We’re hearing of an increasing number of financial services that have woven a social mission into their operations. Today’s guest, DeAnn O’Donovan is CEO at AHP Servicing, a crowdfunded investment firm that buys past due mortgages at a discount. We talk about how AHP Servicing tries to do well by doing good by finding a way to help homeowners keep their homes out of foreclosure. This social mission permeates the company, from marketing materials to investor relations and even employee interviews.
DeAnn discusses her transition from running a publicly traded real estate finance firm with deep pockets to a younger crowdfunded firm and what that’s been like.
Social mission in financial services
The social responsibility aspect comes through when we’re purchasing someone’s past due loan, we’re genuinely trying to work them them to find a consensual solution — whether that’s modifying the loan, a discounted payoff, of taking a deed in lieu of foreclosure if they’ve already vacated the property.
It’s intended to align the interests of our investors so that they get an outsized return, to make our investments open to non-accredited investors, to find a good solution for our borrowers, and do good work in the community. We;’ve tried to set up our company as a win-win-win for our investors, borrowers and the community.
How deep a social mission runs
Our social mission is everywhere. It’s on our website. It’s in our material we send to borrowers. It’s in our investor material. It’s something I interview for when we’re hiring people to make sure their DNA and what gets them excited resonates with our company mission.
We feel we can be as successful or more successful than our competitors who look only at the bottom line. It’s possible to do well by doing good.
Why it’s so hard for financial companies to get a social mission right
When you’re dealing with people with a financial focus, they tend to lose sight of a social mission because they’re focused on the bottom line. They’ve been trained in finance or economics. A social mission asks them to look at their business through a different lens. It’s not that they don’t want to do it — it’s that they don’t have experience or exposure working with a social mission.
But working with a social mission is a growing trend and it’s growing in financial services. I’ve had interesting preliminary conversations with people who run private wealth funds and they’re actively looking for how to invest in socially responsible companies. When you look at millennials, they like to spend their money with and work for companies that resonate at a social level.
Transitioning from large financial institution to the fintech space
I was previously the chief administrative officer at a national mortgage company that was a division a publicly traded firm. We were originating $5 billion a year. When I moved to AHP Servicing, our predecessor company was doing about $5 million. This year, we think we’ll do about $50 million.
What drew me to AHP Servicing, in addition to the social mission, is that I’m really a builder. I love building companies, teams, and strategy. When I looked at the nucleus of this company, our founder had figured it out but there’s a big difference between being an entrepreneur and being able to build the organization.
There have been a lot of challenges during the first year on the job, including putting all our technology platforms in place and hiring a leadership team whose skills will be able to scale as the organization grows. Putting together the branding and website and all that goes into the marketing has also been a challenge.
Taking the company from $5 million in 2017 before I joined to what should be about $50 million this year has been a lot of work, but it’s been a blast. I absolutely love it.
Crowdfunding as a funding source
Crowdfunding was one of the things that intrigued me about this job. We do a Reg A offering. In November 2018, we launched out current fund. A Reg A offering is somewhere in between a private placement and a public offering. So, it is reviewed by the SEC and we’re open to both accredited and non-accredited investors.
What that does is allow us to be an investment alternative for anyone. An investor can invest with us for as little as $100, unlike other real estate investment platforms out there. We want to be available to anyone, even if they’re just getting started. We’ve had borrowers whom we’ve helped save their homes and when they got back on their feet, invested in our fund to pay it forward.
Crowdfunding has worked well for us and we view it as a cheaper cost of capital compared to a private equity partner or venture capital.