09-12-2022 Weekly Mortgage Updates with Adam DeSanctis, Les Parker, Matt Graham, David Kittle, Alice Alvey, Allen Pollack, Marc Helm, Jack Nunnery, and David Lykken.
09-12-2022 Weekly Mortgage Updates with Adam DeSanctis, Les Parker, Matt Graham, David Kittle, Alice Alvey, Allen Pollack, Marc Helm, Jack Nunnery, and David Lykken.
Weekly Mortgage Updates With Adam DeSanctis, Les Parker, Matt Graham, David Kittle, Alice Alvey, Allen Pollack, Marc Helm, Jack Nunnery, And David Lykken
There is so much going on in the marketplace in this industry, like a contraction. We’re going to talk a little bit about that. I got Marc Helm joining us. He’s going to take over the co-hosting role. You’re not going to believe this, but Jack Nunnery, who is a regular part of the show who couldn’t wait for years before he retired, says, “Lykken, two years out, and I’ll be joining you on the show.”He retired, joined me or got out, and there’s a company that has recruited him away. I can’t say much about it because his first day is now. They recruited him out of retirement. Can you believe it? We’re hoping to see Jack. I am so grateful that Marc Helm is going to join me as a co-host. Marc, I appreciate you doing that. Good to have you here, friend.
Glad to be here too.
Your expertise in servicing is just a little bit of a glimpse. You certainly run through many successful mortgage companies. We’re going to know more about that. While you’re servicing expertise is the best in the industry, you also have owned and operated companies to your knowledge of the capital markets and origination. You also work with me as one of the consultants and coaches and are doing a stellar job.I’m excited to have you here, Marc. I want to say a special thank you to our sponsors, Finastra. They have an automated email notification part of their system that lets the consumer know at the various stages of each loan and access to real-time pipeline information for those of you, the lenders. Everyone has it yet, but it’s the way Finastra goes about it.That’s unique. You need to get a demonstration of this product. Take a look at what’s going on. You’re going to hear a lot more about what is going on at Finastra because they’re making a real effort to come after and go into working with independent mortgage bankers. Now we have regulated institutions. Finastra does real well already in the banking community and credit union space. They’re coming into the IMB space. IMBers, get ready. You go to get familiar with Finastra and what they do. FormFree does a great job with its auto-check support, like the Fannie Mae Positive Rent Payment History. You got to learn about that. Christy Moss was on the show back on June 20th. I love Christy Moss. She’s such a dear friend. She’s so passionate. She’s like a social media marketing machine just in her function. She’s partnered with FormFree. You go to check out what those guys are doing. There is some of the most innovative stuff that’s going on.We did another show that will be releasing shortly, which is good stuff. Lender Toolkit, you got to get to see what they’re doing. One of my clients says, “I love what these guys have. They have some of the best suites of all these little products that fit so nicely around our LOS System.” There’s Snapdocs. They have great tools and support the need to implement eMortgage technology effectively.They do a great job of that. With the Snapdocs eMortgage Quick Start Program, it makes it good. I know there are different ones that have different products that work in the eMortgage space. Finally, we’re getting some more traction there, but it’s great stuff. What they have is the best breed and best of class. Also, Total Expert is the leading FinTech software company that delivers purpose-built CRM and customer engagement tools.What I love about the program is not only does it go great when you’re interacting with a customer, it helps you with your recruiting. There’s a lot of that going on now. Check out, Total Expert. Also, SimpleNexus does a great job with its program. We had back in June Shane Westra talking about their vision and what’s going on. I go to tell you that we’re so proud of the sponsors we have.They’re some of the best in the industry. They’re the best of breed in their respective areas. Also, the Mortgage Bankers Association of America. I love their association and what they do with us and our partnership, as well as Lenders One and The Mortgage Collaborative. These two co-ops do a great job of helping you come close to your peers. You got to check out both these, as well as SuccessKit. They do a great job of letting your story be told by a third party.They help you tell your stories. You go to check them out at SuccessKit.io. Also, The Knowledge Coop. They have Houston and Austin live continuing education classes that have a 10% discount. If you go to our website and you’re looking for CE credits, you’ve got to check out what the group at Knowledge Coop is doing. When it comes to recruiting, you go to check out both Mobility MI as well as Modex. These two companies complement each other well. What they also do well is help you recruit. I recommend both of them, but certainly, you got to have one of them.Mortgage Advisor Tools and DW Consulting are some of our sponsors. Check out all our sponsors on our website. I’m very grateful to have Adam. Thank you to the MBA, Les Parker, Matt, and David Kittle, who’s new to the show, Alice Allen, Marc Helm, and Jack Miller. It’s so good to have you all with us. Let’s get over and hear what the MBA has with our Mortgage Minute.
