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M ANAG EM EN T C H A L L EN G E
STORY
Inside A Year Of Uncertainty
THE LESSONS ONE PRIVATE LENDER LEARNED DURING COVID ARE LAYING THE GROUNDWORK FOR HOW IT OPERATES GOING FORWARD.
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By J EFF T ES CH, S PEC IA L TO M ORTGAGE BAN KE R M AG A ZIN E
arch 2020 was a month that started with problems that had been building for months. RCN Capital was growing fast but not fast enough to keep up with demand. In the private lending industry, we focus on lending directly to customers acquiring one- to four-family homes for investment purposes. As the CEO of one of the nation’s largest lenders in this space, our ten-year-old company was bursting at the seams as all of the hard work put in by our amazing team was paying dividends with record demand for bridge lending as well as 30-year loans for aggregation of rental properties. These were good problems to have all things being equal. Our Connecticut-based management team had heard of the pandemic, but it truly seemed a world away. There always seemed to be some virus threat from overseas but the United States always seemed to handle it without too much disruption to commerce. As we all know, that turned out to be very much wishful thinking. On March 16th, 2020 we sent just about our entire workforce remote to protect them from any outbreak in our main office in Connecticut as well as our satellite office in Charlotte. This was the first test for our management team as well as our RCN family as a whole.
TALK, TALK, TALK
Like other employers, the steps we took to make sure the company ran as business as usual were critical at that stage. Communication within each department, but even
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WE SPENT TEN WEEKS WORKING ON EVERY SINGLE AREA OF RCN CAPITAL FROM LOAN INTAKE ALL THE WAY TO SERVICING. more importantly from management to the employees, happened daily. I can not stress how important it was that all the employees had at a minimum, at first, conference calls, and very soon into the new normal, video calls three times a week. I made sure that I was on at least one video call inside every department every week to provide updates and answer questions. As a very close-knit company, it was just bizarre not being able to see each other in the office. The OVER communication that we mandated was truly a lifesaver for morale. I highly encourage all business leaders to get in the weeds with how each manager communicates with their team and make sure that it is more than would be expected in any normal business situation.
FISCAL FREEZE
As if going remote was not bad enough, the very next week the pandemic caused a complete freeze of the capital markets as it relates to the securitization of our two main loan products -- both the short-term bridge and the long-term rental. In layman’s terms, our ability to be able to sell our closed loans to access the long-term debt markets was completely cut off. Yes, we have warehouse lines supplemented by a great deal of our own equity but this was uncharted territory.
By the end of March, like many other private lenders in our space, we made the very difficult decision to pause all origination of loan products. The next lesson, which is a good lesson for all leaders, was that RCN benefited from the ultra-transparent communication we had with our customers, brokers, and correspondent lenders as to exactly what was happening. Yes, we told them we were not funding and why we were doing exactly that. Many folks in the lending industry chose a different path of pretending to be lending when there were not, but we as a company generated a tremendous amount of goodwill with our partners by being transparent. That lesson, while hard to execute at the time, is one that every leader can use for future challenges in the marketplace. Internally we decided from day one in the pause in lending to double down on not only our core company mission but our employees as a whole. The employees were scared, heck we were all scared at the time. The key, as I look back at it was an unwavering belief that if we kept the employees, and I mean all the employees, working on our process as a company so that when we resumed lending we would be stronger than ever.
