NMP National Mortgage Professional May 2023

HOW GUILD MORTGAGE PLAYED ITS CARDS RIGHT

BROKEN HOMES, NEW LOANS

LEADS FROM LAWYERS CAN BUILD A NEW BOOK OF BUSINESS SUPPORT IN DARK TIMES

THE MORTGAGE WORLD MAKES THE MOST OUT OF PINK SLIPS

SCRUPLES ARE SWIRLING DOWN THE DRAIN

Vol. 15, Issue 5 $20.00

Terry Schmidt, incoming CEO, Guild Mortgage Co. is betting on continued success.

HOW GUILD MORTGAGE PLAYED ITS CARDS RIGHT

BROKEN HOMES, NEW LOANS

LEADS FROM LAWYERS CAN BUILD A NEW BOOK OF BUSINESS SUPPORT IN DARK TIMES

THE MORTGAGE WORLD MAKES THE MOST OUT OF PINK SLIPS

SCRUPLES ARE SWIRLING DOWN THE DRAIN

Vol. 15, Issue 5 $20.00

Terry Schmidt, incoming CEO, Guild Mortgage Co. is betting on continued success.

Keep Your Head In The Game T

he headlines are stark. Mortgage lender after mortgage lender are closing their doors. Employee layoffs are skyrocketing. The cost of being in the mortgage business, right now, is just too high. So, many industry players are simply folding, or at best are staying pat.

Then there are the high-stakes players. They’re the ones who’ve been careful with their chips when they won. They hoarded their winnings, careful not to bet cavalierly. And now they’re betting big. Because in a year when players across the board are bemoaning the hand they’ve been dealt, the high-stakes players understand that every gamble has the opportunity to bring in stacks of cash.

It’s natural for companies to want to leave the table when the action is against them. But true card sharps don’t do that. They know the game has ups and downs, and they know that if they are strategic in their play, the odds long term will be in their favor.

UPPING THE ANTE

So for those in our industry who think the best bet is to fold and come back to the game at a better time, we say just look at the participants who are instead bulking up, getting ready to be powerhouses when the cards turn. Mutual of Omaha Mortgage grabbed Keller Williams Mortgage and is quickly positioning itself as a bigger power. CMG pulled in the entire retail side of Homebridge Financial. Crain Mortgage Group surrendered and is now part of Legacy Bank & Trust.

But the company winning hand-over-hand appears to be Guild Mortgage. The publicly-traded company was a regional retail powerhouse all on its own. But with good capital reserves and savvy leadership, it’s been on a tear expanding its national footprint and growing its talent ranks. In just the past six months, it raked in New Mexico-based Legacy Mortgage, then midwest legend Inlanta Mortgage, and just a few weeks ago capped off its winning streak by sweeping up Cherry Creek Mortgage.

Guild takes pride that it’s C-Suite is predominantly female. But it’s been proving that in the M&A world, gender doesn’t impede aggressive action. Guild’s story is one that has a simple premise: those who planned before and are strong now will be strongest tomorrow.

Ante up, they say.

VINCENT M. VALVO Publisher, Editor-in-Chief

STAFF

Vincent M. Valvo

CEO, PUBLISHER, EDITOR-IN-CHIEF

Beverly Bolnick

ASSOCIATE PUBLISHER

Christine Stuart

EDITORIAL DIRECTOR

David Krechevsky

EDITOR

Keith Griffin

SENIOR EDITOR

Gary Rogo

SPECIAL SECTIONS EDITOR

Mike Savino

HEAD OF MULTIMEDIA

Katie Jensen, Sarah Wolak

STAFF WRITERS

Rob Chrisman, Dave Hershman, Erica LaCentra, Harvey Mackay, Lew Sichelman, Mary Kay Scully

CONTRIBUTING WRITERS

Nicole Coughlin, Nichole Cakirca

ADVERTISING ASSOCIATES

Alison Valvo

DIRECTOR OF STRATEGIC GROWTH

Steven Winokur

CHIEF MARKETING OFFICER

Julie Carmichael

PROJECT MANAGER

Meghan Hogan

DESIGN MANAGER

Stacy Murray, Christopher Wallace

GRAPHIC DESIGN MANAGERS

Navindra Persaud

DIRECTOR OF EVENTS

William Valvo

UX DESIGN DIRECTOR

Andrew Berman

HEAD OF CUSTOMER OUTREACH AND ENGAGEMENT

Tigi Kuttamperoor, Matthew Mullins, Angelo Scalise MULTIMEDIA SPECIALISTS

Melissa Pianin

MARKETING & EVENTS ASSOCIATE

Kristie Woods-Lindig

ONLINE ENGAGEMENT SPECIALIST

Joel Berman

FOUNDING PUBLISHER

Submit your news to editors@ambizmedia.com

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Faulty Predictions Make Planning More Difficult

This spinning crystal ball called 2023 poses many challenges

BY DAVE HERSHMAN, CONTRIBUTOR, NATIONAL MORTGAGE PROFESSIONAL MAGAZINE

At the beginning of the year, I wrote a column about helping your loan officers plan for 2023. While the concepts are still valid, we need to acknowledge how hard it is to plan in this industry because the future is so uncertain. For example, we expanded our staffs exponentially in the period from 2019 through the first part of 2022.

If someone could spell the word processor or underwriter, we hired them and paid quite a premium. Everyone knew that eventually, these good times would end — and they did. Few predicted they would stop on a dime as they did. Thus, we spent most of the rest of 2022 shedding those hires. Lean and mean has become the key phrase of 2023. Yet, now rates have come down a bit (a few times) and the Spring has brought some buyers out.

With staff pared, pipelines are quickly filling up. Should we start hiring again? Hard to know what the answer is when you can’t predict what is going to happen next month, let alone next year. Certainly, the average employer is gun-shy at this point. And if it is hard to predict what we should do, how do you think our loan officers feel? Should they bring back their assistants? Will you help them? What if things die back in the summer?

CHANGING FORECASTS

We are now over one-third of the way through the year, and you can see the forecasts that came out just a few months ago are already being revised. For example, Fannie Mae predicted a recession to start in the first quarter of this year. After the economy produced 800,000 jobs in the first two months of 2023, they shifted the forecast to a slight recession during

the second half of the year.

Since the economy is stronger than predicted, mortgage rates should have risen higher than forecasted. Yet, the Realtor.com housing forecast predicted average mortgage rates of 7.4% in 2023, with a peak during the first half of the year. In reality, mortgage rates have not risen to these levels, so unless they spike from here, we are not likely to reach these heights.

In addition, we went back and did a review, but did not see many predictions of a banking crisis and certainly did not see a specific warning about the largest bank that went down. Silicon Valley Bank was the second-largest banking failure in history. Some are now predicting that the concerns in the banking sector are what may finally tip the economy into recession.

Time and time again, we have indicated that predicting the future is futile. If any of these high-paid

prognosticators could actually predict the future with some accuracy, they would be investing in financial futures and making a fortune.

BEAM ME DOWN

So, let’s go back and misquote Star Trek — predictions are futile. No one predicted the pandemic. No one predicted the pandemic would cause the biggest real estate and refinance booms in history. And few foresaw the party stopping on a dime. The ability to plan in an ever-changing environment is a key to our success and a key to the success of our loan officers. It is a skill that we must convey. Our leaders should not be always asking — what are you doing to produce today? Our leaders, at times, must be asking — what are you going to do if ____ happens?

Welcome to the world where change is the only constant! n

Dave Hershman is a top author in this industry with seven books published as well as the founder of the OriginationPro Marketing System and the OriginationPro Mortgage School. He can be reached at dave@hershmangroup.com.

Welcome to the world where change is the only constant!

Your Time Matters: What To Prioritize At Work To Ensure Success

Take the time to define — or even redefine — what your workflow looks like

ERICA LACENTRA, COLUMNIST, NATIONAL MORTGAGE PROFESSIONAL MAGAZINE

n the real estate industry, seasons matter, and with spring in full bloom, more folks are likely listing their homes or looking for homes. As the weather gets warmer, this is typically the point in the year when the mortgage industry starts ramping up. Also, as volatility in the industry starts to die down and rates start to settle a bit, you’re likely (and hopefully) noticing that work is picking up and you’re busier than you were during the winter months. However, as your workload picks up, it can often be difficult to prioritize and determine where you should be focusing your attention to make sure you are making the most of your working day. So in an

industry where time is truly money, what can you do to make sure you are spending that time on efforts that really matter?

IDENTIFY YOUR MOST IMPORTANT TASKS AND RETHINK YOUR WORKFLOW

While it may seem like a no-brainer to identify your most important tasks and prioritize them, that is often easier said than done. It can also become increasingly difficult to determine where to focus your attention when you experience a growing client base or an increase in loan volume. These circumstances are particularly challenging because your tasks haven’t necessarily changed, you just have more to handle overall.

Rather than getting overwhelmed by work piling up, this is the perfect time to look at your existing workflow, figure out where you can

make improvements, and even cut out areas of inefficiency. Take a look at all of the tasks you are completing on a daily, weekly, and monthly basis and determine where they fall on your priority list based on importance and urgency. Chances are, you are prioritizing items that often don’t need to be, which is an easy way to knock certain tasks lower on your to-do list.

Then, take the time to define or even redefine what your workflow looks like. Set general expectations and deadlines for yourself, and your clients when they are involved, based on the list of tasks you have already identified. Plan to stick to the timelines you have set for yourself for a specific amount of time, think two weeks to a month. Use tools like to-do lists, your calendar, or even a project management software like Monday. com or Trello to set firm or floating deadlines so you can easily track how well you are sticking to them.

Once the amount of time you set has passed, you can evaluate what is and isn’t working, refine deadlines to be more accurate based on your experience, and ultimately become more efficient at your job. As you refine your workflow, be sure to look for repetitive and recurring tasks as you may be able to employ a technical solution to automate many of these areas, freeing yourself up for more important efforts.

ELIMINATE DISTRACTIONS

One of the major obstacles to productivity in your job is distractions and they can come in many forms. While external distractions like noise or being interrupted by a colleague can be easy to counter, there are many internal distractions that you don’t even realize are severely hampering your productivity. So, to eliminate distractions, start by figuring out what the biggest culprits are.

If your problem is external distractions like a loud workspace, you can wear noise-canceling headphones or set up a quiet space to be more productive. However, if you think internal distractions are your biggest problem, this may require more creative solutions. For example, if you are constantly being interrupted by

messages from other colleagues or unscheduled phone calls, you may want to set your work messaging system and phone to do not disturb as a quick fix. Or maybe your problem is you feel overwhelmed by your inbox and a need to respond to requests as they come in. In this case, you may want to take the time to set up email rules to send emails to specific mailboxes, which you can check at specified intervals during your day. You can also use time blocking on your calendar to your advantage.

Block out time during your day that you can dedicate to certain tasks. This can allow you to focus specifically on the task at hand while tuning out distractions.