I’m Adam DeSanctis. This is the Mortgage Minute, the latest news from the Mortgage Bankers Association. MBA submitted a letter to FHA leadership detailing member recommendations for improving the FHA 203(k) Mortgage Rehabilitation Insurance Program. Based on feedback from MBA members, the letter highlights specific improvements that would make the program more appealing to borrowers and lenders alike, including increasing the cap on limited 203(k) mortgages, increasing accessibility to consultants, and eliminating second appraisal requirements.
Switching gears, MBA’s Mike Ferry and Tony, Marina Walsh, and Joel Kan will provide an in-depth economic and mortgage market forecast presentation at MBA’s Annual Convention & Expo. It’s happening on October 23rd to the 26th in Nashville, Tennessee. For more information on the session and MBA’s annual convention, please visit MBA.org/annual. That’s it. Thank you for reading.
MBA annual is coming up. Get registered. Also, get yourself set up with the Mortgage Action Alliance app to make sure you have your voice heard wherever you are at. It’s good to have you with us, everybody.Adam DeSanctis, thank you so much for that. Les Parker is here from TM Spotlight. He’s off to Europe now. I’m a little envious. Les and his wife flew out and are probably still up in the air. We’re going to read what he recorded at a TM Spotlight and a macro view of the markets. Les, what do you have for us?
The ECB promises all the Euro nations will borrow at the same rate, but they can only do it by transferring wealth from countries that manage their economies well to countries running large deficits. Is that fair? Eventually, all users of the Euro must agree on fiscal and monetary policy. Otherwise, fragmentation happens. That is, the credit risk trades differently. The faulty Euro rewards the dollar and keeps US rates low, so bond credit spreads widen or part. These views are my own. Learn more about partying yields at TMSpotlight.com.
[bctt tweet="The ECB promises all Euro nations will borrow at the same rate, but they can only do it by transferring wealth from countries that manage their economies well to those running large deficits. Is that fair? " username=""]
Check out Les Parker’s TM Spotlight Newsletter. You could sign up and get the paid version for free if you put in the word POWER for PowerSeller and put it in the code. Sign it up. TM Spotlight is a good newsletter, one you should read every day. Some of the top leaders in the industry, me being one of them, read it. It is good material and well-written. He gives many deep insights. Like Alice Alvey says, “It is one of the best when it comes to being the most accurate too.”We have someone else who’s more accurate than anybody because he publishes live data. I’m talking about Matt Graham, Founder and CEO of MBS Live. He’s here with a market update, and guess what? He pushed out a negative alert, “Negative repricing increasing for some lenders after the bumpy ten-year auction.” Talk to us, Matt. It’s good to have you.
It’s good to be here, Dave. I hope you had a good weekend. We’ll get to that bumpy ten-year auction here in a second. It wasn’t the end of the world, but a little bit of turbulence in the middle of the trading day. Let’s take a quick trip back to memory lane and talk about rates jumping up roughly in line with the highest levels in fourteen years as far as mortgages are concerned. Treasury yields didn’t get quite as high, but they were pretty close. It was a culmination of an entire month and then a few extra weeks of a rising rate trend that began in August as economic data improved. Central Bankers wanted the market to remember just because we had a few good inflation reports in July, not to get carried away and assume that we had turned the corner on inflation just yet.
That’s part of why the European Central Bank hiked 75 bips and put more upward pressure on European yields than US yields. US yields rose at the beginning of the week for a couple of reasons. Number one, traders coming back into the office after holiday weekends. Sometimes, there’s going to be a preponderance of trading positions on one side of the trade or the other. In this case, more sellers came back to the office, and we also had that compounded by stronger economic data in the morning of the same day, ISM non-manufacturing.
When people hear ISM, maybe not everybody knows what that is, but it’s important. ISM publishes two different indices, one’s manufacturing and one’s non-manufacturing. They are big market movers, or they can be. They’re better versions and more granular versions of GDP, but they are not nearly as stale. They are suggesting that talk of a recession last month was entirely premature, showing healthy expansion in the services sector. In business activity, just to give you an idea, anytime the index is over 50.0, that’s considered to be expansion. Although it’s 52 for a few reasons, but that gets in the weeds. Technically speaking, let’s call it 50. This business activity index came in at 60.9. Forecasters were expecting 57.0, so it’s quite a big discrepancy between expectations.
