From Fannie Mae's first PM to Pathward Innovation with Suhas Reddy

What if millions of Americans had already proven they could handle a mortgage payment — and the system simply refused to count it?

Reggie sits down with Suhas Reddy, Head of Product at Pathward Bank, to unpack what it really means to build product inside the most regulated corners of financial services. Suhas was among the early product leaders at Fannie Mae, driving the Lighthouse Project that later transformed one of the world's largest secondary mortgage institutions into a customer-centric, digital-first product organisation. He now leads product at Pathward as SVP of Product Management across the Nasdaq-listed sponsor bank's B2B products — payments, issuing, lending, acquiring, and commercial finance — developing the products that enable fintechs and brands to reach customers at scale.

The conversation covers the 10-year product build that became an overnight pandemic success story, why Suhas treats risk and compliance as design constraints rather than roadblocks, and the title insurance battle he fought — and lost — years before it became national policy. They get into the philosophy of “Legos, not unicorns” as a framework for building scalable fintech infrastructure, and the human-centric conviction that turned rental payment history into a mortgage underwriting signal — unlocking homeownership for borrowers the system had previously ignored. 

Suhas continues to build infrastructure that expands financial access for underserved communities through Pathward's product platform.

Transcript

Reggie Young: Welcome back to Fintech Layer Cake, where we uncover secret recipes and practical insights from fintech leaders and experts. I'm your host, Reggie Young, Chief of Staff at Lithic. In today's episode, I chat with Suhas Reddy, the head of product at Pathward Bank. Suhas has a really interesting background. He worked at Fannie Mae for many years and was their first-ever product manager. We talk about his lessons from driving product innovation in the mortgage space, what working on product at Fannie Mae actually looks like, and how fintech builders can effectively operate in such a highly regulated space.

Fintech Layer Cake is powered by the card issuing platform, Lithic. We provide financial infrastructure that enables teams to build better payments products for consumers and businesses. Nothing in this podcast should be considered legal or financial advice. If you enjoy Fintech Layer Cake, please give it a review on Apple, Spotify, or wherever you listen.

Suhas, welcome to the podcast. Really excited for our conversation today. You have an interesting background. You've got a view from the bank, product team point of view, which I think a lot of folks in fintech don't always hear.

The place I really want to start, though, is you were Fannie Mae's first product manager. I'd love to talk about that, because I don't normally think about Fannie Mae and think about Fannie Mae having product managers as a thing that a large secondary mortgage giant would do. What is a product manager at Fannie Mae? What kind of problems did you work on? 

Suhas Reddy: Yeah. Most people think of us, Fannie Mae, as a public policy, capital markets sort of institution. But early when the digital phenomena was transforming every other business and the fintech revolution was just getting started, our CEO at that time, as well as the leader of the single-family business, decided to replicate that within the walls of Fannie Mae and start this whole digital transformation. So we went from focusing on policy, capital markets, especially on the secondary market side, to, hey, who are our customers? What are the products we have? Who uses them? What problems, jobs to be done, are we solving, and what does the customer journey look like?

To put it in a nutshell, our work there was essentially to get products, tools in the hands of our lenders so they can approve a borrower without adding additional risk to the system, without adding additional costs to the borrower. The 30-year fixed rate mortgage is the 30-year fixed rate mortgage. It's a unique product not available anywhere in the world. That's not going to change, but there are so many other things around it where there are opportunities to work on.

That was the big thing I worked on. I was the first product manager in an incubator effort, we called the Lighthouse Project. Three years later, we had transformed into a product organization focused on digital products. We already had made forays into it. We had the number one underwriting engine in the industry, 95% penetration, called Desktop Underwriter. We just turned that into a product and a service and then expanded on the adjacencies over time.

Reggie Young: Interesting. I know you were there before and during the pandemic, which must have been an interesting time. How did the pandemic change things at Fannie Mae?

Suhas Reddy: I tell you, Reggie, 2020, 2021 were massive years for us there, record number of transactions, mostly refis. Everybody and their friend refinanced at that time into mortgages with twos and threes on them, which is incredible. We did some really cool things before that where we were still piloting that just went mainstream when the pandemic happened. Let me give you a feel for some things that happened.