DELEGATE TASKS

While it may seem challenging to hand off tasks to other people, especially if you are used to having full control over tasks within your organization, being able to delegate is critical for several reasons. First, it will free up your time so that you can focus on your most important tasks. If you are a manager within an organization or an owner, there simply isn’t enough time in the day to involve yourself in smaller dayto-day tasks. Delegating these tasks to other team members will allow you to focus on bigger-picture items and ensure you aren’t bogged down in the minutiae. Also, by delegating, you are developing the skills and expertise of other members of your team so that they can also grow within the company.

If you aren’t sure how to best go about delegating some of your tasks to get them off your plate, start by looking at the tasks you handle. Routine or recurring tasks are often some of the easiest to delegate as they are easier to train other team members on. Also, if you have tasks that you feel are outside of your area of responsibility and there

is someone in your organization that is better suited and more qualified to handle them, those are also tasks that can be easily delegated.

Once you have identified what you want to delegate, make sure you identify team members that have the skills, experience, and bandwidth to be able to handle these tasks. It can be counterproductive to try to delegate tasks to team members that are too busy or ill-equipped to handle them, as they will likely end up back on your plate.

Meet with the identified team members and set clear expectations and training for the tasks as you hand them off. Be prepared to initially provide support and feedback and be available to answer questions.

However, once they are trained on these tasks, you will have one less thing to worry about and can focus on more pressing and important tasks.

TAKE TIME FOR BREAKS

It may seem counterintuitive to take breaks in your workday if you are trying to increase productivity, however, factoring in time to step away from your work periodically can lead to greater efficiency. Taking regular breaks has been shown to increase productivity and creativity while reducing stress levels and potential burnout. So if you start feeling overwhelmed or unfocused, take some time to step away for a short walk or even just take some deep breaths to clear your head and get back on track.

In times when volume picks up, it can certainly be stressful trying to adjust to everything that comes your way. However, it is important to do just that and adjust to improve efficiencies and be as successful as you can be. n

Erica LaCentra is chief marketing officer for RCN Capital.

Look for repetitive and recurring tasks … to employ a technical solution to automate many of these areas.

What Happened To Ethics?

A disturbing trend of disappearing values

BY LEW SICHELMAN, CONTRIBUTOR, NATIONAL MORTGAGE PROFESSIONAL MAGAZINE

Years ago, I attended a session on ethics at a National Association of Realtors convention. It was eye-opening. The audience filled the room, which in and of itself was surprising, being that real estate agents have a terrible reputation. This is despite the fact that I truly believe most are hard-working souls trying to do right by their clients. That aside, when the speaker asked how many had seen another agent violate NAR’s highly touted Code of Ethics,

every hand shot up. Every one! But when they were asked if they had ever violated the code, nothing. Not one hand was raised. Not one!

I bring this up now because there seems to be something of a trend in the housing sector where companies and/or their leaders or employees are allegedly violating the rules, not to mention perhaps the law. Where are these people’s scruples?

Recently, for example, four women from the eXp Realty in California have charged two men with drugging them and then sexually assaulting them while at industry and company

conferences. One of the men is a former eXp agent; the other still hangs his license there.

According to the complaint, the two alleged miscreants participated in an “ongoing venture to entice women to travel in interstate commerce, recruit enthusiastic real estate agents with the promise of career advancement and coaching, and use their considerable influence in the real estate industry on these other real estate agents(‘) behalf, knowing that they would use means of force, fraud, or coercion to cause these women to engage in a sex act.”

WHAT DID LEADERS KNOW?

The complaint describes in fairly graphic detail — I won’t bore you with the specifics — several incidents in which the plaintiffs maintain they were drugged, then woke up naked in bed with one of the defendants.

Worse, they charge that when they brought the incidents to the attention of eXp’s founder and its former CEO, the company leader did nothing about it.

Specifically, the complaint accuses both company leaders of knowing about a “pattern and practice of predatory sexual conduct” by the two defendants but not doing anything to help the woman. If true, has this company no moral compass?

Next, I give you Celebrity Home Loans, which stands accused of laying off more than 90% of its employees just three days before they expected to be paid. Even Silicon Valley Bank paid its workers their annual bonuses — bonuses they earned in 2022 — just hours before the financial institution collapsed.

Yes, the timing of the bank’s incentives seems a tad shady, especially since the officers had to know they were on the brink of failure. But they weren’t paid to just the top guys. They were paid to everyone. Also, according to news reports, bonuses have always been awarded on the same day every year, and the payments had been in the works for days.

And yes, there does seem to be some shadier — more shady? — dealings among leadership. Reportedly, several officers sold stock they owned in the bank to SVR’s parent company, pocketing millions for themselves, just before the bank went under.

PAY WITHHELD

But Celebrity, if the suit proves true, denied employees timely compensation for the pay period immediately prior to their termination. “For many,” the suit alleges, “the outstanding pay included salaries, wages, and commission earned during the entire month of January and the first half of February.” According to the lead plaintiff, they weren’t paid for accrued paid time off and vacations, either.

Come on, guys. These are the people who brung you there. Where’s your sense of right and wrong? At least Homespire Mortgage has agreed to pay 12 former loan officers the full amount they were due for working overtime and off the clock. It took a lawsuit to get Homespire to step up, but it finally did.

Citing violations of the Federal Fair

Labor Standards Act, the Homespire suit sought to recover unpaid overtime, minimum wages, and commissions as well as attorneys fees and court costs. According to the suit, the plaintiffs were individually owed between $9,500 and $42,960, including both total wages owed and liquidated damages. The loan officers were said to be compensated through a baseline hourly wage plus commissions on loans they closed. The amount of the commissions depended on a number of factors, such as the number of loans closed, loan size, and the loans’ interest rates.

POACHING

And then there’s the less-than-ethical practice of pouching the other guy’s employees. Here, PrimeLending is suing First Community Mortgage for raiding 100 of its employees last September, stripping it of about 10 percent of its workforce and $30 million in annual revenue. And earlier last year, LoanDepot sued CrossCountry Mortgage for purportedly poaching at least 32 of its New York employees, taking with them thousands of confidential documents.

Actually, CrossCountry also has been accused by two other lenders, Guild Mortgage and Caliber Home Loans, of raiding their workforces. In Caliber’s case, the company alleges that CrossCountry snatched more than 80 employees who were responsible for more than $2.3 billion in annual originations.

“We see cases like this all too frequently,” says mortgage banking consultant Joe Garrett of Garrett, McCauley & Co. “So here’s our advice: Anytime you’re thinking of hiring more than two or three employees from a competitor, talk to your attorney first to make certain you do it in a way that will avoid a lawsuit.”

And how about junk fees? Call them legit if you want, but to me, it’s outand-out thievery. And the Consumer Financial Protection Bureau agrees. In March, the watchdog agency identified them as “illegal fees old and new ways that mortgage servicers attempt to run up” the tariff on homeowners.

Among the controversial fees: Charging the maximum late fee allowed by relevant state laws, even when

Thankfully, there’s some justice in this hocus-pocus, switcheroo world.

owners’ mortgage contracts capped late fee amounts below state maximums. Charging for property inspection fees for every visit even after addresses were known to be incorrect. Charging for mortgage insurance premiums that were not owed. Failing to waive late fees for borrowers entering certain loss mitigation options that precluded late fees from being charged while in forbearance.

And that’s not all! Last year, the CFPB reported finding servicers that charged borrowers who paid by phone “sizable” fees, even though consumers were not made aware of the pay-byphone penalties. Have these robbers no consciences?

PREYING ON THE MILITARY

I could go on and on. A Calfornia lender shut down by the CFPB for repeatedly advertising to military families — our soldiers and sailors — that illegally indicated it was affiliated with the U.S. government. A Florida-based loan

officer accused of concocting child support documents for kids that didn’t exist, creating fake income statements and forging judges’ signatures in order to qualify borrowers for financing for which they didn’t otherwise qualify. A large national bank accused of welching on its commitment to increase its lending in low and moderate income communities.

Thankfully, there’s some justice in this hocus-pocus, switcheroo world. To wit, the California couple who sued an appraiser of undervaluing their property because they were Black. The appraiser valued their place at $998,000. But with a White friend posing as the owner, a second appraisal came in at $1.48 million.

The parties have since settled out of court for an unspecified amount. But the deal comes with a unique and justifiable caveat: The defendant and others who work for her company were compelled to watch a documentary about appraisal bias and

featured the plaintiff’s experiences. That film, “Our America: Lowballed,” was produced by ABC News.

And speaking of Justice, four realty firms have now settled with New York Attorney General Letitia James in the infamous Long Island case in which agents were found to be steering Black clients away from White neighborhoods. Said James, “Discriminating against people because of race is not just shameful — it is illegal. Housing is and always will be a human right, and my office will continue to address these pervasive and discriminatory practices statewide.”

Amen! n

Lew Sichelman is a contributing writer to National Mortgage Professional magazine. He has been covering the housing and mortgage sectors for 52 years. His syndicated column appears in major newspapers throughout the country.

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HOW

BUILD A BROKER

Nonbanks Need Watching

After Your Pink Slip Between Mediocrity & Success Never ‘Under’ Reach

YOUR FIRST MILLION DOLLARS

Don’t Feel Fear — Feel Lucky BENCHMARKS & BEST PRACTICES

Make That Stretch CAREER TICKER

People On The Move

> Superus Careers, a recruiting agency based in Sykesville, Md., has named Mo Oursler its executive vice president, Mortgage Career Exchange.

> Anchor Loans, a provider of financing to residential real estate investors and entrepreneurs, announced that Rayman “Ray” Kaur Mathoda has been named CEO.

> Cenlar FSB, a national mortgage suberservicer, said that Pete Johnson has joined the company as vice president of special products in loan operations.

> Steve Meirink, formerly leading compliance solutions, is the new CEO of Wolters Kluwer Financial & Corporate Compliance.

PEOPLE ON THE MOVE //

NMP’S MONTHLY SECTION OF HANDS-ON PRACTICAL ADVICE

Why Nonbank Mortgage Companies Bear Close Watching

Lenders are thinly capitalized without much federal oversight

> Churchill Mortgage announced two key personnel moves: Jesse Vazquez as vice president of talent acquisition and promoting Kelly Lee to executive vice president of national production.

> Mr. Cooper Group announced two new executive leadership appointments. Kurt Johnson has been appointed chief financial officer, while Christine Paxton has been named executive vice president and chief risk and compliance officer.

PEOPLE ON THE MOVE //

BY CLIFFORD ROSSI, SPECIAL TO NATIONAL MORTGAGE PROFESSIONAL MAGAZINE

Recent SVB and Signature Bank failures notwithstanding, the financial industry’s stability for surviving a major downturn could depend on large, nonbank mortgage players. These entities are thinly capitalized, have high leverage, are subject to no federal safety and soundness oversight and sit on top of large exposures to highly volatile assets. They’re prone to excessive risk-taking.