In reality, more healthy economic data keeps expectations high that the Fed will keep rates high and keep rate hike levels high at the upcoming meeting. Speaking of that upcoming meeting, that is what is coming up next, September 21st. Incidentally, I’ll be live casting that meeting from the New England Mortgage Bankers Conference and in Sunny Road Island. Hit their website if you want to come to see me for that.
This is the big to-do. CPI, the Consumer Price Index. This is and has been the biggest inflation anecdote as far as the market has been concerned for several months now. Even though the Fed is well known for preferring the PCE, Core PCE Price index, it is CPI that moves the market and CPI that gives that sneak preview of how PCE may come out. It is the only sense of CPI between now and next, as it only comes out every month.
What’s at stake here is that the market could digest whatever comes out tomorrow. Depending on how far it falls from the forecast, they could get carried away. I don’t think necessarily that we’re talking about upping the odds of a 75 bip Fed rate hike to 100 bips. If it were significantly stronger than expected, that is indeed a possibility.
If it were significantly weaker than expected, the market might price in higher odds of a 50-basis point hike. Now, maybe 90% of the market thinks 75 bips. It’s quite well priced and is already reflected in current prices. If CPI were to come in as expected, it doesn’t necessarily need to result in a lot of volatility. If it’s much higher than expected and then if it’s joined by additional data later in the week, that also suggests higher inflations and stronger growth. The market’s going to expect an extremely hawkish announcement from the Fed, and things could get a little bit carried away.
Mortgage Updates: If CPI were to come in as expected, it doesn't necessarily need to result in volatility. But if it's much higher than expected and then joined by additional data later in the week, that suggests higher inflation and stronger growth.
Trading levels could get pushed back up to high and mortgage rates would go higher than they are now. There’s some limiting factor due to the fact that ten-year treasury yields and mortgage rates are based on the longer part of the yield curve and tend to think that if the Fed gets aggressive, then things will deteriorate in the long-term economically speaking to such an extent that it limits the damage in those longer-term rates. That’s a moving target, and there’s no way to say for sure if we have seen the highest rates of the year at this point now that we are so close to them yet again with more data and more Fed communications yet to come. Big possibilities in both directions are coming up over the next few weeks and months.
We didn’t think we were going to see this. This has come as a bit of a surprise. It is as we thought. We’ve hit the highs of the year. Now we should be heading down into that anyway.
A huge surprise is just how resilient the economic data has been. I don’t think people expected after we had the negative GDP and all the talk of recession and these Fed rate hikes. People didn’t see this other economic data coming out so strong, especially the labor market data coming out as strong as it did last and still very respectable in the most recent report.
Marc Helm, any thoughts on the Matt report?
It’s going to lead pretty well in what I’m going to talk about. I’ll share and save this comment for when I get started.
Matt, I appreciate you so much. I keep talking about your website, but people have not experienced it. They need to experience it. Get out here and take a look at it. It should come with a warning. You, too, could get hooked like everyone else. It’s just such a good job. I love the commentary. There are times my eyes go around to different parts of this website I find myself doing. I love the live updates and what you do but also how you cut and paste important interviews that are going on out there. I love it. It’s formatted everything and is pleasing to the eyes. There is so much information, and it makes you look smarter. Matt, thank you so much for being here.
Thank you, Dave.
Sign up for MBSLive.net. When you sign up, put LOL in the signup code, and you’ll get the extended trial period without a requirement of a credit card. It’s always nice. Mr. Kittle texted us and said he could not join us. Normally we’re getting him in here and talking about production and all of those good things. If you knew what happened to David Kittle, he had a big major water leak. He was traveling, and it ruined the hardwood floor.All the hardwood floors have been in, but his kitchen cabinets all came in. He says, “Dave, I don’t have a quiet place at my house to be able to do a show.” He sends all of our audience a big warm hello. We’re not sure what happened to Alice. She’s AOL. We do have Allen Pollack here. He always brings us a lot of information and sometimes some good jokes along with some corny ones. Allen, good to have you here, friend. How are you doing?
The same little man that invented the taco maker, I found him online. I’ve got enough things that this gentleman has made many things, and he keeps inventing the things you’d never think of. Eventually, he is going to hit big. I don’t know if the taco maker did it for him or not, but are you ready for this one, David? This is a good one. It is the letter shredder, a box that wraps around and connects to your mailbox, and then you empty it into the garbage when you take the garbage out. There’s no need to bring the shredder or dirty mail into the house. Shred it right there on site.
