The genesis for Equator, which provides business automation software and an e-commerce hub used by some of the nation’s biggest mortgage servicers, began inauspiciously at eBay about 13 years ago.
It was there that Equator CEO Chris Saitta began investigating whether the auction platform would work for the trading of institutional-sold real estate.
“It was a foundational question with eBay, which was whether they’d have to customize or not,” Saitta recalled. The answer, he said, was yes. Customization was needed for the auction platform to function properly for the real estate industry. Saitta worked on a technology solution that would allow eBay to sell foreclosed properties in this manner. But after two years of using the system, eBay decided it was best for the company to use a standardized platform rather than highly customize it for specific industries.
But by that time, Saitta was hooked.
“I was still really enamored by the foreclosure industry. What I saw was a real lack of technology, especially in the REO sector of default servicing,” he said.
So Saitta left eBay in 2002. Along with Mark McKinley, also an eBay alum and currently Equator’s chairman, he founded REOTrans the following year. (Several years later, REOTrans was renamed Equator.) Their focus: Automate the default transaction universe, beginning with the REO sector.
“If you look at the full continuum, the section that was most underserved was REO,” Saitta said. “At the time, REO was still very much being run by phone, fax and yellow pages. For someone whose passion is automating business with technology, it was just a target-rich environment.”
So Equator began with an REO offer management system. It quickly gained industry recognition, winning the most Innovative Technology Award from real estate trade publication Inman News in its first year, for the first system that automated the offer-negotiation process. It has since expanded that platform to encompass all of REO and all of default.
For his part, Saitta spent time at the California Institute of Technology working on an intangible-asset auction platform, which had many applications, including real estate transactions. In college, he studied economics, not technology, but his passion has always been how technology could automate business functions. Once out of college, Saitta found a better use of his time on the technology side.
THE EARLY DAYS
When Equator launched in 2003, the housing market had little REO volume and residential real estate was fairly strong. The nation had 132,521 REO sales in 2003. That increased to a whopping 892,849 at the peak of REO sales in 2009, according to data from CoreLogic.
“I’d love to tell you that I was smart enough to see what was coming but that just was not the case,” Saitta said. “We certainly vetted the concept knowing that 100% loans were being made and HELOCs were being put on top of them so there might be an issue down the road.”
But the genesis for REOTrans and later Equator’s success really lay with Saitta’s passion for automation technology — and using it to reach an underserved market. A soft sell helped win the company clients in those fledgling early days, he said.
“We thought if we could come up with something that didn’t take the arrogant approach of ‘Hey, throw away your existing servicing system and use us’ … but took the soft approach of ‘Keep your core system in place. We will gently layer on top of it and provide the two things you need, which are configurability and e-commerce,’” Saitta said.
To win over clients, Equator made sure there were no hurdles to doing business with the startup. There were no long-term contracts, Saitta said. There also weren’t any draconian agreements, hidden clauses or exclusivity requirements.
The strategy worked. Even today, Saitta said the company maintains only a small business development staff. Instead, it relies on clients inviting them into other aspects of their business or referring them to new clients.
Equator isn’t the only company out there with a default transaction platform. As one of the first, however, it has established itself as the leader in the field. It touts relationships with four of the nation’s five major servicers as well as one government-sponsored enterprise – but like many aspects of its business, Equator remains staunchly secretive of its client list and did not provide a list for this story.
But with tens of thousands of real estate professionals now using the system regularly, many of the company’s clients appear to be well known to most. Some major clients, according to people who use the Equator system, include Bank of America, Nationstar and GMAC, among others.
Equator, as a private company, also declines to reveal any details about its financial condition, including annual revenue. It does disclose that employment has grown from about 10 in its first year to some 400 people now scattered among offices in Irvine, Calif., Dallas, Los Angeles and Seattle.
The company’s core mission is to provide efficiency, transparency and compliance, Saitta said.
“I don’t think we were ever right (at any one time) on all three fronts, but over time we were right on each front. Initially, people needed efficiency. And then the volume really hit, people started questioning whether they were keeping up with the volume correctly, and what they needed was transparency. They needed to have an auditor sit on a system and look through the entire platform and see that things were being done and how they were being done.”
Post-housing crisis, compliance is now the key benefit for many mortgage servicers on the Equator platform, he said.
THE EVOLUTION OF A SOFTWARE GIANT
From a cultural aspect, Equator worked to build long-term commitments among its employees by fostering an atmosphere that encourages its employees to innovate. So even though the company has ballooned in size, it still works hard to provide that startup excitement, he said.
It’s not unusual for employees to spend a lot of time on whiteboard sessions, for example, when a lot of crazy ideas might come forth with the dry erase marker, but so do some good ideas.
“We fostered that sense of innovation by enabling people,” said Saitta.
“When you enable people that allows them to derive more than just a paycheck. It gives them an internal reward for being able to effectuate change. The first guy that we hired into the company is still with us. And every year at our holiday party, we have the people who have been with us the longest. The 10 people who were really around Day 1 are still very entrenched in the company. I think that speaks to having that thrill of innovation.”