During the 2008 financial crisis, hundreds of nonbank mortgage lenders and servicers went bankrupt. Since they have enjoyed a renaissance of sorts. This rise filled a void left behind by depositories reeling over mounting credit losses, intense regulatory scrutiny, litigation, and reputation damage. However, while market conditions in recent years remained strong, nonbanks have posed significant risk to the stability of the mortgage market when another major downturn inevitably occurs.

Today, the corporate structure and weak regulatory oversight of nonbanks prioritizes short-term business objectives over long-term viability. These factors, moreover, invite weak risk management governance and practices, which at some point will manifest into poor loan-manufacturing quality, resulting

in extraordinary losses for the mortgage industry and another industry shakeout.

According to recent research, between 2007 and 2016 the share of nonbank origination volume rose from 20% to about 50%. These same lenders

in some of the larger nonbank mortgage companies today. However, while such activity permits private capital to flow into the mortgage market, the nature of nonbank regulation — coupled with this type of ownership structure —

today represent three-quarters of loans sold to Ginnie Mae. What’s more, since the crisis, the share of nonbank mortgage servicing rose significantly.

NONBANK MODEL PROMOTES RISK‐TAKING

Given the magnitude of the 2008 crisis and regulatory response, the retreat by traditional banks from the mortgage market and subsequent move by nonbanks to take up market slack weren’t surprising. The timing of this market turnover, with one of the tightest credit environments for mortgage lending in decades, spurred on nonbank participation, as it masked underlying conditions that, in the presence of market stress, place these firms in greater jeopardy than depositories generally.

Hedge funds and private equity firms maintain significant ownership stakes

promotes greater risk-taking by these firms over time relative to depositories. Another risk nonbanks face is from large positions in a highly volatile asset class called mortgage servicing rights or MSRs. The value of these assets is based on a strip of interest earned on each mortgage that is serviced, and so the valuations can fluctuate dramatically depending on the direction and level of mortgage rates. This, coupled with their relatively thin liquidity poses significant risk at times. Nonbank regulatory oversight for the most part occurs at the state level, which translates into significant variability in the quality and consistency of oversight of these firms compared to bank safety and soundness regulation. This in turn provides a perfect environment for nonbanks to take on greater risk.

> Newfi Wholesale announced the addition of John Wise to its executive team as senior vice president of West Coast sales.

> Cenlar FSB, a mortgage loan subservicer, announced that Michelle DeHart has joined the company as vice president of loan operations, escrow.

> Sagent, a Pennsylvaniabased fintech software company, has appointed Perry Hilzendeger as executive vice president of servicing.

> Fairway Independent Mortgage Corp., the nation’s third largest retail mortgage lender, announced mortgage veteran Kym Poladsky has joined the company’s Denver region.

The largest nonbanks should be subject to a form of heightened expectations for risk management that is compatible with their corporate structure and governance.

Clifford Rossi

Hedge fund and private equity investors have limited experience with risk governance practices that traditional banks have spent the last decade building, thanks in part to regulatory mandates. This blind spot for risk management, given the acute return-focused nature of nonbank investors, promotes underinvestment in risk management capabilities that lie dormant during benign economic periods, only to emerge when markets unravel.

LOAN MANUFACTURING, MORTGAGE CYCLE AND RISK

The risk infrastructure used by mortgage originators and servicers tends to expand and contract in concert with the mortgage cycle. Boom periods stretch underwriting resources to the limit while default and collections resources slacken. During these periods, greater loan volume — combined with credit risk expansion — puts enormous pressure on the mortgage production risk infrastructure.

Without robust risk controls, processes and governance in place, these systems can fail under the weight of excessive risk-taking. For example, a recent study of mortgage product development found that lenders with relatively high repurchase rates from Fannie Mae or Freddie Mac (an indication of defective loan manufacturing process) tended to experience credit losses that were 1.52.5 times higher than other firms for the 2003-2008 origination years, controlling for other borrower, loan, and property risk factors.

Building on this analysis, I developed a similar statistical model (predicting the probability a loan would become 90 days

past due or worse) to examine the relative risk of depositories and nonbanks. From a random sample of 180,000 mortgages originated between 1999-2016 and sold to one of the GSEs, a model incorporating similar variables as those used in the earlier study was estimated. An indicator variable for whether the firm was a depository or not was included and interacted with origination underwriting periods denoted as pre-boom (prior to 2004); boom (2004-2007) and crisis; and aftermath (2008-2016).

Loans originated by nonbank firms during the boom period were 20% riskier than loans originated by depositories. However, the risk of nonbanks is statistically no different from that of depositories since the crisis. These results support the point that the risk of nonbanks is masked during times when credit standards are tighter.

Under such circumstances, strong borrower and collateral requirements can cover up deficient operational risks in the underwriting and origination process that become more apparent as credit standards relax and production accelerates.

IMPLICATIONS AND PARTING THOUGHTS

Weak regulatory oversight of nonbank mortgage companies requires mortgage securitizers to redouble their efforts to manage counterparty risk exposure to these firms. Nonbanks have three strikes against them in their business model that increase market volatility during stress periods: they tend to be thinly capitalized, their funding sources pose liquidity risk, and their

risk management processes tend to be underdeveloped.

During the 2008 crisis, warehouse lines, asset-backed commercial paper, and tri-party repurchase agreements — major sources of mortgage financing of nonbanks — dried up and helped put many nonbank mortgage companies out of business. The good news is that in the years since the crisis, strong net worth and liquidity requirements have been established by the GSEs and Ginnie Mae. For example, the GSEs took steps to impose a set of rigorous (bank-like) risk-based capital standards on private mortgage insurance companies and Ginnie has done the same for their counterparties including nonbanks as well as added liquidity buffers. However, given the increasing importance of nonbanks to the mortgage industry, their oversight needs to continue to evolve.

In addition to strong liquidity and capital standards, the largest nonbanks should be subject to a form of heightened expectations for risk management that is compatible with their corporate structure and governance. Doing so will ensure alignment of risk-taking between nonbanks and depositories, mitigating another race to the bottom in mortgage underwriting. n

Clifford Rossi (PhD) is a professor of the practice and executive-in-residence at the Robert H. Smith School of Business, University of Maryland, and a principal of Chesapeake Risk Advisors LLC. Prior to his current posts, he was the chief risk officer for Citigroup’s North America Consumer Lending Division.

Standing Out In A Crowded Home Equity Market

Faster and more accurate valuations among needed changes

BY JEREMY MCCARTY, SPECIAL TO NATIONAL MORTGAGE PROFESSIONAL MAGAZINE

With rising mortgage rates, homeowners in need of cash for remodeling, debt consolidation, or just a rainy-day fund, have increasingly turned to a home equity loan. And, thanks to rising home values over the last decade, homeowners are sitting on more equity than ever. Many homeowners are opting to remodel or add on rather than move, but don’t want to touch their low-interest first mortgage when

tapping into their home equity. A home equity loan is now one of the most viable options to convert equity into cash. Home equity loans are a great option to consolidate debt or used as a cushion to weather the challenging economy.

With this surge in home equity demand, lenders need to re-focus on this market and establish a way to differentiate themselves from the competition.

FASTER VALUATIONS

Home equity loans are often categorized as consumer loans with the credit and title underwriting completed very quickly. Similarly, the property valuation component needs to be expedient for a successful program and to meet homeowner

expectations. The ability to provide an equity loan commitment within a few hours is a game changer for the lender’s competitive abilities and for the borrowers to potentially get faster access to their funds.

ACCURATE VALUATIONS

Often, equity lending valuations are completed through the use of Automated Valuation Models (AVMs) or other valuation tools that utilize only a drive-by inspection of the property. While these tools serve a purpose, they may not show the maximum home value, especially if interior remodeling and amenities are not considered. Furthermore, homeowners are disappointed when the lender’s valuation does not reflect the true value of their home because the chosen

Jeremy McCarty

tool did not provide a complete view of the property.

TECHNOLOGY

By leveraging new technology to show all the interior and exterior amenities, rather than the antiquated valuation processes focusing only on the home exterior, lenders can be operationally more efficient, and provide the true home value to their borrowers. All of this results in a positive borrower experience.

Additionally, with the right technology, lenders do not have to sacrifice the quality of their valuation. With the proper tools in place, a decision made with the help of technology can be just as thorough and accurate as a full appraisal, at a fraction of the cost.

VIRTUAL INSPECTIONS

A key technology to streamline home equity valuations is the “virtual inspection.” Rather than waiting for someone to drive by the property to do just a front exterior inspection, virtual inspections can be completed within minutes — and the process is much simpler than you would think.

With a virtual inspection, the homeowner connects to the virtual

inspector through a streaming video call to conduct a brief, but thorough inspection of the home’s interior and exterior. The inspection usually takes just 15-20 minutes, and homeowners often enjoy the experience. They appreciate being able to show off their home, being part of the process and knowing that the

the necessary elements for a sound and accurate valuation. The valuation analyst can then provide a strongly supported valuation report within a couple hours after inspection. Technology like virtual inspection helps set lenders apart where the time for loan approval can be measured in hours,

unique qualities of their home have been considered in the valuation.

Within minutes of the lender ordering the evaluation, the homeowner is contacted, and if available, the inspection is conducted on the spot. Alternatively, the homeowner can schedule a time that is convenient for them through an online calendar.

Collecting the property data virtually is a much faster, lower cost, thorough and consistent manner to provide

not weeks. This sets a new standard in home equity lending. Additionally, homeowner involvement in the inspection solidifies their commitment to the loan and vastly improves the borrower experience — reflecting very positively on the lender in the highlycompetitive equity lending landscape. n

Jeremy McCarty is founder and CEO of Valligent, an appraisal management company that was recently acquired by Veros.

Technology like virtual inspection helps set lenders apart where the time for loan approval can be measured in hours, not weeks.

APPRAISAL STANDARDS MUST INCLUDE

FEDERAL PROHIBITIONS AGAINST DISCRIMINATION

CFPB continues to raise concerns with The Appraisal Foundation

BY PATRICE ALEXANDER FICKLIN AND TIM LAMBERT, SPECIAL TO NATIONAL MORTGAGE PROFESSIONAL MAGAZINE

Homeownership is one of the best paths for building intergenerational wealth. For some homebuyers and owners, however, a home’s valuation may be skewed by skin color or community demographics. Biased home appraisals can worsen racial inequities and distort the housing market.

The CFPB and leaders from across the federal government submitted a joint letter to The Appraisal Foundation (TAF), the private, nongovernmental organization that sets appraisal standards. The letter urges TAF to revise its draft Ethics Rule for appraisers to include a detailed statement of federal prohibitions against discrimination that exist under the Fair Housing Act and Equal Credit Opportunity Act. We are concerned that some appraisers may be unaware of these prohibitions and, in particular, that the draft Ethics Rule emphasizes that “[a]n appraiser must not engage in unethical discrimination,” implying that appraisers may engage in “ethical” discrimination, a concept foreign to current law and practice.