We had been working on this product that helps us waive the need for a physical appraisal for a mortgage. There's the credit risk, and then there's the collateral risk. It started off as a three-year effort, but it became a 10-year effort because we have to go all the way back, look at the forms that a licensed appraiser uses, completely standardize them across all states, standardize the data and collect the data, build the models on that data, train the models. So we were using it internally, and in 2019, we launched a pilot called Property Inspection Waivers. Careful wording, right? We're not saying we're waiving an appraisal.

But the pandemic came, and suddenly, an appraiser visiting your home is not an inconvenience. It's a health hazard. So we had to go mainstream with this product. We realized that within a certain LTV band, our confidence in the valuation was much higher than even the actual appraisal on the ground. By mid-2021, 40% to 50% of all the mortgages we were doing had appraisal waivers. If you restrict it to non-cash-out refis, it went up to 65%, 70%.

I'm a product guy. You're talking about a product that took 10 years to get ready, and it found its moment in the pandemic. Also, the twos and threes are not coming back probably ever in our lifetime. So it helped a lot of people get cheaper mortgages. It has other side effects now, but it's fantastic to see the product go mainstream.

Reggie Young: Yeah. A 10-year overnight success story as a lot of product adoption stories are. Interesting. And then now you've moved to working at the bank sponsor side, head of product at Pathward Bank. I think a lot of listeners are probably familiar with Pathward, but in case they aren't familiar, what should they know about the bank? 

Suhas Reddy: We've been in the fintech sponsor banking space for a while now, 20 years in the payment industry. But just to step back a little bit, publicly traded, OCC regulated, meaning federally chartered bank, listed on the Nasdaq. We've been around for almost 50 years, but last 20, 25 years primarily in the payments business. You're familiar with cards, so we've done a lot of that. We were pioneers of the prepaid card industry. But now we are a broad swath of products available, all the way from issuing cards, acquiring, consumer lending, and commercial lending, as well as embedded finance solutions in the tax space.

Reggie Young: As the head of product management at a sponsor bank, what sort of problems do you work on? What's the sort of road map of typical issues you encounter?

Suhas Reddy: The headline I would give there is my job is to figure out how to make us the best platform that fintechs and brands can use to reach out to their niche audiences, embed great financial products that serve their specific needs, including moving money, offering credit, giving early access to pay perhaps, or tax refunds, and to do that in a way where, on the back end, we have the infrastructure that can serve a variety of use cases while still building Legos, we call them product Legos, inside. We have this going thing, Legos, not unicorns. It's very easy to build specific to every single program.

This is a fascinating problem I have in my role. I find it really interesting. How do I serve all these use cases across all these verticals, but in a way that we optimize internally, standardize internally, and preserve the core, store the core, innovate on the edges.

Reggie Young: We talk about this at Lithic all the time. If you have a few large customers that get success and break away, that can sometimes teach you bad lessons, that get you away from the Legos and the primitives that apply horizontally. And so you obviously want to support the programs that are growing and having that success. But you also need to make sure that you're still building the Legos appropriately in ways that will scale and be applicable as a sort of infrastructure layer.

Suhas Reddy: Yeah. You have a large background in this space. You see the parallel side. In my role at Fannie Mae as well, a lot of the work that I did was to figure out how innovation can happen in partnership with fintechs while still being within the confines of a heavily regulated financial institution. And it's almost the same model that transitions here as well.

I've just finished four years at Pathward, and it's been a great journey, taking a traditional institution and really proud of what we have accomplished in terms of transforming to be a digital-first organization that can build for a variety of partner situations. We call all of them fintechs, our partners. And to look at their journey and who they're trying to serve and be great allies in doing that.

Reggie Young: I think one consistent thing from places you've worked, Fannie Mae, Pathward, most of your careers, it's highly regulated places, which is a hard area to be in product. This kind of speaks probably to the 10-year timeline for adoption of waiving the requirements during COVID. How does navigating the regulatory complexity- how do you deal with that as somebody in product? How do you push innovation forward while also making sure that the institutions you're at are staying safe and compliant? What are your top tips and lessons for folks who may be new to product or want to up-level their product knowledge in fintech?

Suhas Reddy: A lot of folks come from the tech side into financial services.

Reggie Young: Move fast and break things. Doesn't work well. 

Suhas Reddy: Fail fast. To be honest, some things transition over quite nicely. Some things don't. Let me say a few principles to keep in mind. Firstly, risk and compliance, you should treat them as design constraints, not blockers, not check-off points. How do you solve a problem within that set design constraint? How do you bring your colleagues in the risk space, the legal space, the compliance space, early into the discovery cycle, not in design, not in go-to-market, but early in the discovery side? So co-create with them.

