Feb. 13, Part 2: LO jobs; Planet Home hack; regional manager job in danger? STRATMOR on M&A; official Guild/Academy news post market close

Today, Shrove Tuesday is the last day before the fasting period of Lent (for Western Christians), 47 days before Easter Sunday. Shrove Tuesday is also called Mardi Gras. Do you think there’ll be any fake IDs in New Orleans? An underground website called OnlyFake is claiming to use “neural networks” to generate realistic looking photos of fake IDs for just $15. Security is hard to come by sometimes, the latest example being the Planet Home breach. “Planet Home Lending has disclosed a cyberattack that exposed the loan records of hundreds of thousands of people. The lender believes that the ransom gang LockBit is responsible.” Ever heard of “pig butchering”? Last fall, FinCEN issued a warning to financial institutions to be on the lookout for “pig butchering” scams. It lures victims into investing more and more money into what is purportedly virtual currency, until the con artist takes it all. Pig butchering involves the use of fake online domains in what is essentially a blend of catfishing and cryptocurrency scams. Instead of stealing whatever is readily available, the con artist slowly gains the trust of the victim and promises a big payoff that requires just a little more up front, and then more, and then more still. The name “pig butchering” refers to a technique used by scammers to “fatten up” their victims before running away with the victim’s entire investment. Be careful out there! (Today’s Commentary podcast can be found here and this week’s is sponsored by Lender Toolkit and its AI-powered AI Underwriter and Prism borrower income automation tools. By providing lightning-fast underwriting decisions, your market reputation with borrowers and Realtors will soar, which means more repeat and referral business. Hear an interview between Lender Toolkit’s Madison Kelly and AMS LLC’s Andrew Hicks on AI underwriting.)

LO employment

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Exciting opportunity for Wholesale Account Executives! Join A&D Mortgage, a leading Top 10 Wholesale Lender and prominent Non-QM company in the nation. We’re expanding our team in CA, NV, AZ, UT, CO, KS, TX, AR, AL, GA, KY, NC, and SC and looking for dynamic professionals. With a diverse range of products, including Conventional, Government, DSCR/Bank Statements/Foreign National, and a new innovative ITIN program. Especially in today’s market, we offer unparalleled opportunities for growth. Boasting 18 years of industry leadership, we’re committed to exceptional customer service and a culture of innovation. If you’re ready to join a winning team and elevate your career, explore openings at A&D Mortgage’s Career Center or connect with Andrew Taylor or Bobby Frank for more details. Don’t miss this chance to be part of our success story! Apply today online.”

“Attention Mortgage Brokers: Are you feeling isolated? Are you lacking support or struggling to establish relationships in this shifting market? Take your career to new heights with RWM Home Loans, a trusted name in home financing with over 30 years of excellence. With our FNMA, FREDDIE and GNMA approvals, we offer a wide range of products and direct loan servicing, empowering our retail sales team to fund both in-house and with brokered solutions. Whether you’re assisting first-time homebuyers, navigating Jumbo, Non-QM, reverse mortgages, or managing construction loans, we have the solutions to meet your clients’ needs.  Do you want a voice at the table and the ability to provide 5-star service, best in class technology, and competitive pricing for your borrowers? If you are evaluating your options and looking for a top tier lending partner to call home, contact us now for a confidential conversation.”

A top residential bank and mortgage lender headquartered in the Midwest is seeking Loan Officers and Sales Teams to join its retail lending division nationwide. Along with a robust product line of traditional, non-QM, and portfolio loans, the bank has an unwavering commitment to technology, streamlined fulfillment, and unparalleled marketing support. Plus, since it’s a bank, there’s no need for loan officers to deal with pesky state licensing; you can originate in all 50 states. Learn more about this unicorn (a bank with home lending at its core) and contact Chrisman LLC’s Anjelica Nixt to arrange a confidential discussion. (Please specify the opportunity.)

A well-capitalized IMB, based in the NJ/PA tri- state market, is seeking Loan Officers, Sales Teams, or possible acquisition opportunities of small to midsize IMBs in NJ, NY, CT, FL, PA, while expanding in MD, DC, VA, NC and SC. The IMB’s focus is a highly personable and high touch experience for LOs and Realtors. Organizationally lean, very competitive pricing, a wide array of products, and much higher LO Comp than what is offered by other larger IMBs. The focus is to attract serious loan officers who want an unparalleled service, where your voice matters and you have a seat at the table in growth. If interested, message Chrisman LLC’s Anjelica Nixt for a confidential discussion. (Please specify the opportunity.)

CEOs eying regional manager business model

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CEOs and owners who care about shareholder value need to be consistent and disciplined in this environment of tight margins and low volumes, especially when dealing with underperforming branches. Is anyone really surprised by profits dropping when locks do? Staying focused is difficult for some, as is taking a hard look at loyal employees and branches.

