Michael Tannenbaum on Why Mortgage Technology Keeps Failing Mortgage

Mortgage has always been a relationship business, but it has also always been a performance business. Markets move in real time, capital flows react instantly, and every basis point matters. Few people understand that balancing act better than Michael Tannenbaum, the CEO of Figure and one of the more closely watched executives in housing finance right now. Long before he was running a public company trying to reshape mortgage infrastructure through blockchain-based capital markets and AI-driven origination, he and I were coworkers at SoFi, both navigating the chaos and ambition of fintech’s early growth years. More than a decade later, we still regularly meet for dinner, usually talking about the mortgage industry ("mortgagia," as we call it), life choices, rates, and tales from years gone by.

Figure occupies a strange and increasingly important corner of the mortgage world. It is part lender, part capital markets platform, part infrastructure company, and part technology bet on what the future of housing finance could look like. At a time when traditional mortgage companies are under pressure from elevated rates, shrinking volumes, and investor skepticism, Figure has managed to attract a very different kind of attention from Wall Street. The company recently posted what Tannenbaum calls “Rule of 140” earnings: roughly ninety percent revenue growth paired with nearly fifty percent EBITDA margins, numbers that stand out not just in mortgage, but in public markets broadly.

In our conversation, Tannenbaum discussed what it feels like to run a newly public company in an unusually volatile market environment, why he believes mortgage’s cost structure has barely improved despite decades of technological advancement, how Figure is trying to build liquidity and standardization into non-Agency lending, and why he thinks the future loan experience will depend as much on infrastructure as interface. We also talked about public market psychology, blockchain, AI hype, the treadmill of quarterly earnings, and the growing gap between traditional lenders and companies positioning themselves more like financial networks than mortgage originators.

The conversation below has been edited for length and clarity.

Q: Figure recently reported earnings. What stood out most from the quarter?

A: One of the highlights was that Figure is what we call a “Rule of 140” company, whereas the traditional benchmark is the “Rule of 40.” In the software and tech world, investors often look at a company’s growth rate plus its margin profile, and they generally want that number to total around 40. The idea is that if you’re growing extremely quickly, investors may tolerate lower margins because the growth itself is valuable.

Figure is unusual because we’re growing revenue around 90 percent while also producing roughly 50 percent EBITDA margins. That combination is rare. U.S. GDP grows around 3 percent, while we’re growing close to 90–100 percent, but we’re also doing it with very strong profitability. That’s what really differentiates the company, and it in large part reflects the value we add to our partners' businesses.

Q: Mortgage stocks broadly have struggled in the market lately. What makes Figure different from traditional mortgage companies in the eyes of investors?

A: I think it’s too simplistic to say the market likes Figure and dislikes other mortgage companies. Public markets in general are extremely frenetic right now, and not just in mortgage. There’s a huge amount of noise around AI, interest rates, inflation, and the economy overall. Investors are trying to figure out how AI affects software companies, financial services companies, and the broader economy all at the same time.

The truth is that Figure is increasingly viewed less like a traditional lender and more like a technology and capital markets platform. Investors see us as competing more with infrastructure providers or even with pieces of what Fannie Mae and Freddie Mac do. Obviously, part of our business still uses our balance sheet, but when I joined the company in 2024 we launched Figure Connect, and that platform now accounts for roughly 60 percent of our volume. Most of that business doesn’t touch our balance sheet or our licenses. We’re building a marketplace where partners can use our technology to originate loans and then distribute them efficiently into the capital markets.

Q: How would you describe Figure Connect?

A: Figure Connect is essentially a combination of origination technology, underwriting infrastructure, and secondary market execution. It standardizes the entire process from loan creation through securitization and sale into the market. Figure partners use this technology to originate and underwrite loans and sell into a capital market that is directly connected to this origination technology, which acts as a combination of an LOS + Fannie Mae.

A big part of what differentiates Figure is the way we’ve used blockchain infrastructure. Blockchain by itself isn’t some magic solution; just like AI isn’t automatically a solution. Mortgages moved from paper processes to software years ago, but production costs still sit around $12,000 per loan industry-wide. Technology alone doesn’t automatically lower costs.

What we’ve done differently is use blockchain for standardization and liquidity. We’ve created a liquid market for assets originated through our system, and those two things go hand in hand. That’s allowed us to remove significant time and cost from the process. The average time through the Figure funnel is about nine days, which is dramatically faster than traditional mortgage workflows. It also reduces interest rate risk and balance sheet risk, which is important for our partners.

Q: You mentioned mortgage production costs remaining high despite advances in technology. Why do you think that is?

A: There’s a concept in tech circles called Jevons Paradox, which basically says that when something becomes more efficient, people often end up using more of it overall. The same thing can happen with AI and workflow automation. As AI lowers the cost of producing information and content, you may actually create more workflow and more complexity rather than less.

That’s why infrastructure matters so much. AI by itself doesn’t necessarily lower mortgage costs if the underlying system remains fragmented. At Figure, we think of AI as the brain, while blockchain acts more like the nervous system. You still need standardized, verifiable infrastructure underneath all the automation, especially as the overall volume of information grows.

Q: What has being a public company CEO taught you?

A: The scale of public markets is very different from private markets. As a private company, you spend a lot of time trying to find a small number of investors. Once you’re public, anyone anywhere can invest in your company instantly.

That changes communication entirely. Investor relations, messaging, and explaining what you’re building become incredibly important because the percentage of investors you’ll ever actually speak to is very small. You have to be extremely clear about what the company is, what the strategy is, and why the business is compelling long term.

Q: How did you personally handle major stock price volatility after earnings?

A: Pretending you don’t notice it would obviously be dishonest. It feels bad because you feel like you’re letting people down: employees, investors, people who bought the stock at higher levels.

But at the same time, I’ve been through much worse situations in my career. I’ve been at non-bank lenders where we were genuinely worried about whether the company would survive. I’ve had financing pulled before. So while the stock volatility was difficult, it never felt existential because the underlying business itself was strong.

After one earnings release earlier this year, the stock dropped sharply and then recovered quickly afterward. That experience reinforced how emotional and noisy public markets can be in the short term. Being a public company almost feels like being on a treadmill: you’re constantly operating quarter to quarter because by the time one earnings cycle finishes, you’re already halfway into the next quarter.

Q: How do you balance investor expectations with the company’s long-term vision?

A: We absolutely care what the market thinks... otherwise we wouldn’t have chosen to go public. But you can’t manage a company based on daily stock movements.

A lot of this comes down to alignment internally. Figure's founder and Chairman Mike Cagney thinks very long term, and we’re aligned around building something much larger over a multi-year horizon. When you’re focused on building for the next decade, you can’t overreact to one day or one quarter in the market, even though obviously you still pay attention to it.