The letter marks the second time we have raised these concerns with TAF. On Feb. 4, 2022, we urged TAF to provide clear guidance on existing legal standards related to appraisal bias in response to a prior draft of its Ethics Rule included in the Uniform Standards of Professional Appraisal Practice. In a blog post released with the letter, the CFPB noted that we are deeply troubled by the discriminatory statements the Federal Housing Finance Agency

identified in some home appraisals, and the appraisal disparities for communities and borrowers of color described in both Freddie Mac and

Fannie Mae studies. Moreover, the CFPB continues to see reports of appraisers who fail to follow the law and who base their value judgments on biased, unfounded assumptions about borrowers and communities.

For more than 50 years, federal law has forbidden racial, religious, and other discrimination in home appraisals. It is imperative that TAF provide appraisers clear, detailed, and unambiguous warnings about the requirements of federal law covering appraisal standards.

RELUCTANCE?

The Appraisal Foundation, however, appears reluctant to act. Its recalcitrance undermines efforts to rid the housing market of bias and discrimination and threatens the market’s fairness and competitiveness.

We continue to work closely with other member agencies of the Interagency Task Force on Property Appraisal and Valuation Equity (PAVE) to create an equitable path toward addressing the persistent misvaluation of properties owned or sold by families and communities of color. We look forward to engaging with all relevant stakeholders and using all of the CFPB’s tools, in collaboration with our interagency partners, to address these important issues. n

Patrice Alexander Ficklin is the Fair Lending Director and Tim Lambert is Fair Lending Programs Lead and Senior Counsel. This article originally appeared on the CFPB’s website: https://www. consumerfinance.gov/about-us/blog/

The CFPB continues to see reports of appraisers who fail to follow the law and who base their value judgments on biased, unfounded assumptions.

Patrice Alexander Ficklin

Tim Lambert

Embrace Your Fear Of The Unknown

Taking risks can be the difference between mediocrity and success

BY HARVEY MACKAY, CONTRIBUTOR, NATIONAL MORTGAGE PROFESSIONAL MAGAZINE

Once upon a time, there was a warrior whose teacher told him he had to battle fear. He didn’t want to because it was scary. But his teacher said he must do it and gave him instructions for the battle. When the day arrived, the student warrior stood on one side and fear on the other. The warrior felt small, while fear was big and wrathful. They both had their weapons, but suddenly the

warrior fell prostrate and asked fear, “How can I defeat you?”

Fear replied: “My weapons are that I talk fast. And I get very close to your face. Then you get completely unnerved and do what I say. If you don’t do what I tell you, I have no power.”

At that, the student warrior learned how to defeat fear.

When things fall apart and you start feeling fear, feel lucky instead. Because only when you feel fear will you have the courage to overcome it. Being courageous and having a great life is all about being intimate with fear. Rather than being depressed or scared about fear, lean into it and see it as an opportunity to learn and grow.

My friend, motivational speaker Les Brown, said, “Too many of us are

not living our dreams because we are living our fears.”

Don’t be afraid to confront your fears. If you are afraid, admit it. We all face fears and anxieties every day, and the only way to overcome them and succeed is to recognize them up front so we can confront them directly.

• Examine your fears by identifying them. Spend some time each morning asking yourself what might happen during the day that you’re afraid of — failure to reach the people you need to talk to, for example, or getting lost on the way to an appointment.

• Take preventive steps. Think of what you can do to prevent your fear from coming true. Be on the lookout for behaviors and thoughts that add to your fear, and train yourself to change your patterns of action and thinking.

• Learn from your fears. You’ll succeed or fail. Either way, use the experience of confronting your fear to overcome new problems.

Fear is the factor that prevents many from taking risks that can mean the difference between mediocrity and success.

Many years ago, I wrote a column about “The Second Ten Commandments.” Commandment two stated: Thou shall not be fearful, for most of the things we fear never come to pass. Every crisis you face is multiplied when you act out of fear. Fear is a self-fulfilling emotion. When you fear something, you empower it. If you refuse to concede to fear, there is nothing to fear.

Companies that make bold moves

rarely do so without some element of fear. Leaders worry every day whether they have acted too soon or are missing some unanticipated obstacles when they introduce new products or services. Have they performed their due diligence? Will their decisions pay off?

Those choices are never easy, but then business is never easy. Successful organizations know how to master their fear and put it in the proper perspective. They know their target markets and customers well enough to predict their chances of winning. They understand that if an idea fails, it most likely will not spell imminent doom.

They understand the difference between confidence and arrogance. I’ve seen plenty of businesses succumb to arrogance when a reasonable dose of fear might have prevented their failure. Fear can be useful when it is used to guide practical decision making.

But fear can paralyze you, preventing you from achieving, even from living. Can you actually die from fear? Most likely not. What fear kills is your spirit, your ambition, your confidence.

A commanding general in the Persian army would go through a rather unusual ritual with captured spies: He would give criminals a choice between the firing squad or going through “the big, black door.”

Most spies decided on the firing squad, with the usual results.

Turning to his aide, the general said, “They always prefer the known way to the unknown. It is typical of people to be afraid of the undefined. Yet, we gave them a choice.”

“What lay behind the big, black door?” asked the aide.

“Freedom,” replied the general, “and I’ve only known a few brave enough to take it.”

Mackay’s Moral: Never be afraid to try something new. Remember, amateurs built the ark, professionals built the Titanic. n

Harvey Mackay is a seven-time New York Times best-selling author with 15 books.

When things fall apart and you start feeling fear, feel lucky instead.

Expand Your Reach To Expand Your Business

True success comes when you can multiply yourself

MARY KAY SCULLY, COLUMNIST, NATIONAL MORTGAGE PROFESSIONAL MAGAZINE

You are only one person. While that seems like such an obvious statement, sometimes we need to be reminded. You can’t be everywhere with everyone at once, and you can’t do everything alone. To truly be successful, you need to multiply yourself. And while cloning machines are still a thing of science fiction, there are ways to achieve this effect in the real world. Many different tools and strategies exist that can help you multiply your efforts without spreading yourself too thin. So, let’s talk about how you can seemingly be everywhere at once.

MAIL

Mail may seem like an odd place to start, given the digital world that we live in, but there are a few advantages to using mail to reach out to customers. A study by Redfin shows the average homeowner stays in their home for around 13 years. Mail is a surefire way to get a hold of your existing customers — you know exactly where they are because you helped put them there.

Rather than cutting through a crowded email inbox, classic “snail mail” may grab their attention. Think about it: when was the last time you got good mail? It’s probably been a while — and that’s likely the case for your customers too.

Be prepared to think outside the box with this, as another mail

advertisement isn’t likely to move the needle. However, a short card or personal message can have you top of mind the next time they’re looking for home financing.

EMAIL

Of course, standing out amongst the hundreds of emails someone gets in a week can be a challenge, but leaning in and personalizing your emails can bring a great return. Hubspot reports that personalizing your emails simply by segmenting your customers can increase revenue by up to 760%. Adding interactive elements to your email can help you group users based on their interests or circumstances.

Whatever you do, make sure any email you send is relevant to the customer and, from there, any additional personalization you can add is icing on the cake.

A customer relationship management tool (CRM) can be a great advantage in keeping track of customer information so you can reference it and use it to your — and their — advantage when sending emails.

Make sure you have a CRM and that you’re maintaining it. Update it when their contact info changes, make any important notes about the person, and keep track of when you last contacted them and when you should follow up. This also helps when sending mail — or even making a phone call.

VIDEO

Face-to-face connection is still an important part of the customer relationship, but it’s hard to get in front of everyone you need to contact. Using video helps you bring a more personal element to your communications without having to stand in front of someone.

Canva even reports scientific reasons why our brains respond well to visual marketing. Our brains are hardwired for visual processing, and mediums like video can convey emotion, color and movement, all of which capture our attention.

We’ve talked about this plenty of times before, but it always bears repeating: you need to make sure your videos look professional. You don’t need a full camera and lighting setup — just ensure that you look and sound professional, that your surroundings aren’t distracting, and that you are getting the right message across in a clear and succinct way. There are so many tools that help you easily edit videos and make them look like they were shot by a pro.

IN PERSON

Of course, when you can be in person, it’s a great advantage. Whether it’s with your customers or referral partners, being face-to-face allows you to form a relationship that can’t develop as easily through a screen or a message. You may have many tools that help you be successful when not in person, but don’t write off the valuable time you could be spending in person with someone.

You can’t be everywhere physically, but you can be everywhere you need to be, simply by using different tools and strategies to get in front of your customers and referral partners in as many ways as possible. So, get out there and start connecting! n

Mary Kay Scully is the Director of Customer Education at Enact, leading the development of the company’s customer education curriculum.

Adding interactive elements to your email can help you group users based on their interests or circumstances.

Acra Lending

Lake Forest, CA

Acra Lending is the leader in NonQM Wholesale and Correspondent lending programs. Offering a range of programs and services geared toward helping mortgage professionals and borrowers achieve their purchase and investment goals. We are committed to providing simplicity, consistency and an optimal customer experience.

acralending.com

(888) 800-7661

sales@acralending.com

LICENSED IN: AL, AZ, AR, CA, CO, CT, DC, DE, FL, GA, ID, IL, IN, KS, KY, LA, ME, MD, MI, MN, MT, NE, NV, NH, NJ, NC, OK, OR, PA, SC, TN, TX, UT, VA, VT, WA, WI, WY

Champions Funding

Gilbert, AZ

Mission Driven Non-QM + CDFI

Wholesale Lender

At Champions Funding, we Non-QM all day, every day! It’s our core business, and we live to serve underserved borrowers through our valued broker partners. We put diversity and inclusion into mortgage lending by empowering the mortgage broker community to provide solutions for non-traditional credit profiles and those who cannot get approved with standard financing. Through our highly coveted CDFI certification backed by the U.S. Department of the Treasury, we can offer our flagship neighborhood products and tap into a $1 Trillion market of historically underserved communities in the country.

Focused on speed to closing (in days, not weeks), smooth processes, and userfriendly access to our underwriting and support teams, we offer modern, flexible, and responsible non-traditional lending solutions.

champstpo.com

(949) 763-9494

Wholesale@ChampsTPO.com

LICENSED IN: AZ, CA, CO, CT, DC, FL, GA, HI, IL, IA, MD, MI, NJ, NC, OR, PA, SC, TN, TX, UT, VA, WA

FIND IT.

Civic Financial Services

Redondo Beach, CA

CIVIC delivers fast, honest, simple lending for real estate investors. Description of your products or services.

CIVIC Financial Services is a private money lender, specializing in the financing of non-owner occupied residential investment properties.

CIVIC provides Mortgage Brokers and Real Estate Investors with a fast and cost effective funding source for their real estate investment needs. civicfs.com

(877) 472-4842

info@civicfs.com

LICENSED IN: AZ, CA, CO, FL, GA, HI, ID, IL, IN, LA, MD, MA, MI, MN, NV, NJ, NC, OH, OK, OR, PA, SC, TN, TX, UT, VA, WA, WI

THE COMPANIES AND TOOLS YOU NEED

When searching for products or services to help your business, browse through our Resource Guides, or find a specific provider through one of our Directories.

