Lykken on Lending

True leadership emerges when we navigate the toughest times with resilience, transparency, and an unwavering commitment to our team and values. In this episode, we delve into the captivating world of mortgage industry leadership during challenging times. Join us as David Hopper, Chairman of the Board at LeaderOne Financial, explore leadership dynamics and discuss the unique obstacles faced by professionals in the mortgage industry today. He dives into the current market climate and how it presents a new set of challenges. As Mark rightly points out, even the trying times of 2007-2009 pale in comparison. David’s authenticity and transparency shine through as he discusses LeaderOne’s distinctive approach. He shares their business and leadership model and the core values that drive their success. Tune in now and get equipped to lead effectively in the present market challenges.

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Watch the episode here

 

Mortgage Industry Culture And Mindset In Present Market With David Hopper Of LeaderOne Financial

We’re in for a real treat. The focus of this episode is leading and leadership in challenging times. We have some challenging times going on in this market. Marc Helm is joining me. He’s my co-host. Marc, it’s good to have you here.

I’m glad to be here, David. Thank you.

Marc, you would agree. These are some of the more challenging times we have seen in our years in the industry.

You and I have talked about this numerous times but everybody thought 2007, 2008, and 2009 were tough. This is a whole different kind of tough. It’s the toughest time we have had, David.

I agree with you. It’s the contrast. We’re bringing on one of my clients. Full disclosure, this is a client, one that I care about. He is a leader. He is the Chairman of the Board of LeaderOne. His name is David Hopper. He was born and raised in Kansas City. He’s married to his high school sweetheart. I love romantic stories. I have to hear that part of that story one of these days.

 

 

He’s got 3 daughters and 2 grandkids. I joined him in the grandkid category. I sent him a T-shirt when he got one of his grandkids. I love this guy. He’s a competitive golfer, a real athlete, and a veteran of the industry but the thing that I like so much is how he’s leading his organization. We can’t hear enough from leaders. I’m sure there are a lot of other leaders out there. They’re doing a great job. I would love to hear from them and get them on the show. I listen to this man and how he’s leading his organization. David Hopper, welcome to the show, my friend.

Thanks for having me. I appreciate the invitation. I look forward to having a good little chat.

I want our audience to get to know you briefly and a little bit of your background. I want to get into the LeaderOne model and how we’re leading. Let’s start with you, David. Tell us a little bit about yourself and your background. Were you born into mortgage lending? How did you find your way here?

I was born and raised in Kansas City. Here’s a quick story on my wife or high school sweetheart. She taught me one of my first life lessons. It relates to the mortgage industry. I graduated high school, and she broke up with me. She broke my heart. It’s one of the most painful times of my life. I still remember that pit in my stomach but that biggest pain became my biggest gift in life. We got back together two years later, and we have had a great life since.

It’s one of those things that reminds me right there that at that time, it was the worst and the best gift she ever did. She’s an angel and somebody that I cherish very much. I have 3 daughters and 2 grandkids. I was not born in the mortgage industry. I fell into it. I played tennis all my life. I thought I was going to be a pro tennis player. I had long hair.

That would be Andre Agassi.

Back in the ’80s, I played tennis at the real USC or University of South Carolina. That’s what we like to say. I’m a gamecock. I lost in my senior year in the NCAA championships. I cried. My dad said, “You’re going to have to cut your hair and get a job.” I said, “I’ve never worked. I’ve played tennis.” I got a job at Norwest Financial in their training program and cut my teeth in the finance business. Here we are years later. It has been a crazy ride but I wouldn’t trade it for anything.

You have an excellent company like Norwest, which was a good company back in those days. Many things in acquisitions have evolved. I had a foundation at a bank when I started. I’m so grateful for that foundation that’s still in there and making a difference. Tell us a little bit about LeaderOne, the model that you have. It’s a very unique model. It’s not one that I have seen anywhere else in my years in the mortgage industry. It’s something special.

We like to think so too. Long story short, LeaderOne was started in 1992 by AW Pickel here in Kansas City.

We all love AW.

He’s a good friend. He had the foresight and vision. In ’07 and ’08 when all that happened, he had a vision of creating a platform where people could collaborate. They could have a seat at the table. He sold 75% of his company to guys like me and a lot of guys that are still here. The thought process back then was he had a Fannie ticket. He had a flat management structure. You could buy in.