I’m not sure I’m going to buy a shredder. When the mail comes, I go walk right to the garbage can and start pitching the stuff into the garbage. Maybe I should hook a shredder up to it. Maybe that would be a good idea.
Fraud is on the rise, and it’s one of the items in my report. They have implemented what they call Ocrolus Protect. It’s a comprehensive fraud detection solution for small mortgage businesses and consumer lenders. It uses data and analytics to determine fraud workflows and any data that doesn’t seem right. It also indicates potential file tampering that may have occurred within the document. We all know fraud is on the rise. Whether it’s fraud on the mortgage side or fraud on the consumer side, it’s a big deal. A letter shredder can help others from stealing those credit card offers you’re always getting and help you save a lot of money. Let’s continue with a couple of others.
I did get a notification from Chase that I have one of my credit cards. I researched who has the best security and combined with who has the best frequent flyer points program. Chase came up on the top of the list, and they notified me, “Did you buy this?” It’s instant. You go yes and no. If you say no, you might throw it away because it’s worthless. You get a new credit card in the mail within a short period of time, which is much better than paying for things that are not yours. Allen, I interrupted you.
That’s a great topic, David. I also have Chase, and I have another bank as well. With Chase, it’s fantastic because with other banks, when you call the fraud department, you could be in a store to try to buy something, and it’s denied. You have to call them and wait twenty minutes on the phone to get through to someone to have you approve it. The text message works great, but if you hit no, everything’s just shut off forever. It takes two weeks to get a new one in the mail, whereas other banks generate digital numbers or generating cards on-site. With all the tech and the amazing functionality that exists, there’s a disconnect between the ability to get cards much quicker. It seems like it’s going to a snail mail fulfillment center that probably does realize for the mortgage industry as well, let’s assume.
We just got a text message from one of our audiences, “Allen, why we’re not seeing them start appearing in our eWallets? Why are they not going right there? I want more of those credit cards there. I don’t want to carry credit cards. I have a little pouch on the back of my phone that carry all my credit cards. Why don’t we have it there?”
I know other countries are almost 100% digital currency. That’s not just credit cards in your wallet but also digital currencies. With the payments process, we’ve been trying to follow them in the US for many years. We’re getting there. In all the big firms like Fiserv, for example, the majority of the revenue comes from payments. There are a number of folks that are pushing in that direction, and I completely agree. It’s so convenient and easy. It is secure. We’ll see if that continues.
Why get this card in the mail that somebody can steal and put in their own mailbox paper shredder? David, let’s talk about two things real quick on top of the fraud detection, which I didn’t even realize the mailbox shredder would lead into that. That was great. One is pivoting. If you are a tech vendor and you are reading this, we’re always focusing on the lender.
You have to remember now is the time that you pivot. You decide how many things we are trying to sell. Why are we making it so confusing? Why are we investigating time and effort and selling things that aren’t going to make it out on the roadmap, leading people to be upset later or selling shadow puppets? Now is the time to pivot. Focus on a specific product that is going to help with what is training and what is needed may be focused on partnerships. It may be the front face of a partnership having no technology needed at all, but that partnership helps clients do better. Meaning lenders do better with your technology. Now is the time to start thinking and pivoting. If you haven’t done already, you can shoot me an email. I’m more than happy to talk about it. I’ve done it a few times myself.
[bctt tweet="Now is the time to pivot and focus on a specific product that will help with what is needed, which may be focused on partnerships." username=""]
The other thing I wanted to mention is Fannie Mae’s CIO, Ramon Richards. There’s a video on YouTube, and you can google it called Mortgage Lending’s Digital Future. He has many points in there. He has four points that I thought were absolutely on target for everything going on in the world. These are in the order that he listed them. The first one is automation into underwriting. Now’s the time for all these vendors, even Ocrolus that had the fraud detection workflow, all of these automated vendors out there to read the data, to have access to digital documents, automate the underwriting process, and decide the easy loans to hard loans and the defective loans. That’s where you want to be. The second thing is your data strategy. What is your data?
What does it tell you? I could spend a week talking about some of the tools, and things that even I use that are out there. Data strategy, externally and internally, is extremely important. Ramon Richards also said building a team to foster innovation. There are 30-plus vendors out there that touch every single loan you close on. What is your team? How are you innovating on that? Are you expecting what your peers are doing? Are you getting it from a conference? Are you truly innovating your process? Use the data, use the automation, foster some innovation, and getting folks that are out there.