Carlos Gaudinez Jr. with First Team SNS Real Estate in Diamond Bar, Calif., has been using the Equator system for several years, beginning when his client, Bank of America, began processing short sale transactions on the system.
“When we first started there were a lot of glitches, but overall, now, it’s probably the best system out there,” Gaudinez said. Equator’s system tends to be “more user friendly” than others, he said.
Gaudinez said he likes how the system can be customized so servicers can use their own unique forms. Equator, he said, provides helpful tutorials for real estate agents on how to use the system.
McKenzie Clark, transaction and offer coordinator at Pacific Moon Real Estate in Southern California, which does REO, said she works with about 10 bank/property management sites, including Equator.
“I do find Equator at the top of my list,” she said. “It is very user friendly and efficient. They recently did a complete upgrade on their platform to enhance the user experience even more. If there is ever an issue, there is a helpful online chat option.”
Alex Macau, from Keller Williams Realty Premier Properties in Miami, said he’s used the system for many years and hasn’t had a quibble – at least until recently.
A new messaging system, however, makes it nearly impossible for him to retain records of messages between himself and servicer clients, Macau said. Under the old system, he said he copied his messages sent to servicers to Outlook email to retain a copy. But now some servicers are using a new privacy option that requires him to log into the Equator system to retrieve a message from a servicer client. It is no longer possible to copy himself with an email of the message or to download the message. The only way to retain it for his records is to go old school and print it out.
“If I try to copy myself, the message I get is that I have a message on Equator and I don’t get to see what I’m sending or receiving, so I can’t keep records on Outlook,” Macau said. “You never know when there might be an issue where you need to send transcripts to the court or to a mediator.”
Equator, he said, was generally unresponsive to his concerns and unceremoniously ended his chat sessions in which he was trying to determine if there was a way for him to retain records via the new system.
“I’m afraid I will lose access to all of these messages,” he said, but added, “My other experiences have been good. The system is a vessel. It depends how servicers and agents use it. It is definitely much more reliable than some of the other platforms we are forced to use.”
A LOOK TO THE FUTURE
John Vella is Equator’s chief operating officer. He is still a newbie of sorts, having joined the company in 2010.
Vella’s role includes overseeing growth strategy.
Although REO is waning, Equator still sees a significant need for those default service products, Vella said. It has added newer, mid-tier servicers and special servicers into the fold who are buying mortgage servicing rights from some of the industry’s big players. Those players need the technology to provide compliance. Meanwhile, existing customers are enhancing their systems as compliance rules change, he said, providing additional streams of business.
But Equator isn’t content with incremental changes affecting the REO business. Instead, it has created a whole suite of new products and services to see itself expand into the next housing era.
“We are not just an REO and short sale platform,” Vella said. “We also have a loan segmentation model, which basically is a post-collection system that works in loss mitigation and on early delinquencies.”
Equator also created a loan modification module and foreclosure/bankruptcy module in early 2013, for a full suite of default products serving the whole continuum of default management, according to the company. Equator has just started promoting its latest two modules to the industry and is getting a good response, Vella said, although he did not identify clients that have signed up for the new modules.
Expansions in default aside, Equator isn’t banking on a default-only business because that segment declines as the traditional housing market improves.
Part of the company’s plan is to diversify into origination technology, as well as consumer and real estate agent products.
On the origination side, Equator believes it’s a natural fit with the data and relationships it already has with mortgage servicers and real estate agents to provide clients with data management, document management and mortgage prequalification technology.
It plans to provide leads and connections between banks, real estate agents and consumers who already are connected via Equator’s technology and e-commerce marketplaces, Vella said. It is at the very beginning stages of that process, but the business plan to expand into origination is in place, he said.
“With minor adjustments (our system) can be a perfect integration into the origination space to provide various services from compliance to pre-qual to lead generation,” Vella explained.
Equator expects the automation and connections it already provides in the default space to translate well into other areas. As REO transactions wane, it’s partnering with others to diversify the platform’s reach.
It recently partnered with Carrington Technology Solutions to launch software automation for real estate investors called RentPointe, using functionality Equator already held from its default servicing side. The new partnered system adds in an acquisition and rental product to help investors manage diverse portfolios of single-family rental properties.
On the consumer side, Equator launched a consumer-facing website in February providing free access to real-time foreclosure information — a service that costs money on competitor websites even though the information might be dated because it’s pulled from public records. Equator, as the source of the transactions, can provide real-time information, Saitta said.
The strategy behind making the site free is to raise awareness of the company among consumers as well as to benefit its servicer clients who get quicker turn times with the more exposure they get on their properties, Saitta added.
Equator’s goal going forward is to maintain its focus on innovation.
“It’s a real good time for Equator,” Saitta said. “One of the things we’ve been focused on for a long time is efficiency, transparency and compliance. In today’s environment, there is a real need for solid, able technology that ensures compliance. It’s a difficult time because of the pace of change, but [I think] we can match that pace.”