Originator Tech, Non-QM, Wholesale, AMC. These listings provide quick, easy access to the resources you need, all in one convenient location.

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Global Integrity Finance LLC McKinney, Texas

DSCR Rental NO DOC Loans

As a direct, private lender, Global Integrity Finance takes a commonsense approach to underwriting, with all approvals made in-house. We are dedicated to providing quick responses to time-sensitive loans, often times with the ability to close in as few as 3 business days. At Global Integrity Finance, we value referrals and our brokers are protected. We are committed to the highest level of customer service, because our success thrives in building relationships.

globalintegrityfinance.com

(214) 548-5190

toby@globalintegrityfinance.com

LICENSED IN: AL, AR, CO, CT, DC, DE, FL, GA, HI, ID, IL, IN, IA, KS, KY, LA, ME, MD, MA, MI, MN, MS, MO, MT, NE, NH, NJ, NM, NY, NC, OH, OK, OR, PA, RI, SC, TN, TX, UT, VT, VA, WA, WV, WI

LoanStream Mortgage Irvine, CA

Home loans

LoanStream is dedicated to providing the best combination of wholesale loan products and wholesale loan rates in the industry. We understand that along with your need for excellent service, innovative TPO Portal, and fast turn times, you need loan programs that give you the competitive edge with your customers. With over 70 different home loan products and programs to choose from including Non-QM loan portfolio products, you’ll be sure to find the right product to fit your borrower’s needs. We offer Non-QM, Conventional and Government loan programs. loanstreamwholesale.com

(800) 760-1833 inquiries@lsmortgage.com

LICENSED IN: AZ, AR, CA, CO, CT, DC, DE, FL, GA, HI, ID, IL, IN, KS, KY, LA, ME, MD, MA, MI, MN, MT, NC, ND, NV, NJ, NJ, NM, NC, OH, OK, OR, PA, RI, SC, TN, TX, UT, VA, WA, WI

Luxury Mortgage Corp. Stamford, CT

Non-QM, Wholesale, Delegated Correspondent, Non Delegated Correspondent

The Simple Access® Non-QM suite of products was built around the idea that it doesn’t have to be complicated to finance a home. We have created a diverse selection of borrower friendly programs that are simple, innovative, and flexible. For more information on our Correspondent division, visit www. luxurymortgagecorrespondent.com

luxurymortgagewholesale.com

(949) 516-9710

tpomarketing@luxurymortgage.com

LICENSED IN: AL, AK, CA, CO, CT, DC, DE, FL, GA, IL, LA, ME, MD, MA, MI, MN, NV, NH, NJ, NM, NY, NC, OH, OR, PA, RI, SC, TN, TX, UT, VA, WA, WI, WY

A Family Of 13 Children FINDS A HOME

What was your best deal?

My best deal was when I helped a family that didn’t think that they could ever qualify for a mortgage to purchase a home. They had 13 children; some were adopted. They were in a very small home and they outgrew it. They were losing hope, thinking that they could never achieve the American dream. They got turned down by several lenders before I ever met them. They were referred to me by a business associate that highly recommended me. With my knowledge and experience, I was able to guide them on cleaning up their credit and soon after, I was able to get them approved for a home loan and close their escrow successfully. They were in tears of joy and so grateful for all of my hard work and for believing in them and not giving up the way all the other lenders did.

What made it your best deal?

That transaction stays with me in my heart and will always follow me in my career since I saw their stress soon turn into happiness after I funded their loan, and their Realtor handed them the keys to their future. I found out recently that the wife had passed away. I was so saddened to hear since they were like my extended family. And clients like them end up becoming like family going through all the emotions with them throughout the process. I end up building a great friendship with them and not just a business relationship.

What else was interesting about the deal?

The other thing that made the transaction so interesting is that their eldest son wanted to become a chef and he always dreamed of being able to cook meals for his family in a big kitchen at home, but he started cooking in the little home that they were renting before they bought a home. He was in heaven once he was able to see his parents’ big beautiful home with a kitchen island and plenty of counter and cabinet space and a chef stove with all stainless steel appliances! He went on to continue to cook for his family all of his signature dishes and he eventually became an executive chef at a very renowned restaurant.

linkedin.com/in/bernadine-torres-3224a447 instagram.com/fernieandbernie

ATIONAL MORTGAGE PROFESSIONAL MAGAZINE WANTS TO FEATURE YOU!

hat is the best deal you ever made? We know biggest isn’t always best. Did you help a single mom get the house of her dreams? How about the couple that finally found the one home they could afford — almost, that is, until you found a way. Was it the first deal you ever closed? A deal that turned your life around?

ubmit your story using the link, and your deal could be featured in a future Best Deal column!

nmplink.com/bestdeal

2.3%

FEBRUARY NATIONAL STATS

RATE LOCK VOLUME

Purchase locks edged up 4%, cashouts fell 11% and rate/term refis held at record lows

MARKET MIX

14% Refi 86% Purchase

AVERAGE LOAN AMOUNT

$349K

The average loan amount rose by $9K in February

6.68%

Refi share of the market mix returned to a record low in February

MONTH-END C ONFORMING RATE

Our Optimal Blue Mortgage Market Indices tracked a 52 bps rise in 30-year rate offerings throughout February

Veterans, when you’re struggling, soon becomes later becomes someday becomes ...when?

Don’t wait. Reach out .

Whatever you’re going through, you don’t have to do it alone.

Find resources at VA.GOV / REACH

We

WHOLESALE LENDER RESOURCE GUIDE

PRIVATE LENDER RESOURCE GUIDE

ACC Mortgage Rockville, MD

ACC Mortgage is the oldest Non-QM lender that has never stopped lending in 22 years. We specialize in Bank Statement, ITIN, P&L, Foreign National and DSCR lending. Price, Product and Process are what make for Non-QM success.

ACCMortgage.com

LICENSED IN: AZ, AR, CA, CO, CT, DE, DC, FL, GA, ID, IL, IN, KS, MD, MI, NV, NJ, NC, OK, OR, PA, SC, TN, TX, UT, VA, WA

Change Wholesale

Irvine CA

Change Wholesale gives mortgage brokers an unfair advantage to close more loans, faster. Our CDFI certification from the U.S. Department of the Treasury allows us to offer proprietary programs that are tailored to meet the needs of commonly overlooked prime borrowers. Our flagship Community Mortgage requires no income, employment, or DTI documentation. Prime borrowers looking for their dream home or vacation getaway can get approved with just the first page of the bank statement.

ChangeWholesale.com

(949) 255-6085

info@changewholesale.com

LICENSED IN:, AL, AK, AZ, AR, CA, CO, CT, DC, DE, FL, GA, HI, ID, IL, IN, IA, KS, KY, LA, ME, MD, MI, MN, MS, MT, NE, NV, NH, NJ, NM, NC, ND, OH, OK, OR, PA, RI, SC, SD, TN, TX, UT, VT, VA, WA, WV, WI, WY Find

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Industry Insights

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— understand it. Find insightful articles from leading industry voices to help digest all the changes in the industry.

Stratton Equities

Pine Brook, NJ

Stratton Equities is the leading Nationwide Direct Hard Money & NON-QM Lender that specializes in fast and flexible lending processes. Our Hard Money and Direct Private Money loan programs support the following investment projects:

• Fix and Flip

• Soft Money Loans

• Cash Out — Refinance

• Fixed Commercial Loans

• Commercial Bridge Loans

• Bridge Loans

• Stated Income/ No-Income Verification Loans

• Rental Loans

• Foreclosure Bailout Loan

• NO-DOC

• Blanket Loans

• Fixed Rental Programs

• Multi-Family Loan

No Upfront fees! No Junk Fees! No Tax Returns!

strattonequities.com (800) 962-6613 info@strattonequities.com

LICENSED IN: All States except for: AK, ND, NV, SD, UT

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Networking and support amongst mortgage professionals can help you get a job

NATIONAL MORTGAGE PROFESSIONAL MAGAZINE

Here are stories from those who used networking to find work and one who networks to find new employees.

NICOLE MATTIELLO

After Nicole Mattiello got laid off from Certified Credit, she did everything but panic. She hopped on LinkedIn and made a post, not just about her layoff, but about others experiencing being laid off, too.

Mattiello wrote, “Well, at least I’m in great company by adding that little green Open to Work filter to my profile. There are some pretty incredible people rocking that semicircle right now … but every day I see celebration posts of someone starting a new opportunity. Regardless of the Great Right-Sizing, budget cuts, and closures our industry is facing during this season of our careers, it doesn’t diminish my love for it.”

Damn — that layoff has finally come. All that time networking for new clients has meant nil as the unemployment office beckons. Yet, it may not be too late. There is hope. You don’t need to start flipping burgers to keep the family afloat.

Networking is a key aspect of any job search, and the mortgage industry is no exception. Building connections and relationships within the industry can open doors for new job opportunities. LinkedIn’s Open-to-Work button is a safe haven for those looking to continue on the path of mortgage originating. Many turned to their contacts and networking connections to sniff out job opportunities.

That post was months ago. Within one month, Mattiello accepted a new role at Chicago-based TransUnion as a client executive — and didn’t even find the position via a traditional job board. “A previous coworker reached out to me since they knew the quality of my work.

#OPENTO WORK

I’ve known 18 members of the [TransUnion] team for years upon years,” she said. “The industry is like a merry-go-round. You’re going to bump into the same people again at some point. The quality of your relationships is so important, and often people hunt for those passive candidates for work.”

Mattiello says her new position — which entails support for TransUnion’s customer base — opened her eyes to the

network that allowed her to be accessible.

“I’ve seen a lot of conversations about whether to use the open-towork button because a lot of people feel ashamed or there’s some level of fear about saying, ‘Hey, I’m looking for a job’ or ‘I got laid off,’” she said. “With the support of your network, thankfully there are opportunities out there, especially if you’ve cultivated a network where you have friendships and personal relationships.

“People are welcoming [in this industry],” Mattiello said. “Nobody really goes to college for mortgage lending, so we all in some respect landed here by accident, and I think that makes us willing to kind of take the next group of people under our wing. I was able to land another job because of the people who took me under their wing.”

STEVE FRANKIEWICZ

Steve

Frankiewicz learned the mortgage business from his father who took him to sales calls and client meetings back in the 1980s. However, his father deterred him from following in his footsteps.

company to company. After working together at Simple Mortgage for seven years, Frankiewicz decided to take the plunge and start his own path in 2019. Today, he operates Frankiewicz Home Mortgage, a division of Kaye Financial Corporation based in Farmington Hills, Mich. His father— who still originates at 80 — is on the staff roster.

As the president of a mortgage division, Frankiewicz has a different perspective about support in the industry since he only had his father take him under his wing. However, as a boss, Frankiewicz said that he tries to give back by considering his network in times of need.