The last thing is training skillsets. It’s not even a tech play. He talks about training your internal folks on training and enhancing their skillset. It’s the Fannie CIO, Ramon Richards, about Mortgage Lending’s Digital Future. You can find it online. It’s a great YouTube video. Those are the four top things that I thought were just on target and in line with everything we’ve been doing.
I pay attention to what they say. They got a pretty good size budget. They have a unique view of the perspective and the market. As we get into this discussion with Marc here and want to get a Marc report, I want to talk about profitability from that standpoint. Matt, if you could hang in here too. I think it’s going to be interesting. I know you go to watch the market, so we always know you hang in here for a little while, Matt. Sometimes the markets demand your attention. If you can, that would be great. By the way, if you want to get a hold of Allen Pollack, sending in your tech report thoughts and some things you are turning up, I’d be sure to email Allen@TMS-Advisors.com. Allen, it’s good to have you here.Let’s get over to Marc Helm. Marc Helm is an Executive Partner here at Transformational Mortgage Solutions. He is best known as the Servicing Guy. He knows everything you could ever want to know about servicing Ginnie Mae, Fannie Mae, and Freddie Mac approvals. Marc Helm, good to have you here. Glad you’ve joined me as a co-host. I appreciate you.
Thank you, David. It’s funny when you’re thinking about your show a few days in advance. I had all in my mind exactly what I wanted to handle and realized there needed to be a precursor to that. The precursor has been supported by Matt and Allen’s conversation here. I’ll go in that direction. On the back burner a little bit, it’s going to be our topic of successful mortgage servicing retention for those folks who haven’t started retaining servicing. I want to talk a little bit about the anatomy and somewhat the psychology of making a decision to retain your servicing and some best practices and smart things we need to think about. I’d like to go through those if we could.
The most important thing I want to talk about is putting in the market nowadays. We’ve got some things that are going to affect mortgage servicing as much as they affect everything else. They’re going to affect the value of mortgage servicing, the retention of mortgage servicing, the satisfaction of the customers in mortgage servicing, and default in mortgage servicing. It’s the whole gambit. Let me explain why. Now with the rates high, what it’s doing is it’s going to start putting pressure on the housing market.
There are going to be less homes available because people are not going to be able to afford the homes that go out or move. It’s going to somewhat cause a shortfall for those folks that are out there thinking of relocation. They’re going to have a home back in XYZ city that they got a sale. I know all about that. I have a home that’s been on the market for about a couple of months now and only had six offers.
It’s a high-end home, not real high-end, but a high-end home. The most amazing thing about that is that 30 days prior to me putting it on the market in our neighborhood, there was a bidding war for all the properties. What happened as soon as the rates started escalating was nobody was making offers. We all heard this, and volumes are down in the industry, this astronomical percentage. What that’s going to do is it’s now going to place stress on the multifamily market where people try to have dwellings for those who need a home or first-time home buyers and others who can’t afford homes.
There’s one of the interesting things I heard the other day, and I’m trying to do some research on it to solidify these numbers. The number just blew me away. It was estimated that about 35% of the college graduates that will graduate in the spring, if the rates stay where they are, are probably going to go home and live with mom and dad. There’s always been a fair percentage of that. Where are people getting that number? I don’t know, but I’ve heard it from two random sources.
Mortgage Updates: It was estimated that about 35% of college students who will graduate in the spring, if the rates stay where they are, will probably go home and live with mom and dad.
If that number does play out to be true, it makes a lot of sense in many respects. Some of those people are married couples going home to live with mom and dad on one side because housing is going to be so cost preventive for them for each keep on rising. Now, they’re cost-preventing for a lot of folks, too, coming right out of college and having their first job. What I’m advocating here in my talk is to have a precursor to the retention and mortgage servicer for those people thinking about it. It’s a thought-provoking conversation.
I want to talk about knowing your customer. We have essentially three major areas of customers that come into the mortgage servicing portfolios. We’ve got new loan originations that we do ourselves, and we’ve got purchase stuff such as correspondent and wholesale business that comes in. We’ve got people if we’re in a bank that might have been a consumer loan customer that rolled over to a mortgage customer. They come from different places.
One of the most important things out there is to know our customers. What do I mean by that? What I’m advocating is a couple of things that need to happen in the industry that hasn’t happened before. The first thing I’m advocating goes back to the fraud discussion. We need to lock down something, and that’s the security on our mortgage loans with mortgage servicers.
