November 02, 2022

A Q&A with Irene Tollinger of Acre Homes

Katie Neal

In an exclusive conversation with Plaid and Fintech Nexus, Irene Tollinger, Co-Founder, Product & Engineering, Acre Homes, shares how they use Plaid to unlock buyer insights and deliver a seamless customer approval application experience.

In order to fulfill their mission of building a modern home ownership experience, Acre Homes needed a way to improve the customer approval application experience. With Plaid’s suite of credit products, Acre Homes built a seamless application experience, leveraging Plaid’s best-in-class conversion practices, while gaining deeper insights into their potential home buyers so that they can make more informed decisions. 

In this Q&A, Irene Tollinger, Co-Founder, Product & Engineering, Acre Homes, discusses how Plaid fits into their application process, what data they look for when working with potential home buyers, and what today’s consumers expect from a modern approval process.

Todd: Irene, can you tell us about Acre Homes?

Irene: Acre is a new model of home ownership. We've always thought that there should be something in between renting with zero ownership and taking out a huge mortgage, levering up your family with debt to own 100% of that home. With Acre you can effectively buy between 5% and 10% of that home. We call this the “value share”. Acre buys the rest with a competitive cash offer which means our customers have zero debt and lower monthly payments–up to 20% lower. As a result, they’re able to build wealth on their value share and have more flexibility whether they want to buy the whole home, transfer to another Acre home, or cash out. 

Todd: Katie, how does Plaid support both lenders and this new home ownership platform? 

Katie: Plaid provides data to both traditional mortgage companies and rent-to-own companies. We provide the relevant data Acre needs to complete its buyer evaluation. Lenders use a host of Plaid products from Identity Verification to account authentication to move ACH disbursements and set up the repayment process. 

Plaid also provides data that traditional and fintech lenders and other platforms use to underwrite the consumer. Plaid Assets provides identity data, transactions data for up to two years, and historical, current, and available balance data while Plaid Income, our latest credit product, provides you with three different ways to verify income and employment. Consumers can either connect their bank accounts and select income streams, connect to their payroll provider, or upload a pay stub. With Plaid, it’s easy for companies like Acre to gain more insights and build the seamless application experience that today’s consumers expect. 

Irene: Acre is not a lender but we’re still able to use Plaid’s Asset and Income products to make decisions in the context of home ownership fit. We’re also not constrained by a specific set of requirements that you find in the traditional underwriting process. Our first product approval process was very much wrapped around Plaid and we've been able to get a lot of mileage in terms of creating a clean user experience with that end-to-end.

Katie: Irene, I'm curious why you originally wanted to partner with Plaid and how that's helped kick off the process for you as a newer company.

Irene: We never considered building because it wasn’t strategic or practical. It just didn't cross my mind–we were always going to use Plaid. The thing that was new for me was wrapping a third-party product right in the middle of a core customer workflow. That's different from what I've done in past iterations. When I worked in health tech in the early days, there was no Plaid equivalent. We built everything in-house and it was so heavy and unstrategic. It's amazing to be able to just pull together the infrastructure that exists.

It's inspiring that the MVP of a super important Acre process is wrapping Plaid. Plaid was able to help Acre even though we're pretty tiny in terms of scale. We were able to knock on the door and say, "Hey, we want to use these beta products. We don't have a lot of volume, but we write really good bug reports." And the answer from Plaid was, "Let's do this." How amazing is that?

Todd: Irene, how much more streamlined is Acre's process and the home ownership potential process versus what a traditional mortgage might be? 

Irene: I've seen the mortgage checklists that are 80 check boxes long, and we have a significantly streamlined process in comparison. That's because we don't have to provide all the data that is required to resell a mortgage. So we're able to pull off a lot of those constraints. Of course, we do want to make sure that Acre is actually a fit and that our customer is in a good financial situation. We want aligned incentives of shared ownership and building wealth.

Katie: People expect that these types of experiences are geared for Millennials or Gen Z, but really everyone benefits. The people who benefit the most are those who know what it’s like to go through the traditional loan application process and aren’t interested in doing it again.

Irene: Our end-to-end process, from an initial intro, often from a real estate agent, to having an offer accepted on a home can be as fast as 1-3 days. The real estate market moves fast and the approval process is a key piece of that. The approval process can be done in as quickly as four minutes. On average, it takes roughly 15 minutes. Obviously it can take longer if you don't have your bank credentials handy.