#OPENTO WORK

“He told me not to chase being a part of the mortgage industry right out of high school. He told me I was too young, so I decided to get a job at Ford Motors,” Frankiewicz said with a chuckle. “But as it turns out, I was getting my father leads from the guys I worked with at Ford. I figured to myself that if I could get my father 2-3 deals a month, then I ought to try my luck at the industry.”

At age 24, Frankiewicz got laid off from Ford. “That was in 2004. I decided to try my luck at the industry as a loan originator, which proved to be mediocre at best given the market at that time,” he said. “I managed to stay in the industry the whole time, which was scary because I saw people falling out of it left and right.”

Frankiewicz said that he and his father, Larry, worked as a team from

“I always go after people [for jobs] in the industry that I know from the past or through social networking,” he said. “It’s hard to go out there and hire when I’m still a loan originator because I want business to be the best it can be, which is why I’m looking for people in my network before advertising a position outside of that network.”

MICHELE KRYCZKOWSKI

After Michele Kryczkowski got laid off from Planet Home Lending, she decided to embrace LinkedIn — not just for the open-to-work button, but for social outreach.

“I’ve been laid off before and at times when I didn’t have a strong network, it

was devastating,” she said. “Now, I’m taking everything that I’ve learned from being laid off and putting out videos to help others navigate being laid off.”

Kryczkowski, who has been in the industry for 21 years, got her start as a processor at a brokerage out of Omaha, Neb. From there, she worked in several different industry positions: loan officer assistant, account executive, senior loan processor, mortgage operations manager, and vice president of national wholesale.

“I only ever panicked when I got laid off right after 2008,” she said. “I was unable to find work where I lived in Michigan, and I was considering waiting tables again because I was worried that I would need food stamps.”

After relocating to Texas, Kryczkowski found a job at Nationstar Mortgage as a mortgage operations team manager. As her network began to grow and she grew into a managerial role, Kryczkowski found that other doors kept opening.

“I had clients that tried to recruit me to work for them,” she said. “And after I got laid off from a place, I would have clients and friends from the old workplace offering to put my resume out there for me.”

Now, Kryczkowski said that she’s using this time after getting the pink slip in January to focus on helping her network accept that being laid off is not the end of the world. She knows from prior experience that job searches can trigger self-doubt and discouragement.

#OPENTO WORK

“I wanted to start the dialogue of what being laid off is like and where to go from there,” she said. “It’s been remarkable to see how many people have reached out, even if they have a job, to connect with me or offer to help. Job searching can get

“The industry is like a merry-go-round. You’re going to bump into the same people again at some point. The quality of your relationships is so important.”

> Nicole Mattiello, client executive, TransUnion

discouraging quickly, and I didn’t expect this outpour of support.”

Although Kryczkowski’s videos focus on embracing a strong network, elevator pitch tips, and career optimism, she says that her top, realistic recommendation for others going through layoffs is to not feel guilty for pausing your job search and enjoying free time.

The feedback to Kryczkowski’s videos has been positive.

“I’ve been invited to speak on podcasts about how to broaden your network and stay positive after being laid off,” she said. “I also get tons of messages from people also in the industry going through layoffs who remind me that layoffs are just a result of poor planning, not a reflection of your capabilities.”

WHEN THE LAYOFF NOTICE COMES

The experience of Frankiewicz and Mattiello finding support in the industry is proof that today’s networking isn’t strictly in-person. And, networking is what will save you if you get laid off.

With today’s networking being predominantly digital — such as during virtual events or over social

media — it’s even more important to skillfully make strong connections.

Mary Kay Scully, director of customer education at Enact, says that networking has to be “intentional,” meaning networking is something to be prioritized.

Scully recently wrote for NMP, “It’s so easy to opt for the choice to stay home, be comfortable and multitask — but that’s the very issue. It’s hard to network virtually — you don’t just run into people online and you can’t strike

up a conversation as casually.”

Scully said that carving out time to network might be tough, but the results of honing in on personal relationships makes it worthwhile.

“Be deliberate and purposeful in your communication. This not only goes for business partners, but customers, too — you never know who you may be talking to,” Scully continued. “Connect with a broad array of people, and you’ll be surprised at how things line up.” n

“It’s hard to network virtually — you don’t just run into people online and you can’t strike up a conversation as casually.”

> Mary Kay Scully, director of customer education at Enact

The Unlikely Appraiser Advocate

BY STEVE GOODE, STAFF WRITER, NATIONAL MORTGAGE PROFESSIONAL

Some kids dream of becoming firefighters or professional athletes.

Others want to be movie stars or president of the United States.

Jillian White chose something a little less glamorous — appraiser.

Now she wants to make an impact on this unglamorous field by opening it uo to more minorities and women.

Traditionally, the appraisal business

has been dominated by middle-aged white men. That’s because to become an appraiser you have to find a mentor and share the revenue. That has led to the business being passed down like a family-run hardware store. It’s created a legacy resistant to change.

“This explains why there is so much homogeneity within the appraisal industry,” White said. “Until the supervisor-trainee model changes, the demographics of the appraisal industry

will not change.”

White, a 41-year-old Black woman, does not fit the demographic. She relied on what she called “the kindness of a stranger” who hired her outside of a family tree to get her first training position.

FIGHTING AN ANOMALY

At the time, White didn’t realize getting hired outside of family connections was an anomaly. She didn’t see the

Jillian White, a minority appraiser, says entire industry needs reappraisal

predominance of older, white men in the business because she was doing course work with women and minority students.

“I did find it odd that my instructors would consistently ask me who in my family was an appraiser, but I didn’t yet know what to make of it,” she said.

It was only years later when she was in a room full of appraisers for a continuing education course that White saw the shift in demographics. “Those interested in becoming appraisers versus those who actually became

appraisers were two distinctly different groups,” she said.

The disparity hit home when White, then working at White Picket Fence Appraisals, began networking on the national level at a conference, where she was the youngest attendee, one of four women, and the only person of color.

There are about 75,000 appraisers nationwide and only about 300 are Black women, according to the U.S Bureau of Labor Statistics. That means there are a few hundred appraisers who

understand both what it’s like to be Black in America and also what it’s like to have an appraiser’s methodology.

White was about eight years into her career when she met Ernest Durbin II at a meeting of The Collateral Risk Network back in 2011. Durbin recalled that she was running her own appraisal company in New York.

“In conversations with her, I learned that she was 29 years-old and had a bachelor’s degree in neuroscience from Columbia University. This led to the inevitable question, ‘How did you end up in the appraisal industry?’” he said.

Durbin, who was publisher of a national valuation magazine call “LiveValutation,” said he was impressed with White and asked her to write about her personal experience getting into the industry.

White did not disappoint, as she pointed to the lack of young appraisers and willing mentors in the business.

Durbin noted that the article highlights an issue that still remains in the appraisal business a dozen years later; a lack of diversity in the industry

As for the question about her degree in neuroscience, White explained that she would have had to pursue an MD or PhD and she wasn’t interested in that so she looked for other options.

ONE BIG ADVANTAGE

As hard as it was to break into the business, White recalled having the distinct advantage of a financial cushion provided by her family. It enabled her to hang in there instead of switching to something that paid the bills.

White lived with her parents, who also covered her food and insurance needs while she took a part-time job as a cheerleading coach, which covered her gas money and hanging out with friends.

“I was able to send out hundreds of resumes, and wait. I could afford to go on a few inspections a week and still have a roof over my head,” she said. “I didn’t have to worry about making a living wage in those first two years because I had financial support.”

But it wasn’t all rainbows and butterflies. By 2016, White said the strain of running a business was wearing on her to the point that she was on the verge of leaving for an office job. Three weeks later she got a call from Better Mortgage.

There are about 75,000 appraisers nationwide and only about 300 are Black women.

> U.S Bureau of Labor Statistics

“Not every bet is going to pay off. Therefore, the challenge is in knowing which opportunities to say yes to and which ones to pass on.”

> Jillian White

“They needed someone to build their appraisal department from the ground up. I got to put all of my appraisal knowledge to work while being in an office setting. It was my dream job,” she said.

During her time at Better Mortgage, White said she created a staff appraiser panel and hired 19 appraisers, most of whom were trainees and 50% of whom were women or minorities.

THE PRESENT

More recently White, who is now a member of the board of trustees at the Appraisal Foundation, and the government relations committee at the Appraisal Institute, has become a public, vocal advocate for combating appraisal bias in communities of color. In December, she was featured in “Our America: Lowballed” a documentary that highlighted the ongoing issue of unfairly low property valuations among Black and Hispanic homeowners, In January, the New York Times published an article that shined a spotlight on her and two other Black women who are on a mission to end bias in home appraisals.

“Bias in appraising is complex and requires a multifaceted solution. It cannot be eradicated by appraisers alone,” she said. “Therefore, the issue needs to be addressed from many different angles. Every opportunity to speak to a different audience is also an opportunity to discover new perspectives and resources, which then get added to the toolkit to address the issue.

White and Kenon Chen, executive vice president of strategy and growth at Clear Capital, have spoken on a number of panels highlighting the need for more diversity in the appraisal industry and the need for greater transparency on issues of racial bias.

Chen said the two started collaborating on improving the appraisal process several years ago during her time at Better Mortgage as head of collateral/chief appraiser.

“I remember being impressed right away at the thought behind her questions and the grace with which she dug into problem solving,” Chen said. “Over the years that impression has only grown as I have watched her navigate professional and personal challenges. She has a willingness to understand the root cause of issues while looking for innovative solutions

to move forward.”

That includes looking at her profession honestly and being willing to point out where it can and should be better.

“It is much easier to be defensive and take the approach of protecting every inch so you don’t lose a mile,” he said. “Appraisal bias is an incredibly complex issue with years of history at the federal, state and local levels to unravel.”

Chen said that while there isn’t going to be agreement on many aspects of identifying problems and solutions, he appreciates White’s willingness to share her story and address the issues head on with the goal of making the process better for everyone.

To that end, White left her position as head of growth at Aloft Appraisals in December to create her own venture, Appraisal Insights. White, the CEO, is awaiting approval of the name. The company, she said, is focused on closing the information gap regarding appraisal bias with data and resources that can assist lenders, regulators, consumers and appraisers as they go through the process.

“This new venture allows me to focus exclusively on the latest developments in appraisal bias whether they be related to policy, reporting or enforcement,” she said. “My offerings include speaking engagements, educational courses and consulting with the aim to prepare stakeholders for the changes that are arising specifically from the Property Appraisal and Valuation Equity initiative.”

THE FUTURE

Over the next five years, White sees herself continuing to work on policy issues, especially those related to homeownership and closing the wealth gap. The biggest challenge facing the industry now, she said, is working within the current framework while trying to innovate for the future, which White thinks is doable.

“Not every bet is going to pay off,” she said. “Therefore, the challenge is in knowing which opportunities to say yes to and which ones to pass on.”

A decade down the road she sees the appraisal industry finally catching up to technology.

“I see the appraisal industry finally entering the 21st century,” White said. “I think virtual inspections will be the

norm, appraisers will have greater access to data, and technology will enable faster and more defensible reports.”