Let me give you an example. I was talking to a person, and the person said to me, “Marc, have you ever heard of this before? I have a rental property in North Carolina, and he’s from North Carolina. I have a rental property up there too.” He said, “I got a phone call. The guy asked me if I wanted to sell my property. I said not really, and he says I only owe $42,000 on it.”
The guy said, “How do you know what I owe?” He said, “I’m sitting here looking at a payoff statement.” The idea is that a third party can now get a payoff statement on your mortgage loan because all mortgage companies out there work off a loan number that is on the recorded document. They work off a social security number that’s more public than we all won’t admit. They work off a sale number that everybody can get to but pay for a service online.
Your mortgage loan is not secure anymore. What I’m advocating for the people with the sub-servicing systems and the servicing systems is to add some of this verification coding where you give a secret password, you get an email sent to your phone, you answer your phone, accept it, then it gives you a password that you can give to the person on the phone or online, so you can access the mortgage account. That’s going to be very important. The reason why I’m going into this is because we’ve got some steps we need to do when our customers are coming in. It needs to be done during the origination process, post-closing process, interim servicing process, or the actual servicing process of your retention.
We need to talk to and survey those customers. We need to better understand the day more than ever where our customers are coming from and where they’re going. How do we do that? We need to know some things. We don’t need to know the detail. We need to know, “Are you married and have children? Is this your first home? Are you thinking about moving at some time in the future? Are you open to changing jobs and moving out of state?”
These are things you can capture on an internal system. You can develop your own system for this. We then look at them and say, “Would you be interested in products that we screened that we could recommend and be helpful for you?” Not the old-timey products where you sell them some insurance that costs five times what they could buy it for on the street themselves but products that are meaningful like homeowner warranty programs, credit protection programs that are out there, and more of the homegrown insurance and programs that can be sold to people.
You can still have a licensed agent on board and still make a commission on it, but it’s a reasonable market compared to the outside people that sell the same product out there. What you do is you start developing a personality with your customer because when that person calls in, you know how to deal with them on the phone. Let me give you an example. You got a person that goes in the default. Why not tell these people up front that you’ll do what some of the credit card companies are doing? “Mr. or Ms. Jones, if you ever get into a problem on your loan, call us and tell us you’re having a problem making a payment.”
The first time that happens, guess what we’ll do? We’ll waive the late charge. “Mr. And Mrs. Jones, if we ever have to do a workout on your loan, if you sign up for a repayment plan and make it work at the end of that program, we’ll either greatly reduce your late charge balance as part of the workout program or eliminate it completely.”
Be proactive with your customer, so they’ll come back to you and ensure that customer makes their first call no matter what conduit they came from, like wholesale or retail correspondent, that they make that first call to you for a refi. That’s very important. Also, an education process. One of the products I can speak of and offer is a product where we look at mortgage servicing portfolios and find out who has tax exemptions they don’t know about. We identify what exemptions people have and what is available to them.
There are so many people out there, believe it or not, that do not have their base senior exemptions or homestead exemptions on their property. Those amounts can save them 25% to 35% of their taxes in administrative jurisdictions in the country. That’s very important for them. What I’m advocating from my presentation is to protect your loan, know your customer, service your customer, and use all this information you gather to train your customers so when they call in that first time, you can assess them, “Are they calling in to check their balance or check the late charge or they got something else on their mind?” You need to get that customer talking to you, so you know what the future holds and how you can best deal with the customer’s concerns and all.
Next time we talk, we are going to go into the anatomy of servicing and retention. I call it the psychology of servicing retention, too, because there are a lot of things you go to talk about. First, we got to learn how to know our customers and take care of our customers. Just because we originate the loan doesn’t say we know everything we need to know. Remember those things I talked about, and you’ll be a much more successful person with your mortgage servicing portfolio whether you service it or have it sub-service, you retain it, or sell it. You got a good chance if you do that post-closing. Your loan goes away if you sell it to a third party. There’s a good chance those people know you care about them, and they’re going to call you when they buy a new home.