Last, get your data right. A lot of problems or uncertainties can be managed or mitigated through having the right data that gives you a higher level of confidence. Forget giving you as the product guy at the table, but give your colleagues in the risk and compliance space data confidence of the risk exposure. If you can figure that out, you can innovate the heck out of things. Let me give you another example, again, another idea, right idea, right solution, but timing wasn't great.

All of us have had mortgages, right? One of the things we all pay for but we don't probably notice as part of our closing cost is $1,000 to $2,000 shock for lender-required title insurance. Even if you were doing it for your primary home where you've lived for 10 years, and if you refinanced it, you still have to pay another $2,000 on top of it for title insurance.

We tried, from an innovation perspective, to get rid of title insurance, at least for a sliver of cases where it doesn't make any sense. We looked at the data of delinquencies, issues that we would get because of title issues. Fifty years ago, different case. In this digital age where records are digitized from the get-go, you can search titles with a click of a button, it's not as expensive. It's an unnecessary cost that Fannie Mae was tagging on, and the lender was tagging on to the borrower, and the borrower was paying the cost.

So we figured out that's needed by our risk folks to get comfortable that a certain sliver of loans don't need title insurance. And we did all the work. We piloted the product behind the scenes for a while to prove out what we did. When we were getting ready to launch, that's when I realized in the financial services space, you have to know your regulatory climate, the political climate, the policy environment.

What I did not know as an immigrant who was learning the ropes is ALTA, which is the industry body for title insurance, is a very politically, well-embedded institution. There's a lot of state protections for title insurance that would not let that go away. It didn't go anywhere, and I got flack for trying to change a lot of things. But it was just an idea that had not come of age. It took years later, three years after I left. In fact, Biden announced it in a State of Union that they were doing that. And now the product is live. It went live in December 2024. We're actively waiving title insurance for that. So when we solve for this, you have to take in all the factors. Those are the kind of problems that are fascinating to me then.

Reggie Young: Yeah. It's interesting, too, because I imagine you can't over-optimize for all of the factors. You almost have to figure out the product in advance of the regulatory environment being favorable to the change you want. You kind of can't wait. All the cards won't always line up, but you’ve got to start placing them in order.

I enjoy it, but it's one of the maddening aspects of being in the financial services space is having that longer-term view of like, okay, we're doing this thing. It's not going to be done next month. Maybe in two years, we'll start seeing the results and the fruits of our labor. Maybe longer, we'll see. But it's part of why I don't think AI will be replacing a lot of fintech and sponsor banking anytime soon, because there's a lot of complexity, regulatory obligations and otherwise, that lead to that long timeframe.

Yeah, I love them. Always a fan when people say that legal, compliance, and risk should be involved in the product process, not as cost centers, but as creative restrictions and enablers. I think about it, too. There's a sort of incubation period for ideas where I'm like, I don't want the lawyers in the room for the incubation period because we'll start throwing out all the restrictions. First, I want the product teams to come up with their ideas and then get some feedback and then go back to the whiteboard and hash out ideas a little more and then come back with the PRD and take it from- it's an iterative process.

Suhas Reddy: Yeah. You make some fantastic points, Reggie. I will align with that. AI will certainly accelerate how we get things done, probably help us a lot in reducing the manual operational side of things, but you still have to figure out the fundamentals when you do product in the financial services space. And it's not going away.

That's why I tell a lot of fintech start-ups, leaders that come to me for advice, I say, we discount the value of trust in the fintech space, and trust gives you runway. Trust is earned. Will you be there in five years helping that early-stage borrower build his financial credit? Will you be there in five years giving him an earned wage advance loan? You have to think long term. That has to be your DNA because trust is earned and trust delivers in the long term.

Reggie Young: Yeah, definitely. AI will not be replacing trust and accountability, all the fun parts that actually matter and are the driving forces in the industry.

I know from our prior conversations that human-centricity is something you're really passionate about. It's a common thread I see in fintech, but not a lot of people talk about it as explicitly as I think you do. How does human-centricity show up in your day-to-day work at Pathward?

Suhas Reddy: Great question. There's two parts to this, one more philosophical, just who I am as a person, and the other one is it resonated with me so much that I had to figure out ways to bring it into the day-to-day work that I do.

