off the tongue.

But yes, building the institution really was a challenge. I think we all had realized, going in, that it would have all of the complexity of a startup, combined with all the complexity of a big post-merger environment. And all this would be executed in the fishbowl of a bizarrely politicized environment.

What was surprising to me, as a newcomer to government, is just how much more challenging virtually everything is given the constraints of the federal system. A regulatory agency has got just a few raw materials: money, talent, and technology. But in the federal government it’s almost intentionally hard to spend money, it’s hard to acquire world-class talent, it’s hard to develop technology. All that to me was surprising.

On the other hand, I was also surprised, and gratified, by the fact that some things were easy for us. And I think that was because, in the government as in the private sector, some things matter above all else: mission matters; culture matters; leadership matters. We had a mission that everyone – and I really do mean everyone – could really believe in. We had a culture that was hard-driving and team-centric and nimble. And, we had great leaders: Elizabeth Warren and Tim Geithner and Rich Cordray first among them.

As a lender, is it important to you to help your customers better understand credit products and the role their credit profiles play in everyday life? If so, what is your approach to this challenge?

Finance has the potential to make people’s lives better, but for too many, financial products have made their lives worse. There are lots of ways that can change for the better. I personally think that sensible regulatory reform was a big step in the right direction, but there’s no question that better financial literacy would be a big help. That’s a lot easier said than done, but I think financial institutions like the ones we serve as clients, and the ones we are building, and the ones we are investing in, are in a particularly good position to help. After all, a typical homeowner might have five mortgages over the course of his or her lifetime. When we’re at scale in our mortgage company, Ethos, we’ll do five mortgages every 15 minutes. We should be able to give our customers the benefit of some of our experience.

What other areas of the consumer credit market are in focus for Fenway Summer and why?

We’ve built a team that is particularly deep in three areas: credit analytics; capital markets execution; and regulatory and legal analysis. We’ll spend time wherever those three sets of issues are important. So we have lots of activity in unsecured lending, including a credit card venture that we are incubating; we obviously are building a mortgage bank called Ethos; I’d be very surprised if we don’t have a number of activities in student lending.