At that time, LeaderOne was doing about $40 million a year. The guys that got together wanted to have a say. We wanted to take all the things that we saw that were good in our career, take out all the things that we didn’t like, and try to put them in one place. It’s evolved through the valley of fire and death in this business. We ended up buying AW out. We fast forward to now. Nobody owns more than 12% of the company.

It’s the originators that bought the company. It’s not a bunch of mortgage bankers, underwriters, funders, closers, and secondary people. That’s one of the things I want to zero in on. You wanted to have a seat at the table, brought the best elements from the other things, and kicked out the other ones that you didn’t like. You’ve had a chance to create your recipe and bake your pie.

What I like to say is we bake the cake. If we don’t like it, it’s our cake. We need to change it.

Eat your stuff.

With that, no private equity, parent bank, or 1 or 2 guys run it. It’s not my company. Nobody owns more than 12%. I don’t think we were smart enough to know at the time but when we look back, that’s probably one of the strongest assets. Our secret sauce is when nobody owns more than 12%, you’re focused on what’s best for the company, the employees, and the customers, not what’s best for David Hopper or somebody else. It’s a model that I wouldn’t trade for anything. It’s something I love dearly.

In these challenging times, I keep pinching myself to think we will never have another opportunity like this in mortgage banking because we all know how tough it is to start a mortgage bank, survive, and do all this stuff. I’m very grateful for where we are. You see the quotes out there built by originators for originators. We’re living and breathing it every day as the Chairman of the company but I also have a division myself with 100 employees. I’m wearing a lot of hats. We’re having fun but in a market like this, you have to check yourself. It doesn’t matter what model you’re in.

You’re a division president, which means you own a region. It’s your oversight. You own it. You are also the Chairman of the company or the whole end of the legal entity. What volume have you done? Give us a little idea. You went from $40 million all the way up to the high watermark that you’ve done. Everyone is off of the high watermark but you went from there to what?

The high watermark was $5 billion in ’20. We knew we weren’t a $5 billion company. The waters rose, everybody. We did $185 million in May 2023. We’re a $2 billion company. If you would have asked me before, I thought we were $2.5 billion or $3 billion. It might be different.

It’s driven by marketing times. You were talking about the high watermark. It’s a rising tide. How high are we going to go? We’re going to go as high as the tide can. The key is to grab the market share. That’s pretty impressive. Marc, have you ever heard of a model quite like this?

I hadn’t. It’s fascinating. The ownership structure is very unique. From my leadership experience, that’s a good play. It’s exactly what’s making you as strong and successful as you are getting everybody’s buy-in. There’s no better way to do it than spread that ownership out.

As you talk about this, I’m thinking about the head of underwriting, the head of secondary, the chief financial officer, and those that are reading. We have a lot of them that read this. They’re also going, “My boss would be the guys that are producing the loans, making my life miserable sometimes, and making unreasonable demands. That would be my boss. How is that working?”

I’ve gone through the whole company from top to bottom, stem to stern. You have good quality loans. You are not the production folks. It’s not the tail wagging the dog. There’s a good partnership in there between what we refer to as executive leadership or those that run the mortgage bank and the producers. How have you been able to navigate that, especially in these times?

It’s like a marriage. It’s a lot of work. It’s not easy. It’s give-and-take. It’s all of that. The smartest thing that we have done right is to protect ourselves from ourselves. I’m a sales guy at heart. I’m competitive. We’ve got a fantastic executive team that has been combined at LeaderOne for 50-plus years. We’re a full-service mortgage bank. I like to say we’re a Chevy or a GM. We’re not a Range Rover but we have it all. It’s built out from our CFO to all of those C-Suites. They run the company day-to-day. Probably the biggest thing is everybody buys into what we’re trying to do. It’s the collaboration, the transparency, and the open-mindedness.

Protect yourselves from yourselves. Click To Tweet

That to me is something that works the best because most mortgage companies or the ones I’ve been at in the past are like, “Be quiet. Get in the corner. Give me loans and give me more. Don’t tell. Don’t ask why.” That’s different. When you say you’re open-minded, what does that mean? It means you better be humble. You have to bring humility and check your ego because the old school is, “This is the way we do it.” We’re trying to challenge the status quo. That’s the thought process.