Mortgage Updates: We have to learn how to know our customers and take care of them. Just because we originate the loan doesn't mean we know everything we need to know.Thirty-five percent of college graduates, even married, are going to live with one of their parents as they can’t afford to buy a home these days. That’s amazing. Great stuff. It’s good information all the way around. There’s so much you covered there. Thank you, Marc. I love it. We’re going to have David Kittle coming on soon and sharing a show that we did about how to right-size your company. It is a real struggle. Matt, I’d love to hear what your thoughts are. Allen’s on it from a tech standpoint. Marc, it’s your perspective.What’s interesting, Marc, is when we go out and contact our warehouse letters. Some we consult directly with, and some we just do the warehouse reviews. Because of the amount of referrals we give out, we’re in a great relationship with all of them. They’re all saying this, “There is not enough cutting going on.” Now, 50/50 is profitable.We’re finding an alarming indication that it is getting worse. It’s now 60/40 in many cases. Most warehouse lenders will all admit, “We’re at 50/50. Fifty percent of the people banking are not profitable, and the ones that are profitable are hanging on to their noses barely above the water.” In other words, they’re barely inking out a profit. Those that are marked seem to have a servicing portfolio. Isn’t that interesting? I’ll get your thoughts on that. That’s a good reason to have servicing, Marc.
Servicing portfolios are real plus for companies that are struggling now with volumes. The reason why they are is they’re giving you something that’s growing in value now. The rates are going to slow down payoffs and increase retention and make the portfolio more valuable. Those values on the portfolio can translate into your financial statements to put you in a much better position.
If you need to, as some companies have done, if you need to sell some of that servicing to exercise against that cash that you need, you’re going to get a better value from it of the prepayment speed. That’s very important for what’s happening in the environment. My caution that I say, and I don’t want to throw this to the wind, I want to make this solid, is you got to be careful when you’re cutting personnel inside a mortgage company that you don’t cut across the board and cut servicing when you’re servicing portfolio has not gone down.
I don’t mean you can’t fine-tune it. Don’t ever walk into a servicing outfit and say, “The whole company cut 10% of servicing.” Guess what? You go to cut 10% too. Can 10% be attained? Over time, it certainly can, through outsourcing both domestic and non-domestic outsourcing of better technology to take care of your customers and special vendor relationships. There are a lot of different ways you can reduce staffing and responsibilities internally so you can reduce some staff, which is not something you’ve tried to figure out after the fact.
Also, doing so in a manner that isn’t irresponsible in the servicing area because you’re spot on with that comment. Matt, you have your wonderful website here, and I love it. You have this MBS live chat. I know a lot of LOs around there, but you also have some executives that use your system that have it in their company. Any field for profitability from your perspective?
In terms of specifics, no, but in terms of the general tone of the conversation, yes, it’s a tough environment and a lot of cutthroat pricing going on where lenders are trying to price other lenders into oblivion. I’m not sure what the endgame is there, but it’s not happy in the short term and not sustainable in the long term.
That isn’t. We’re seeing a lot of pricing through the floor to the point where it’s like predatory to drive out your competitors, and it’s usually into recruiting. It’s so true. It’s negative. Allen, Marc talked about cutting in the servicing area. What are your thoughts on cutting technology? Is there too much technology budget? Is there a budget, or do you feel like, in your perspective, you’re watching letters trying to cut there, and they go, “We just can’t. That’s one of the ways we gain efficiencies.” Allen?
I’m going to say something that I’m going to make those tech vendors not so thrilled with me. The reality is you can’t stop spending on tech. My next comment is going to be the tech piece. I think there’s a lot of overpaid people in tech for when companies were strategically building, whether on the lender but more on the vendor side when people were strategically building and trying to sell. There are a lot of cheats, and I think there are too many cheats. If you take the advice of Fannie Mae, you train internally and teach people new skills, and help them rise in their careers, you’ll learn more about your business, and you’ll use the data. On the servicing side of the fence, to answer that one more directly, there’s so much data there that we’re not using to either understand our clients.
[bctt tweet="There's so much data we're not using to understand our clients. Make sure you understand your customers, and you train and use that data. " username=""]
Financial institutions make a minimum of seven-year investments in their members. These are loans that could prepay. These are opportunities to consolidate debt. All the tech’s not there to do it all digitally and automatically. These are opportunities. These are customer relationships. Before you start cutting people, which you may have to do because budgets are budgets, I would ensure you understand your customers and train and use that data.
This is one of those things in the tech area where there can be a real strong argument for a variable cost model because there are things you can do, and you do not have to support it with an expensive, huge amount of staff. There are variable ways. You can do that comment.
You can work with your vendors to come up with a monthly minimum. They’re guaranteed some income, and they can put resources towards the relationship and then you can have a variable model after that. You’d find a lot of acceptance on something like that.