The first part is it happened as part of the transformation at Fannie Mae where I got exposed to design thinking and went to the design schools to understand how it works. At the end of it, I think there's a technical term for it. It's called zero-based ideation. If you wipe the slate clean and we're solving something for that human at the end of the loop, how would you solve this? And then work backwards from that. How will that human experience the product or service you're exposing to them?

Given my own background, teaching meditation and other things, that resonated with me, to build for that human being. And also personally, I found the digital revolution disenfranchised a whole generation. I think about my mom. She was a single mom, really savvy with a whole bunch of things. Then the digital revolution came, and suddenly, a lot of her experience and knowledge was no longer applicable in the practical world. Figuring that out is being human-centric. Where it manifests at our work is this concept of financial inclusion. How do you infuse that motivation into the products that you build and how they impact the products and services that you have? I'll give you one more quick example if you'll indulge me.

A mortgage is a housing payment, correct? The closest thing for a person who has never owned a home that is also a housing payment is a rental payment history. Till three, four years ago, we did not include rental payment history in underwriting someone for a mortgage approval, which means a whole swath of people who are being great renters, 10 years, 15 years, never got credit for that, because you only used what's on the credit report to assess credit risk. Some of the most gratifying work I did in Fannie Mae was to look at rental payment history.

We started off trying to get rid of bank statements and said, okay, how can I use third-party aggregators, Plaid wasn't around then, to pull asset information from banks directly from source and then run through it. We started looking at these figures and we realized, oh, there's a lot more in there. There's rental payment history. There's net income that flows through. It's the precursor of cash flow underwriting as we have today.

We actually saw consistent rental payment history in the bank statements, and we ran it. Once we got confidence, we introduced this as a positive factor that can contribute to the underwriting decision. So absence will not ding you, but if it's there, it's going to help you. And suddenly, we opened up housing access to a whole bunch of people. For me, that's being human-centric, solving for access to housing using the work that we do in the fintech space, in the financial services space.

Reggie Young: Yeah, I love it. I think that’s a big thesis of fintech, is it's innovative, but the innovation is driving more inclusion, more people get access to all the services. I love it.

Suhas Reddy: Yeah. It shows up in all the products that we do at Pathward, too, earned wage advances, prepaid cards for those unbanked or underbanked in a whole bunch of geographical areas where they don't have access to banking. We have a network of 1,200, 1,400 community banks that we white label our products and services to, that they sell to their customers. It's part of our ethos at Pathward, financial inclusion. That's why this resonates with me. It's being human-centric but within the financial services space.

Reggie Young: Yeah. Payments touch everyone. It's an opportunity to have a huge impact. I’m going to switch my wrap-up questions for the episode. What’s something you've been thinking about a lot lately that you think people in fintech aren't talking about enough? 

Suhas Reddy: Great question. Two things. First is trust. We discount it. I would say in the fintech space, how do you earn trust from the get-go? It leads to loyalty, retention, high NPS scores if you solve for trust. And a lot of trust is not the cool, sexy UI/UX, AI-driven tools. A lot of trust is stability, security, protection.

The other thing I would say is don't discount operational excellence, the behind-the-scenes plumbing that makes things work. I say these two things because I myself am drawn to the human impact side because of just who I am. You have to win the confidence of all the stakeholders inside your doors and have the data before you actually can go innovate at the front end for the customer and solve their needs. Those are things I would say we should talk about more.

Reggie Young: Yeah. I love that. I think the operational excellence is a big theme that I love, too. Product is front and center in any tech-oriented company, and sales also tends to be front. It's go-to-market generally. But of course, you need the operational excellence to support the things that you build and the deals that you close to make sure that all those products are delivered with high uptime, reliability, all that fun stuff that ends up being the- that operational excellence piece is a huge driver for that trust component.

Awesome, Suhas. If folks want to find out more about you or Pathward, where should they go?

Suhas Reddy: I'm on LinkedIn. Pathward.com is a great place to start. We have a lot of content in LinkedIn as well as a company. Please feel free to DM me. Happy to always chat about product and financial inclusion and fintech anytime. I have a lot to learn. It's a fascinating space to be in, and it's constantly changing. People said payments is changing. Fintech is changing constantly. Sponsor banking has also been through a ride as well. I'm not sure it's going to go away anytime soon.

Reggie Young: Yeah, endless stuff to learn in the sponsor banking and fintech industries. Suhas, thanks so much for coming on.

Suhas Reddy: Thank you, Reggie. Thanks for the opportunity. Nice to chat.