You’re doing a great job on the leadership side. We have these fun coaching calls that we do back and forth with each other. I listen to how you talk and your attitude. It comes into how you lead because there are divergent interests. You have the owners who are producers looking at a rate sheet, and then they’re getting recruited because not everyone understands your model. They’re getting recruited and showing their rates. It’s all over the map.

We’re seeing a lot of divergent interests, especially when everyone is blowing and going, “We’ve got more loans.” They’re falling out of the sky, running around with a basket, and collecting them up. There’s no time to get in and start getting into conflicts but in these times when things start contracting, we find out when the tide goes out where the rocks are. You have done a masterful job on that as you worked through that. One of the areas we’re talking about more is technology. I would love to get your thoughts on how you see technology playing out in the mortgage industry. Is this something that you see as the magic bullet? How do you bring that in and look at that within LeaderOne?

First of all, I want to preface. I’m not a technology expert. We have failed in technology. You want to look at mistakes. We invested in a concept several millions of dollars, tried to create our CRM, and failed. I have a bad taste in my mouth from that. As the chairman and division head, I’m not sure how we’re all going to survive together. We need technology. We have what I consider good technology but the one thing that I can’t get through my head, and I’m a pretty simple guy, is the mortgage companies are the hunters and gatherers. We’re out there. Every time I turn around, there’s a technology company saying, “I have to have this.” The pie is only so big, and it’s getting smaller.

Hopefully, I don’t offend anybody. What I would like to see is a mid-sized IMB. I need technology. If it’s as great as they say it is, give it to me. Don’t hammer me upfront. If I’m going to get an ROI on it, let’s share the upside because when you start looking at all the costs and everything we have to go through to run a mortgage bank, the math doesn’t work. I don’t see it. If there are going to be fewer IMBs, how are all these FinTech companies going to survive? I get it but I don’t understand. When we look at our technology costs, they’re through the roof over the years.

Especially the LOS component of it. It’s death by 1,000 cuts but it’s not these little paper cuts anymore. It’s major knife wounds. You brought up something. When I was at the Total Expert conference, you texted me with a concept, “Let’s go to a performance model.” I raised that with Total Expert and several people. There are companies already starting to do that.

David Savage of Total Expert says, “That’s how we do it. We don’t get paid unless our clients are successful. We have gone to a performance-based model.” Anyone who’s enlisting to this with technology or any independent mortgage bankers should be paying attention to that because if you want your technology to be adopted, then we have to get on the same side and alignment on that. I love that concept. To what degree that could happen, we shall see. I’m glad you put that out there.

I appreciate you saying that at the conference because as mortgage bankers, if we can get together and find the tech companies that want to help us grow or if my baseline is $2 billion, and they come in and we grow to X and Y, then they should share in that. I don’t need to lock in on a 2 or 3-year contract. If your stuff is so great, give it to me. It doesn’t matter. It has to be rethought. Hopefully, we can bridge that gap somehow with these technology companies. We’re going back to all of them. We’re like, “You have to help us out here. We have to bridge the gap. In tough times, let’s work together. Let’s win in the good times.” It’s going to take all of us together.

 

Here’s a follow-up question on technology if you don’t mind before we move on. I dealt with technology my whole life, and I enjoy hearing what people are doing with technology in their shops. What I keep hearing out there is most people feel like technology now is death by 1,000 cuts. It’s exactly what you’re talking about. Everybody has got something new they want you to try. They want you to implement it. I like your concept of sharing. The upside is to get people to come together.

I’m glad to hear from David that people are looking at that but along that line, do you think we have created our nightmare inside the industry? I’m not saying there are way too many technology companies as much as I’m saying there are way too many technology companies that aren’t that good and are clouding the waters. What’s your take on that as you look at technology for your business?