We went on a phone call before we got on the show from James Harrison of Independent Financial and his boss. We are talking about the importance of lenders focusing on a variable cost model. In fact, it was such a good conversation. We’re going to do a show and share it with our audience. James Harrison is such a fan of the show, so we give him a shout-out. He says, “You go to get my boss on. He talks about this all the time.” I’ve known the boss for years. Great guy.We’re looking forward to having that topic, variable costs. It’s more expensive when the times are going strong, but it’s so valuable now in these markets because you pay for just that loan funding. What are they projecting for the tech spend? Are they just saying, “I don’t care what technologies are out there, Allen?” I’ve got Anthony Hsieh said at the loanDepot, “I’ve got technology indigestion. I can’t handle it anymore. I’m stuffed.”
That was great when he made that comment. We’ve heard the term in the industry for a long time, “Death by a thousand cuts,” as far as how people are getting billed. A lot of tech and folks have had opinions on both sides of the coin. I like the only-in-one solution where it’s a LOS, and they have a lot of features. I also like having multiple vendors. Some of it’s from a risk mitigation perspective. There are a lot of folks involved. Look at what Apple’s doing in the industry.
There are a lot of great companies that come up with cool little ideas. Apple buys them, or Apple makes something that matches them and then everything’s native to the phone. You have one vendor, one invoice, and one experience. You just have to make sure you’re partnered with the right vendor so that one experience doesn’t go down. Over time, we’ll see a consolidation because there are a lot of vendors, and there’s a lot of death by a thousand cuts. Sometimes it’s hard to manage as a lender. You have too many people and too much risk.
You get annoyed too. I have the guy saying, “I don’t care.” It’s an emotional response because they’re looking at all these checks going out or proving the invoices being paid on and go, “This is crazy.” You go to look at it as a whole.
How many chiefs do you need for each relationship? How many people do you need to manage? How many PMs to manage all the different vendors that are out there?
Great question. Did you get an answer?
No.
There are a lot of questions in the marketplace that there are no answers like, “When is this going to stop?” We got Matt’s reporting back here. Matt, you can’t tell us, nor you wisely say not going there. There’s a lot of wisdom in that. You try to let the market speak for itself. That’s a smart guy, Matt.
I don’t like being wrong. Just wait and find out.
There’s a lot of wisdom in it. Marc Helm, have you got any parting comments for us?
I want to share three quick things so that some people get some meat into it. In mid-2019, Forbes said that over 50% of young adults are thinking about moving back home after they finish college. If you look at a year ago, it said overall, 32% of young adults live at home. The percentage is even higher for 36% of young adults without a college education. It’s even higher. If you go on down and look at it more recently and you look at more recent dates, you can look at the Bureau of Labor Statistics said that 54% of the students in college are considering moving back home with their parents. That’s the survey they did, so 35% might be a real conservative.
Mortgage Updates: Forbes said that over 50% of young adults are considering moving back home after finishing college. About a year ago, it said overall, 32% of young adults live at home. Today the percentage is even higher.That is a real conservative. I do believe that. When you look at the outplacement, I was riding on an airplane and writing it down. She just graduated. I said, “How exciting. How are you doing?” She said, “I don’t have a job.” She told me what her degree was. I go, “No kidding, there are no jobs for that.” I said, “What are you doing?” She says, “I’m graduating with $250,000 of college debt. I’m going home to live with my parents.”She says, “I am so freaking depressed,” which means we go to go back and look at the whole educational system. Why aren’t we spending that much money educating to where there is no job situation, and it’s back home to the room you grew up in oftentimes? There’s a lot we can talk about this. Thank you so much, everyone. Mr. Matt is up there in Portland, Allen Pollack is out there in Florida or wherever he’s at, and Marc Helm. Thanks so much, everyone, for joining the show. Special thank you to our sponsors. We have Finastra, FormFree, Lender Toolkit, Snapdocs, Total Expert, SimpleNexus, as well as the Mortgage Bankers Association of America MBA, Lenders One, Mortgage Collaborative, SuccessKit, Knowledge Coop, Mobility MMI, Modex, The Mortgage Advisory Tools, as well as DW Consulting. Check them all out on our website under Advertisers.We appreciate you. I look forward to having you back here next episode. By the way, listen to the podcast. We’ll be releasing it on Calque. We’re releasing that, and you’ve go to pay attention. It is a new tool for your lending toolkit that you can have out there to help get more business ongoing in this market. Have a great one, everybody. Talk to you soon.