She also believes that the requirement of needing to know an appraiser to become one has a disparate impact on people of color and that the proof can be found in the demographics.

“Until the qualifications to become an appraiser change, the demographic of the appraiser population will remain the same,” White said. “Even when there is a concerted effort to pair diverse talent with supervisors, it is not enough to get trainees to become licensed or certified.”

White also noted in her comments in “Our America: Lowballed” that the first step to changing the problem is an industry-wide acknowledgement that there is a problem and that there is still a level of disbelief.

“If you are human, you have bias,” she said.

During an interview in the “Lowballed” documentary, Marcia Fudge, secretary of the U.S. Department of Housing and Urban Development, agreed that more diversity and a better understanding of the neighborhoods appraisers are working in are important to changing the current state of appraisals.

U.S. Rep. Barbara Lee, D-Calif., has more serious consequences in mind, including removing the Appraisal Foundation from its responsibility for appraisal standards and creating a federal agency to oversee the industry. Lee would also like to see financial penalties for appraisers found to be guilty of bias in determining the worth of a property.

“Consumers need protection,” she said in the documentary. “If an appraiser is found to be biased, there should be consequences.”

Chen said the debate continues about the best path forward for the industry, but added that he is encouraged by the steps being taken by Fannie Mae and Freddie Mac to modernize the process. He also believes that White will play a prominent role in how and when things get to where they need to be.

“I think Jillian is uniquely positioned to play a prominent role in making an impact because of her experience, talent and ability to share her story in a way that brings people together instead of alienating them,” he said. n

BIG BUCKS BREAK UPS FROM

Divorces can be a lucrative source of business

BY STEVE GOODE, STAFF WRITER, NATIONAL MORTGAGE PROFESSIONAL MAGAZINE

When couples get divorced there is one thing that is almost universally true: Somebody is going to be highly motivated to find a new place to live.

When times are tough in the mortgage business, there’s a tendency for loan originators to expand their scope of offerings into niche channels. NonQM and reverse lending usually come to mind. But what about divorce mortgages?

With almost one in two marriages ending in divorce and 70% of them involving expensive real estate that must be divided, combined with the potential for closing mortgages for both parties, it seems like a no-brainer. But there are things to be considered before diving in, from understanding the dynamics and sometimes volatile nature of a divorce, to finding borrowers in more discreet ways than advertising on social media.

In real numbers, according to research from Bowling Green State University, the number of women who reported they divorced in 2021 was 948,862. The divorce rate is 14.0 divorces per 1,000 married women. That’s over 700,000 potential mortgage transactions.

NOT FOR EVERY LOAN ORIGINATOR

“Itell [LOs] this is not a shiny new object,” said Jody Brun, founder and president of the Divorce Lending Association, which trains Certified Divorce Lending Professionals. “You risk making things worse, much worse.” Brun speaks from experience, having gone through a divorce that involved the division of real property 30 years ago. She recalled noticing a disconnect between the legal situation and the accompanying mortgage situation and the number of gaps in the process.

So Brun decided to educate herself, building on her own experience in the mortgage industry and as a participant in a divorce. She developed her curriculum and passed her knowledge on to lawyers practicing family law.

“They saw a lot of mistakes being made,” she said, adding that even though almost half of marriages end in divorce, no two are alike, whether it be the goals of the two parties involved, their outlook, or perspective.

The association’s program, Brun said, eliminates many of those mistakes, whether they are in divorce and family law, financial and tax planning, or a mortgage.

According to the association’s website, the certification program provides mortgage professionals with the training to better serve clients who are ending marriages, as well as additional mentoring, coaching, and business development designed to help them reach their audience.

For Brun, background knowledge and a broader understanding of how those pieces intersect with real property issues is a key component to working in the divorce lending niche. Mortgage professionals who don’t see the difference between divorce lending and other less complicated channels fail their clients and risk doing them significant harm down the road, she said.

“They can provide value or chaos,” she said

WORD OF MOUTH AND RELATIONSHIP BUILDING

Brian Sacks, a mortgage loan originator at Homebridge Financial, has been in the loan origination business since the 1980s and started working as a certified divorce lending professional in the last four years. Sacks, who calls Bruns’ course “outstanding,” said the niche fits into his philosophy that loan originators need to have a multipronged approach to stay in business.

As for the divorce niche, Sacks said the benefits are pretty simple: “These are people who have to sell,” he said. “It’s not rate sensitive.”

Another advantage, in Sacks’ view, is that he has developed relationships with mediators and divorce lawyers that enable him to participate in the niche without having to advertise, an act that

“These are people who have to sell. It’s not a rate sensitive deal.”

> Brian Sacks, MLO at Homebridge Financial

Divorce

for

over the age of 15

Provisional number of marriages and marriage rate: United States, 2000–2021

Who files for divorce more?

SOURCE: DIVORCE.COM 69% Women 31% Men

1 Excludes data for Georgia.

2 Excludes data for Louisiana.

Note: Number and rate for 2016 has been revised due to revised figures for Illinois. Rates for 2001–2009 have been revised and are based on intercensal population estimates from the 2000 and 2010 censuses. Populations for 2010 rates are based ont he 2010 census.

SOURCE: CDC/NCHS NATIONAL VITAL STATISTICS SYSTEM

According to sociological research by M.J. Rosenfeld, women file for divorce twice as often as men.

Women initiate 69% of divorces in the U.S. compared to 31% of men. Surveys show that such disparity results from women’s high and later unmet expectations of emotional support from men.

SOURCE: DIVORCE.COM

he described as “cheesy.”

“You come blessed,” he said. “They bring us in while negotiations are going on.”

The key, for Sacks, is to come in early enough to make sure mistakes haven’t already been made, such as the case of a divorce in which the client who was keeping the home by virtue of the divorce agreement hadn’t applied for a mortgage. As it turned out, the person was not eligible for a mortgage, but no one had thought to ask.

In another case, Sacks said, the person keeping the home as a result of the settlement needed a year of alimony payments to build credit and income requirements to qualify for a mortgage.

“These are not quick loans generally speaking,” said Sacks, who estimated that he closes 15 to 20 divorce loans a year.

The key to working in the niche, Sacks said, is to realize that you are there to help mediators or divorce lawyers do a better job for their clients and get them through a very difficult time, albeit one that will result in the purchase of one home and sometimes two.

“The approach must be one of an educator

not a beggar,” he said. “Too often LOs are just walking in with their hands held out,” he said.

HELPING PEOPLE

Cindy Tamsin, a senior mortgage advisor and certified divorce lending professional at House America Financial, has been involved in the divorce lending channel for about five years and said it represents about 5% to 10% of her business annually, although she believes it could be a fulltime job.

“It’s slowly growing,” she said. “There will never be a shortage of people divorcing.”

While there may not be a shortage, the Bowling Green research does indicate that the divorce rate is at its lowest in 40 years. But, still, almost a million people a year are calling it quits on their marriages.

Like Brun, she went through a divorce and realized that lenders could provide a much better experience for those going through a break up in which the only bigger issue than what happens to the house is what happens to the kids.

“My goal is to help people. When I went through it I didn’t know what to do,” Tamsin

“The approach must be one of an educator not a beggar. Too often LOs are just walking in with their hands held out.”

> Brian Sacks

Adjusted Divorce Rates, 2021

According to Bowling Green State University, Arkansas had the highest divorce rate among women in the U.S., with 21.7 women divorcing in the last year per 1,000 married women. •

•

Bowling Green Divorces by State

LEGEND

Bowling Green Divorce Rate by State

• • 50 | NATIONAL MORTGAGE PROFESSIONAL MAGAZINE | MAY 2023

Bowling Green Adjusted Divorce Rate

Financial troubles are also another common reason for divorce. According to divorce stats, economic issues cause about 25% of divorces.

Couples going through their first divorce are around the age of 30, Divorce.com said. Married couples between the ages of 20 and 25 are 60% likely to get a divorce.

Baby Boomers have the highest divorce rate among other generations — 34.9%, reports Divorce.com.

Divorce.com also reports the following breakdowns by race:

• African-Americans: 33% divorces per 1,000 married residents

• Hispanic women: 22% divorces per 1,000 married residents

principles or expectations, including: it’s very rare that a divorce doesn’t get contentious; always keep both parties in mind; sometimes it’s like therapy; and there will always be people divorcing.

Timing is also an important aspect of getting involved in a divorce settlement and helping couples divide property and get mortgages.

“It’s harder when they’ve waited until they ruined their credit,” she said.

Tamsin said she’s never had to pay to advertise for divorce cases because the channel is largely word of mouth and cautions those in her line of work that haven’t been through a divorce to “pick another niche” because the process can be difficult and lengthy. However, Bruns disagrees that LOs in the niche should have gone through the divorce experience.

That difference aside, Bruns said her organization has just surpassed training 800 loan originators in the craft of divorce lending, and the goal is to continue to grow that number in order to help them provide a valuable service and to help lawyers and families involved in an emotional experience.

TEAMWORK

Kathryn Kostas, vice president and certified divorce financial analyst with EP Wealth, a financial planning and wealth management firm, has worked with Tamsin for several years.

Kostas said her role in a divorce settlement is to research what will work for both parties — and many times — enable one to qualify for a mortgage to keep the home while leaving the partner leaving the home the ability to afford to buy another home if they want. Tamsin, she said, plays a huge role in that.

“We’re trying to create two financially stable households and the mortgage and real estate pieces are huge,” Kostas said, adding that a divorce lender’s ability to be able to work through obstacles — such as a spouse with no income history in years — is also key.

“Creativity is a huge factor. ‘What can we do here? How do we make this work in a way that’s best for both parties?’” she said. “I’ve had some terrible experiences (with divorce lawyers). I need someone who knows the right questions to ask.”

Kostas said that those experiences don’t mean the lawyers are to blame. Their job is to get the best deal they can for their clients and also not to give financial advice because that’s not their responsibility.

But she also tries to explain to them that a divorce lender can help keep their client in the home, which will likely lead to a good review and future referrals.

“Once they see the benefit , they’ll continue to use a divorce lender,” Kostas said. n

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GUILD DOUBLES DOESNT FOLD, IT DOWN

California-based independent mortgage lender continues to grow through acquisitions

BY DAVID KRECHEVSKY, MANAGING EDITOR, NATIONAL MORTGAGE PROFESSIONAL MAGAZINE

In some ways, the same holds true in the mortgage industry as it adjusts to the housing market downturn. While some mortgage lenders have folded — Finance of America, Majestic Home Loans, and Sprout Mortgage, among others, in the past several months — others have chosen to double down… by growing.

Take Guild Mortgage Co. The San Diego-based independent mortgage lender acquired three independent mortgage lenders in the last few months. Guild acquired Wisconsinbased Inlanta Mortgage Inc. in December; New Mexico-based Legacy Mortgage in February; and Coloradobased Cherry Creek Mortgage in March. This is not a new strategy for Guild, which was founded in 1960 but is now a wholly owned subsidiary of Guild Holdings Co. after going public in 2020. Over the past nine years, Guild has acquired six other mortgageindustry companies. (See list.)