I have two takes. The first one is on technology. Someone brings you a shiny object. In our model, we look at it and embrace the possibility, “A partner or a division head called me. Let’s look at it.” You start looking at it and then adding it up. You’re like, “There’s no way we can do all this. We have to figure out the ones that are going to win because we know some of these tech companies aren’t going to make it. They’re going to get absorbed.” That is super tough to figure out. The second part is not necessarily technology but when you look at the cost of credit and verification of employment, IMBs are getting annihilated by the added cost of everybody raising their prices. It’s a two-pronged approach that we’re trying to figure out.

 

I see what you’re talking about for sure. I’m going to move on to the next question that we had, which is good. Price compression is a real thing that happens every day but we want you to be the predictor of the future here for us. When do you think the spreads are going to come back to normal? Are we playing with ourselves if we think that they’re going to come back to normal anytime soon? We would love your opinion on that. Your feet are on the ground. You’re having to deal with this every day in a real-life situation.

I’m not that smart. I got an email about a competitor’s price. I’m living it right before this conversation. It is so real. I can’t figure, heads or tails. We all know the mortgage pie is only so big. The bigger guys might make a little bit more, and vice versa. We know what our price is. We’re transparent with our people, “Here’s the raw price. Here’s what it is.” I’ve seen some big swings. Here’s my thought process on my prediction. I’m preparing for it not to come back. My kindergarten knowledge throughout the years is this. You go to 1999 and gain on sale. You go through ’07 and ’08. The only thing I’ve ever seen is the price. It stays. It doesn’t come back. I hope I’m wrong.

We’re planning for price compression to stay for a long time. As I look out what we’re talking about from an executive level and a board level, we’re thinking in the second quarter of 2024, maybe we would get a little bit of a bounce back. We’re preparing for the fight of our lives. Even when business is better, we’re going to make money in the second quarter and all this good stuff. We are dotting I’s and crossing T’s. I hope I’m wrong. It’s earlier than the second quarter but that’s what we’re earmarking.

You’re focused in the right way. Adjusting to the new norms whenever they are and how long they’re going to be is what makes us all successful in any business we do. You’re taking a realistic approach, which is an excellent way to be because if you can make money in these tough markets when it does come back, you’re going to have a windfall. I salute you for what you’re doing on that.

Moving on to another question, when you look at the independent mortgage bankers that are out there, you’ve already addressed this earlier in the conversation, talking about everybody nailing you out there with the cost from credit reports to employment verification that you’re ordering. The business has fallen off, and they have to get a price break on it somewhere but at the same time, they can’t take it all out on you because that strips any profit you’re making at all.

With that in mind, we have had the compression we have talked about but what did you do? What can you think about doing? What is Leader doing about the cost aspect of your business? You’ve already covered talking to the technology sides and trying to rearrange the structure you have with them but what are you doing to try to drive your costs down?

We have been working on it. We have tried to get out of the lease business, first and foremost. We’re not taking down large leases. We’re pretty much out of the lease market. When we look back, we have whittled everything down. Honestly, we won’t do a lease any greater than two years, and that takes a higher approval because of that. We have made great strides there. We have gotten efficient in our sales professionals and the operations. You look back years ago and hear people say, “Whether it’s every 4 loans or 5 loans, you can have a production officer or assistant.” We have tried to take that up to 6, 7, 8, and 9 and get lean. You can’t have the LP1, LP2, and LP3 and do ten loans. It doesn’t work.

That’s something where we have made great inroads. You have to market. We’re a referral-based lender. We’re not in the consumer-direct but we’re looking at where you’re spending your marketing dollars. That got out of control. We wanted to co-market here. They’re trying to get ROI and trying to measure that. When we bought into LeaderOne, we wanted to have a competitive price but it wasn’t, “We wanted to have the best price.” We never tried to do that.

We’re educating and coaching our people to hold the line on our price because if we have no value proposition, then we are going to have to yield to the price but if we have a value prop and we can educate and help the consumer, the realtors, and our referral partners, then we feel good about being maybe an eighth hire or a quarter hire because we’re giving value. That has been our approach. We’re working at it every day, and we still have a lot of work to do.

I like what you’re doing and your attitude about the margins. If you have to be the lowest price in the market, do you need a sales force? You can publish a rate sheet, and that’s consumer-direct. Go out and lower costs and everything. Much of this business is a relationship business. David, I look at you and your division. I want to talk about Elliott Lewis, Shane Moe, Allen Price, and all these guys that are part of the ownership structure of this company. They’re out recruiting. They’re going out and talking about the value of the structure. It comes back. They believe in this structure that is so unique to LeaderOne. How are you finding recruiting? What are you finding that works?

