Apr. 18: Shifts in thinking & current trends: why pay rent? Advice for every LO; economic stimulus riddle

Things are sure changing fast, and I am not talking about forbearance or underwriting guidelines. Financial service companies of all types are re-evaluating paying rent on large commercial spaces, and paying for the depreciating furniture that goes into them, and thinking about scaling down into workspaces that allow employees to visit once a week rather than work there full time. Lenders and vendors are pleased that their travel budgets are not being consumed, and smart CEOs and owners are already evaluating shifting those monies into pricing and advertising.

Companies with an eye on security issues are already shifting away from Zoom and toward GoToMeeting, WebEx, or Microsoft’s Teams. But “Zumping” has become a term: to break up with someone over Zoom. Productivity from home is just fine, thank you, and working remotely is allowing companies to hire talent based on talent rather than location, a great advantage when one looks at Bay Area, Los Angeles, or Atlanta commute times. Sales, operations and leadership development platform XINNIX has a daily “12 at 12 Meeting” at noon for 12 minutes to check in with each other, and recently they broke out into song. Thank you to Parkside Lending’s Matt O. for sending along “243 Musicians Perform Vivaldi! The Stay at Home Virtual Choir.” People adapt, right?

Events continue to be canceled and pushed into 2021. San Diego’s Comic-Can, held in late July, has been cancelled. September’s Burning Man, held in a Nevada desert, has gone virtual. Consumers are thinking about discretionary versus non-discretionary spending habits. Retail malls, which have been on the losing end of internet-based shopping, have shifted their focus to non-Amazon goods & services: theaters and restaurants for example, or kid’s activities.

But as Spring spreads here in the Northern Hemisphere, don’t you think that people will naturally creep out of their isolation? It is easy to stay inside when it is 20 degrees and snowing, or 95 degrees and humid. What about when it is 65 and sunny? Communities are already seeing that. Creekside walks and quiet neighborhoods have become pedestrian highways. Remember the scientists that volunteered to stay in a small enclosure in Hawai’i for a year? They have some psychological and time management advice for everyone that didn’t volunteer for this.

Lenders are talking about moving past huge swollen pipelines and then removing overlays. One owner told me this week, “We’ve got to get the loans in process closed, and then we plan on cutting margins and resuming marketing. There are a whole lot of refis out there!”

Loan officers are certainly adapting, or need to. Aaron Ninness sent this. “A lot of originators are still trying to get a handle on the current business environment while seemingly throwing out any business plan they might have put together at the end of 2019. The 2019 year marks a year where everything you thought you knew about our industry could change based on tweets and leakers. Analysts were proven wrong almost daily, and originators seamed to fly by the seat of their pants.

“In many regards, the record-breaking production was more closely tied to ‘he who holds the biggest database’ rather than actual ‘production increasing’ activities. Certainly there are those that formed new alliances with top agents or figured out the proper workflow and process to convert leads at a greater percentage than the norm, but is this really what led to an increase in production? Keep in mind that many of the originators right now have been tenured in the business for a while and do have somewhat of a database to mine for refinances. And while mining for refinances your bound to get some referrals, there is at least someone who wants to move rather than refinance. But just when you thought nothing could beat last year, in rolls 2020!

“Here we are past the Q1 of 2020 and still mining the ‘low hanging’ fruit or easy refinances; only this rally is heavily boosted by the COVID-19 pandemic. If someone has a job that hasn’t been furloughed, and has been in their house for 6 months or more, you probably have a refinance transaction. At this point it feels like you have a 90% shot of a Property Inspection Waiver on the transaction. We even have cash-out refinances that don’t require appraisals. Better technology is available to help with gathering the supporting docs, and providing the consumer with an efficient and enjoyable experience.

“Remember all those millennials we have been giving loans to over the last few years? Well, they’re back! Only this time they are refinancing for the first time. Oddly enough for all of the focus we had on these entry level buyers, no one has really focused on the experience of a first-time refinance client. I know for me personally we cracked the code on making it so easy that the ‘share’ of refinances seems to be greater than what you could hypothesize us originating. The availability of that business though, is based on market conditions out of my control. One only needed to have focused their attention to taking action during these times rather than inventing the newest and greatest way to create leads. Send some emails. Make some calls. Set some records.

“Moving to the 2nd half of 2020, goal planning is going to be tough. 2019 was a record year for companies on profit and volume but alas that is only half the story. The other half is the greatest compression to income for originators with the largest increase in their expenses since the 2008 crash. Whether it was a company lowering comp on their LOs, or the LOs themselves adjusting compensation for pricing reasons, it would be hard to say anyone had a record year for ‘per loan income.’ Evidence of this phenomenon can be seen through the migration to independent broker shops that picked up steam through 2019 in search of higher bps and lower overhead. The dismal 2018 winter through February of 2019 caused so many cost cutting measures that any originator who believes you have to spend money to make money was left with a much higher individual cost to produce a loan. Or at least a lead. Now some of the companies and business models that professed to have the best rates, compensation, P&L plan, loan products, etc., are struggling to keep doors open between margin calls, EPOs, unsaleable loans, and drastic changes to underwriting guidelines primarily due to warehouse lending constraints. Will the pendulum swing back yet again?