In a letter posted to the company’s website a few years ago, CEO Mary Ann McGarry explained Guild’s growth strategy.

“Through targeted acquisitions and

loan officer recruitment, we have grown our annual origination volume from $1.4 billion for the year ended Dec. 31, 2007, to almost $28 billion for the 12 months ended June 30, 2020,” the letter stated, “and our servicing portfolio from $2.5 billion of unpaid principal balance (UPB) as of Dec. 31, 2007, to $52.8 billion as of June 30, 2020 (in each case, excluding any subserviced loans). And, throughout this period of growth, we have remained focused on profitability.”

Some of the figures in the letter require updating. According to an annual report filed with the Securities and Exchange Commission for the fiscal year ended Dec. 31, 2021, Guild originated $34.3 billion for all of FY2020, and $35.7 billion for FY2021. For FY2022, Guild originated $19.1 billion.

In her letter, McGarry added, “[W]e believe our growth story is far from complete, and that we have the potential to expand our geographic footprint from the 31 states where we currently have retail operations to include all 50 states over the long term.”

In the time since that letter was posted, Guild has grown its footprint to 49 states and the District of Columbia, primarily through acquisitions.

Smart blackjack players know that you can win big if you double down.

Doubling down involves doubling your bet during a hand in return for just one more card. Done strategically, you can significantly boost your winnings — assuming, of course, that you don’t lose.

“There’s still so much opportunity in local markets out there, and we do really well in smaller communities.”

> Terry Schmidt, incoming CEO of Guild Mortgage Co. and a director of Guild Holdings Co.

> Mary Ann McGarry, CEO, Guild Mortgage Group, is retiring in June after nearly 40 years with the company

Guild’s growth strategy is praised by corporate analysts. In an analysis of the fourth quarter of 2022 and a preview of 2023, analysts at JPMorgan said that, given the downturn in the housing market, “we believe cost reductions cannot keep up with this level of market compression, driving further losses and consolidation in 2023. Longer term, we believe this will be the foundation for a return to profitability in 2024.”

AN M&A BOOM

For Guild, the analysts said that, “While our outlook for the mortgage sector is increasingly cautious, we believe [Guild] will outperform peers in the sector.“ They added that Guild’s “track record of successful acquisitions/integration may also create an opportunity for market share gains as the mortgage industry consolidates.”

Garth Graham of STRATMOR Group, a data-driven mortgage advisor and consultant that provides strategies for independent and bank-owned mortgage lenders, also respects Guild’s growth-by-acquisition strategy and agrees the industry is ripe for mergers and acquisitions.

Graham, a senior partner, manages M&A strategies for STRATMOR. In October 2022, his company published a report on M&As in the mortgage industry, estimating there would be 50 such transactions by the end of the year — 50% more than in 2018, “the next-highest year of lender consolidations in the past three decades,” the report noted.

While 2022 was a strong year for M&A, Graham said in February, there will be “probably 60 transactions in 2023. So, that means, in the span of two years that’s roughly 100 companies that will be involved in some level of merger and acquisition activity.”

Now well into 2023, Graham said he believes the momentum for M&As remains strong. With mortgage rates remaining near 7% and home affordability falling, refinancing mortgages has fallen off a cliff, leaving lenders to fight over the shrinking pool of purchase mortgages that remain.

“There were 13 million mortgages done in 2021,” Graham said. “That’s a really big number for our industry. Last year, there were 5 million. This year, there might be [4.5 million]. So the drop on a unit basis is 60%

ANTEING UP

Guild Mortgage has been an active player in acquiring other mortgage-industry businesses to boost its market share.

Since 2014, it has acquired seven companies. Here’s a breakdown:

• Sept. 19, 2014: Comstock Mortgage LLC, Sacramento, Calif., an independent mortgage banking firm.

• Oct. 10, 2014: Northwest Mortgage Group Inc., Portland, Ore., home loan and refinancing services.

• June 6, 2016: AmeriPro Funding Inc. (AmeriPro Home Loans), Austin, Texas, residential mortgage lender.

• Jan. 11, 2018: Cornerstone Mortgage Inc., St. Louis, Mo., mortgage banking firm.

• Dec. 12, 2022: Inlanta Mortgage, Pewaukee, Wisc., independent mortgage lender.

• Feb. 7, 2023: Legacy Mortgage, Albuquerque, N.M., independent mortgage lender.

• Mar. 13, 2023: Cherry Creek Mortgage, Albuquerque, N.M., independent mortgage lender.

Source: mergr.com

> Terry Schmidt, president & incoming CEO, Guild Mortgage Co. and director, Guild Holdings Co.

ACQUISITIONS IN 2023

A glance at just some of the mortgage industry companies growing by acquisition:

• Legacy Bank & Trust Co. acquired Crain Mortgage Group LLC

• American Pacific Mortgage acquired the assets of Lend Smart Mortgage LLC

• First American Financial Corp. acquired 1031 Solutions LLC

• Mutual of Omaha Mortgage acquired Keller Mortgage

• CMG Mortgage acquires Homebridge Financial’s retail mortgage business

Source: NationalMortgageProfessional.com

part of a long-term strategy.

That’s according to Terry Schmidt, who serves both as president of Guild and as a director of Guild Holdings Co. Schmidt is one of three women who hold key executive positions with Guild, joining McGarry, the CEO, and Amber Kramer, the company’s senior vice president and chief financial officer. (As of June 30, Schmidt will become CEO upon McGarry’s announced retirement. Chief Operations Officer David Neylan will become president.)

All three have had long careers with the company. McGarry has been with Guild since 1984, when she joined as an internal audit supervisor, and has been CEO since December 2007. Schmidt joined Guild in 1985 as a member of its audit department, and has been president since August 2020. Kramer signed on in 2004 and held various senior executive positions before being named CFO in August 2020.

‘WE PLAN TO WIN’

That continuity allows Schmidt to discuss Guild’s growth strategy from a decadeslong perspective.

“We’re really focused [over] the last … 15-20 years on just being a retail franchise operator,” she said. “So we’ve stayed in having a local presence in branches and offices all over the United States. … There’s still so much opportunity in local markets out there, and we do really well in smaller communities … where we get really involved in giving back. We just feel like there’s a lot more opportunity with great small companies that could be available to us.”

She continued, “And when they come to Guild, it’s a win-win for both organizations. We add a lot more value related to the value and the size, and they can still continue to operate their business and grow in our platform.”

Schmidt said Guild views the downturn in the housing market as

cyclical, and that it still represents “an opportunistic timeframe for us.” While 2020 and 2021 were incredibly profitable years for the industry, she said, “we feel like now is a better opportunity that we’ve had in the last couple of years.”

She noted that, during those two years, “everybody was so busy just trying to keep ahead of their pipelines. It’s a little bit slower right now, but this is the time to really think about acquiring companies and continuing to just grow organically and get talent.”

As of Dec. 31, 2022, the company reported employing a total of 4,000 people, down from 5,100 a year earlier.

It also reduced compensation for its top executives last year. According to a proxy statement filed with the SEC, McGarry’s overall compensation in 2022 was reduced by 46.1% to $1.741 million; Schmidt received $1.565 million in compensation last year, a 34.5% cut. Guild is set up to grow, Schmidt said, because it has the capital to make acquisitions. As of Dec. 31, 2022, the company had $162.2 million in cash and cash equivalents, and $78.9 billion in unpaid principal balance (UPB) for its servicing portfolio.

“Now is a good time to be an investor, to invest in your future, and that’s what we’re doing,” she said. “A lot of companies aren’t in that situation and don’t have the ability to do that. … We’ve been pretty disciplined about that over the years, so that when we’re in times like this, we’ve got capital available to be able to take advantage of the dislocation in the market.”

Schmidt added that, earlier this year, Guild held a “sales rally” at which she told the staff that the company plans to continue to double down on acquisitions in the market.

“I said, ‘There’s going to be winners and losers, and we plan to win.’” n

> David Neylan, Chief Operations Officer, Guild Holdings, Inc.

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Do The Hokey Pokey After A Healthy Breakfast

Nick Roberson is a long-time mortgage industry veteran and a board member of the California Association of Mortgage Professionals. He’s a forthcoming and giving guy, who shares his … unique … perspective on work and life on his Facebook account. Here are some of Nick’s FB thoughts this month:

Did you hear about the guy who invented the knock-knock joke?

He won the “no-bell” prize!

Did you hear about the rancher who had 97 cows in the field?

When he rounded them up, he had 100!

• • •

A nice couple, who live a few doors down from me, were walking past my driveway as I was unloading my leather duffle bag from the trunk of my car. I smiled and said hello to them. The husband said, “Back from another trip?” I said, “Yes, something like that.” His wife laughed and said, “You are always going somewhere, and you typically come back late at night. We are half convinced you are either a spy or a hitman.” I looked at them, laughed, and said, “Lucky guess.” Then I told them to have a nice day and walked into my house. I haven’t looked out front yet this morning, but they may still be standing there staring at my house.

• • •

Having a simply Irish breakfast this morning.

IKEA delivered my neighbor’s new tree today. •

10 signs your coworker went to Chipotle for lunch:

1. They are mysteriously wearing different pants than they had on before lunch.

2. They smiled at an afternoon client presentation and their teeth looked like an ear of Indian corn.

3. Building security just called the coroner because they are convinced someone died in the bathroom.

4. You’ve never seen them running so fast while appearing to be searching for something in their back pocket.

5. It’s been four hours since lunch, and the car still isn’t safe to carpool home in.

6. The pharmacy at CVS calls them by their first name and refers to Imodium as their “usual.”

7. They went to light a candle in their office and the explosion made them look like Wile E. Coyote after an ACME bomb trap failure.

8. Is the real reason everyone in the office started wearing masks again.

9. They have the only food in the community fridge that is safe from being stolen.

10. Those aren’t desert camouflage pants he’s wearing. • • •

A man decided to tie the knot with his long-time girlfriend. One evening, after the honeymoon, he was organizing his golfing equipment. His wife was standing nearby watching him. After a long silence, she finally speaks: “Honey, I’ve been thinking, now that we’re married, maybe it’s time you quit golfing. You spend so much time on the course. You could probably get a good price for your clubs.”

The man gets this horrified look on his face.

She says, “Darling, what’s wrong?”

• • •

A linguistics professor was lecturing his class one day.

“In English,” he said, “a double negative forms a positive. In some languages, though, such as Russian, a double negative is still a negative. However, there is no language wherein a double positive can form a negative.”

A loud voice from the back of the room piped up, “Yeah, right.”

• • •

“For a minute there, you were beginning to sound like my ex-wife.”

“Ex-wife!” she screams, “I didn’t know you were married before!”

“I wasn’t,” he replied. n

To see more by Nick,just go to www.facebook.com/nickroberson

Nick Roberson