Todd: Some people may think that your model is for people who can't get into a regular home. What are some of the incorrect assumptions about your product?

Irene: Acre is really designed to be a financially better option for folks who don't know how long they'll be in the home and who are in that 3, 5, or 6 year time horizon. If folks tell us that they want to be there for 15 years, we encourage them to go get a mortgage. There's no need to sell this to everyone. This stands on its own. And you can also see this in the price point of homes that we're buying which obviously varies by market.

Katie: There's also a misconception that bank account data and various streams of income data are used as stand-alones by lenders, when in reality they're supplemental to more traditional credit scores. All types of lenders use the data that Plaid provides. Some lenders use this data to underwrite consumers because they believe traditional credit scores aren't the most representative example of a consumer's ability or willingness to repay. Some lenders use Plaid data as an additive to their traditional credit model. 

A lot of lenders use Plaid to be more competitive in their offers and to differentiate themselves by offering lower interest rates or larger loans. They’ve also used Plaid to look at two years of transaction data and determined that the ability to pay is higher than we thought. That's really something that has resonated with the mortgage market, especially these past two years.

Irene: Let's say we have a self-employed person who makes $150,000 in a year, and then the following year makes $300,000. Well, that's a puzzle from a traditional perspective because that looks very lumpy. But if you look at the actual detailed data from the assets and bank income side, you're able to see that on a per month basis, if you remove the arbitrary year boundary, the income distribution is much smoother. Once we see this, we're able to update our criteria based on those real world learnings.

Katie: I’ve seen this with one of our lenders who uses both traditional credit scores and Plaid Assets and Income data. They're able to approve 29% more loans than traditional credit based methods at the same default rate. Another lender that uses both traditional credit scores and Plaid data is able to offer a 20% lower interest rate, on average, than using just a traditional credit score. So those are the kind of stats we see for lenders using both Plaid and traditional credit scores. 

Plus, we see a lot of lenders using Plaid to perform ongoing monitoring, and make sure that a consumer is able to repay at that time.

Todd: Irene, what does that mean for your business when you think about where Acre can go in the future?

Irene: As we scale, we’re being very thoughtful about how the data is cleaned and de-identified, so that we can use it to tweak our approval algorithm. Then we can analyze the effect of any changes to our algorithm across our data set. 

We’ve adopted new Plaid products like Plaid Income which has expanded the core assets data set that we can use. We didn't build any analysis on top of transaction data, because bank income data was always available with Plaid. As Plaid continues to evolve and add new products in line with what becomes possible at each point as the ecosystem develops, it only creates more value for us.

Katie: Plaid wants to be a one-stop shop for lenders. We started off with Assets, built Income on top of Assets, and we're laser focused on becoming the best fit for lenders of any shape and size. Ultimately, we want to provide the data in a way that can be ingested by more traditional mortgage lending platforms and also platforms like Acre. 

That’s why we're launching a beta product called Credit Categories that streamlines the insights we've built on top of our Transactions data, and summarizes those into 25 credit categories. Credit Categories makes it easy to identify inflows and outflows–such as business expenses, interest, and payment streams so that lenders can simply incorporate this information into their underwriting models. This feature will help supplement data from traditional credit bureaus who are trying to figure out how they incorporate new types of expenses, like Buy Now, Pay Later. 

Todd: Irene, does that data help Acre react more quickly than some of these traditional models?  

Irene: Yes, the streamlined process helps us move more quickly. You can see some of this in our conversion rates. The completion rates that we're seeing for assets for the bank link are 80% and the percentage of people who make it through the full process is about 65%. I think mostly the folks who don't complete, it's that they decided not to, not that there was a technical issue. We track that very, very carefully. We're also able to turn around approval quickly. Usually within 24 hours which adds to the customer experience. 

Todd: What does the future look like?

Katie: I hope that we continue to move towards a world that's more transparent for consumers by allowing them to see all the data they're sharing including how it's benefiting or not benefiting them. I love the idea of consumers being able to connect to Plaid products in order to get access to better loans. And that's what I'm most excited about exploring.

Irene: Acre wants to be thoughtful about the types of people we can serve and how it can be harder for some people because the system isn't terribly well designed. We want to help a broad range of people find a home that they love and have a sense of place.

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