“My suggestion for any originator looking to create a new business plan for the 2nd half of 2020 is to focus more on how they are going to generate business rather than the math. The days of taking your income and dividing it by average comp to determine how many deals you need are gone. While it is important to say how much volume or units one might produce for staffing and support needs, the real items that could drive production through rates are out of our control. Any day we could wake up to another North Korea nuke attempt, new tariffs against the EU, a coup attempt in a Middle Eastern country, a cancellation of a trade deal, a possible impeachment, an election year, or worst of all a Pandemic. Any one of these items might affect our market, interest rates or both.


Here are the 3 things an originator should look at for building their business during and after this pandemic. First, how can I get in front of more referral partners? For those who have a robust purchase business already you simply need to focus on listing agents and not doing a bad job. How are you touching these partners while staying at home? How are you engaging agents you haven’t spoken to in a while? How do you show you are honestly interested in them as a person and how their business is doing? Most agents would probably tell you their phones are silent from the calls of originators these days. Oddly enough, most LOs are setting up Zoom Happy Hours with long lost friends but struggle to pick up the phone to call that agent they worked with for 5 years.

“Second, how can I get in front my database more? Be thoughtful. And touch them LESS. Yes, I said it. You don’t need to send big long robust emails every 2 weeks to stay in front of them. Rather, send them info that is more thoughtful and deliberate every quarter. This is both for your client and referral partner databases. My inbox appears to be set on repeat with emails from all the companies that are ‘There for me during Covid-19.’ It just becomes white noise. I believe an originator could send out an email of a puppy playing with a box of Kleenex and get more responses and possible ‘deals’ then if they sent out a ‘COVID-19 Market Update.’ Heck, do a giveaway to your database where you draw 1 name and that person gets to choose a charity you donate $500 to on their behalf. See what kind of response you get there! Think outside the box and put some effort into the content you are sending.

“Third, how can I enjoy myself more? Life is a onetime deal. I am pretty sure everyone has stated at least one item they ‘wish’ they could still do while being at home. It could be as simple as hugging a friend or as complex as a trip to place you always wanted to go. MAKE IT HAPPEN. The lending business is about connections and if you are truly happy with what you do and the time you are spending in between work and life it will positively impact your business.


“Right now I think business planning should start with #3. How many days did you spend with your family in 2019? Was that enough? How about events with your kids? I know I missed a couple events because I had ‘too many applications.’ With so little out of our control I think the prudent thing to do is focus on a plan that includes how many hours you are going to work (and I mean focused work) per week, and what 3 items you can do to be better at for #1 and #2. That will get you an increase you need without having to focus on items that could be derailed by social and economic factors out of your control. Also, for sake of personal introspect, give yourself a grade on a couple of items such as income, production, physical health, mental health, family health, faith and fiscal health. If you see yourself getting A’s on ‘work goals’ and not so much on the ones that matter like physical, mental, or familial health, you might want to go back to the drawing board on how you want your 2020 year to finish.”

Aaron wrapped up with, “One day we will be through this pandemic and we will go back to some sort of normalization in our lives both in and out of the workplace. We can all jokingly say that we have ‘spent plenty of time with our families’ after this Shelter in Place period, but do we really want to run right back to getting caught up in business? While I have watched Frozen 2 about 67 times this year, I have also taught my daughter how to play catch and my son how to ride a bike. Business challenges will continue as they always have and we have a rare opportunity at this very moment to create a new plan for 2020 that could be fruitful for years to come. Take back control of the only items we actually have control of in this crazy lending business and you might not only see your business grow, but you might also enjoy it a whole lot more.” Thank you, Aaron!

(Thank you to David T. for this one. $100.00 = $600.00 = $0, or, how our economy works.)

It is a slow day in the small North Dakota town of Dickinson, and the streets are deserted. Times are tough, everybody is in debt, and everybody is living on credit.

A tourist visiting the area drives through town, stops at the motel, and lays a $100 bill on the desk saying he wants to inspect the rooms upstairs to pick one for the night.

As soon as he walks upstairs, the motel owner grabs the bill and runs next door to pay his debt to the butcher.

The butcher takes the $100 and runs down the street to retire his debt to the pig farmer.

The pig farmer takes the $100 and heads off to pay his bill to his supplier, the Co-op.

The guy at the Co-op takes the $100 and runs to pay his debt to the local prostitute, who has also been facing hard times and has had to offer her “services” on credit.

The hooker rushes to the hotel and pays off her room bill with the hotel owner.

The hotel proprietor then places the $100 back on the counter so the traveler will not suspect anything.

At that moment the traveler comes down the stairs, states that the rooms are not satisfactory, picks up the $100 bill and leaves. No one produced anything. No one earned anything…

However, the whole town is now out of debt and now looks to the future with a lot more optimism.

And that, ladies and gentlemen, is how a “Stimulus Package” works.

Visit www.robchrisman.com for more information on our industry partners, access archived commentaries, or to subscribe to the Daily Mortgage News and Commentary. If you’re interested, visit my periodic blog at the STRATMOR Group web site. The current blog is, “Loan Officers: Now More Important Than Ever”. If you have the inclination, make a comment on what I have written, or on other comments so that folks can learn what’s going on out there from the other readers.


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Rob Chrisman