It’s a tough market out there. First of all, we’re re-recruiting the people that we have. I’m a LinkedIn guy. If you’re on LinkedIn, there are a lot of people that have been here for 6, 8, and 10 years. Those people are the fabric of LeaderOne. We want to make sure we have those people here because that’s who got us here. We have been very fortunate in an unfortunate market.

 

You hear the saying, “Make lemonade out of lemons.” We’re grateful. There have been a couple of companies that went down. We were able to take on some new divisions. We were fortunate in someone else’s unfortunate situation. We were lucky. The model allowed us to do that because it’s the seat at the table. We have brought in four new divisions.

Not branches but whole divisions.

When you look at the years prior, we brought in 2 or 3. We have been very fortunate in that. When you have a flat line management structure, we’re trying to run corporate at X. We don’t need to make a bunch of money. We need to be profitable. We need to build the balance sheet but we answer to ourselves. In times like this, we can go, “Corporate doesn’t need to make 20 BPS or 15 BPS. We can make 10. We can help the divisions, the branches, and the LOs.”

We’re doing that. We’re working on that but in recruiting as a whole, we’re being cautiously optimistic. We have a great pipeline but we don’t know who we are. It’s tough to know what people are. They’re great people out there. We’re trying to get it right. We’re not a company that can give $2 million sign-on bonuses but we’re playing the long game. If we can find those people that want to be a part of something where the sum is greater than the parts, that’s our value proposition. I believe, as a board, in a meritocracy.

Explain the term meritocracy. Some people might not understand what you mean by that.

I’m a big Ray Dalio fan. A meritocracy is the holding of power by leaders on the basis of ability, not because I own 12% or not because my son-in-law works here. Everyone views our value. It promotes fairness, equality, and open-mindedness that maybe doesn’t exist in other companies. There are a lot of companies that I follow on LinkedIn. I’m like, “That’s cool,” but there are a lot of companies that don’t have that. That is our value proposition. Whether you’re an LO that has a great idea or a division head, we’re embracing the possibility that you might know something that we don’t.

One of the division managers is Elliott’s wife. When you were all together in the Cayman Islands for what many people refer to as their President’s Club, you gave a speech there, David. I want to end the episode by touching on some of the elements you talked about in that speech. Suzanne, Elliott’s wife, walked up to you. She’s a marketplace leader in her respective industry, which is healthcare. She says it’s one of the best speeches she’s heard any CEO or chairman give. What are some of the themes that you hit on there? What did you tell your people in these challenging times?

I don’t think it was that great but I appreciate her giving me the kudos. The one thing that I try to do in LeaderOne is to keep it real. I don’t have all of the answers but together, we can find the answers. Through and through as LeaderOne, we’re humble enough to know that we don’t have all the answers. When I spoke to the leaders and the top people in Grand Cayman, it came from the essence of who we are. We didn’t get here because of David Hopper or Adam Schwartz. It took all of us together.

I like to focus on, “The sum is greater than the parts.” You’ve heard me already say it. The people matter. You can’t have an army or a team with a bunch of alpha people. It takes everybody. It takes the C’s, the D’s, and the A’s. It takes people who are average but they’re great and loyal. That is who we are in essence. It’s something that I’m very proud of and that we keep working on.

The people matter. You can't have an army or a team with a bunch of alpha-A people. It takes everybody. Click To Tweet

I’m a big Wayne Dyer fan. If there’s one thing in my life, I wish I could have met him. He’s no longer with us. One of the things that I ended with there is to be open to everything and attach to nothing. That doesn’t mean, “We don’t care about our people.” What got us here might not get us through the next five years. We’re siloed into, “That’s how we got it.” Let’s be open to everything, look at it, and crack the egg.

The other thing that I ended with is in markets like this, there are a couple of things. We don’t want to change. I don’t want to change. David, I told you I’m doing this show. You’re getting me out of my comfort zone. When you change the way you look at change, that’s this market. I challenge our people, “We have to evolve, grow, and become better.”

Lastly, the Navy SEALs have a saying, “Embrace the suck.” That’s what we have to do in this market. We have to get the full benefit out of this adversity. We have to become better and stronger. We have to evolve. We’re not throwing in the towel. We’re playing the long game. We’re here. We have the balance sheet. We saved the money. We did the hard work. We’re looking forward to fighting through it.

We have to get the full benefit out of this adversity. We have to become better and stronger, and we have to evolve. Click To Tweet

You’ve got an amazing balance sheet. You’ve grown so amazingly. Allen Price, another one of the division presidents and one of the top guys that produce as well out in the Pacific Northwest, is a great guy. He says, “The thing that I love most about this place is we can scrap like brothers inside of a family but it’s a family. We’re so much better together even though we may scrap once in a while.” I love that attitude. It’s your leadership that’s brought so much of that.

It’s the commitment of Allen, Shane, and Elliott. I could go on and on at all the division heads. Those are the ones I happen to work with and interact with the most. Your leadership is exemplary. I applaud that and the openness. You do hold onto the people but you don’t hold onto what necessarily was the old thing that got us to where we’re at. That’s where we need to be willing to look at new concepts and new ways of going about it. Marc, are there any final thoughts as we wrap this up?

I have one. David, you were talking about your divisions. I’m assuming some of those divisions or most of those divisions can be doing the same thing as another division. No two divisions are going to do things the same. Has that been an iterative process for you? Has it been a learning process as you picked up good things or poor things that have been done by a division that could be improved? Has that been valuable to you?

As LeaderOne, if you want to talk about a weakness, we’re very entrepreneurial. We love the autonomy. We’re risk-takers. You go back years ago. Divisions were like, “This is my division. We will do it. Plug and play.” What we have learned in this market starting from COVID to now is we have to collaborate better. There’s so much good stuff happening. When I look back, we made a mistake. We should have done this earlier but we have learned from it.

We have division calls. We’re internally focused on creating internal coaching. We brought into LeaderOne Rick Scherer and Rich Clayton. They’re big into this. We’re learning so much from them that it has been a breath of fresh air. They are pushing that. Tony and Joe Gabrione are pushing it. It’s an area that we have to get better in. We have identified it. We’re collaborating as we speak to spread that throughout the company.

That was good. Rich and Rick were previous clients of mine. They were looking at doing something, and I’m the one that had the privilege of introducing them to you. I love how you embraced their strengths and brought them in and how they’re now embracing the other aspects of what you’re doing there. This is outstanding.

David, we ought to form a division and join them.

They’ve got a great model.

We need all the brain power we can get.

Marc himself is a good originator. I was in those days. David, thank you so much for joining me here. I know how busy you are. You got an upcoming board meeting. I appreciate the opportunity to work with you as a client but more importantly, you coming on and your willingness to get out of your comfort zone and share with our audience because I love your leadership style. You’re doing a great job in these difficult times. Thank you for being here, sir.

Marc and David, thank you for having me. For the audiences, LeaderOne never had anybody come in and look under the hood. We hired David and Transformational Mortgage Solutions. It has been a great learning exercise. I’ve gotten to know you, David. I consider you a friend. The relationship has been good for LeaderOne and the executive team. I want to give you and your team kudos. It has been a real joy. When I look back, I haven’t had a coach, mentor, or consultant over the years. It has been great. I appreciate you there.

Thank you so much. I appreciate it. Thanks for taking the time here to be with us. Thank you, Marc, for joining in.

Thank you, David.

We will see you.

 

Important Links

• LeaderOne
• https://www.LinkedIn.com/in/David-Hopper-6027789/
• Total Expert
• Transformational Mortgage Solutions

 

About David Hopper

Personal – 53 years old, Born and raised in Kansas City, MO. Married my high school sweetheart 30 years ago this month.

3 daughters 27, 25, and 20, 2 grandkids and a third on the way.

Competitive golfer – Degenerate golfer maybe.

30-year industry veteran – Started in Consumer finance where I learned the ropes and went from Norwest to HFC, Greentree, Fieldstone, and LeaderOne.

14 years at L1 in August, Shareholder, Division President, and Chairman of L1 for 6 years.

Believer in people, Culture matters, and humility and love makes the world go around.