A key tenant of management is motivating the employee to do what you want them to do. Obviously the “regional manager model” is withering, especially if that person’s compensation is not based on profits and only production, and that production is what they brought on board a year or three ago and has dropped dramatically. Greg Sher summed it up by saying, “To me, it’s an archaic strategy, a shortcut to prosperity that has an expiration date, and we’re seeing that play out over and over and over again as margin compression tamps down IMB balance sheets.”

Which has raised the question, “Should loan officers be paid on profits rather than volume?”

I’ve heard of regional manager comp diminishing over time, with their override sunsetting on previous groups and renewing on new groups. Ongoing recruitment is important, as is trying not to churn the same aged LO population. How much decision power do regional managers have? Who is paying for pricing concessions in their region, the manager or corporate? These are issues that shareholders are indeed asking CEOs about.

Mergers and acquisitions continue to be rampant

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Is ego a reason that your company is still in existence? Many lenders tell me that they have cut things “to the bone,” but now what? Some have cut high producing branches after examining the net income of those branches. A lot of volume doesn’t mean a lot of profit. In a merger or acquisition, it is important to let the Agencies know about a potential change in control as soon as feasible and prudent, but more on that below. Meanwhile, mergers and acquisitions continue on, whether they are involving lenders or vendors.

Usually, A+B=C. But in mergers and acquisitions, the dominant party hopes that “C” is greater than A+B. Let’s take a hypothetical example. Let’s say the #16 lender who did nearly 1 percent of the industry’s volume (43,000 units) in 2023, or $13.34 billion with an average loan size of $310k and 87 percent purchase volume, decided to buy the #43 lender in 2023. And say that lender did nearly 14,758 units for $4.87 billion with an average loan size of $330k and 88 percent purchase volume. Will the combined entity do more?

(When I was given the news last night, a big consideration is, of course, that Guild Mortgage is a publicly held company and any information impacting share price should be treated accordingly. Thus the official release of this news AFTER the close of the stock market.)

This example above is not so hypothetical. Guild Mortgage has agreed to acquire the retail lending assets of Academy Mortgage Corporation. The combined organization will be the 8th largest non-bank retail mortgage lender. Academy Mortgage CEO Adam Kessler will join Guild’s senior leadership team and Academy will transition to the Guild brand and operate as its own division. “Guild and Academy are closely aligned with an intense focus on local, relationship-driven purchase business. Both companies have strong values-based cultures and long track records of service.”

(The data above is a blend of deed data, HMDA data, NMLS consumer direct data, census data, and mix of other sources to create the accuracy of the data overall. A big thank you to InGenius CEO Jeff Walton for this information, and questions about the InGenius product should be addressed to him.)

STRATMOR’s take on the current M&A environment

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Meanwhile, STRATMOR is very active in M&A, and recently told me that the pace of deals in 2024 remains very high and likely will exceed the total of 48 transactions that were done in 2023. (I am always amazed by the STRATMOR data since a lot of deals don’t get publicly announced).

As always, timing is tricky, and Garth mentioned that the time it takes to get a deal done can vary widely depending on the complexity and emotions involved and the speed at which the parties engage. Garth Graham told me, “Of the last dozen deals we have done, the timing has ranged from two months from start to finish, to over one year to get the deal done. Asset sales are faster, while stock sales take longer, so it depends on the needs of the buyers and sellers what works best. But I warn potential sellers not to WAIT too long to engage in the process, even if you hold to pull the trigger. For example, we have deals in process where the parties have worked together for months (getting to know each other, share financials) and now are finalizing terms.”

The other key item is to be very careful about premature disclosure. Garth adds, “We are super careful about the NDA and non-solicitation process, and also with ensuring that the potential buyer signs a blind NDA before they know the seller’s name.”

And the final item from STRATMOR. “We try to do a lot of financial due diligence in advance, so the buyers and sellers go into the process with a full understanding of the financial synergies. After all, there is a lot of potential savings in back office and corporate expenses for the right acquisitions, so getting down to detailed analysis of those expenses is key to be done BEFORE the offer is made, not wait until due diligence.”

“We have done multiple deals so far in 2024, and all had upfront premiums with solid earn out. Often the premium being paid is driven by the ability for the seller to add the production without having to add all the corporate expense, so it can be painful decisions about the corporate departments (secondary, HR, Risk, technology etc.), but the end result is that the production is worth more to the buyer than it is to the seller due to the cost savings. And that shows up on premium offers. And the seller gets the balance sheet plus a share of that financial benefit. So, it can be a potential win-win.

(Anyone interested in learning more should talk to David Hrobon or Garth Graham.)

The love and Valentine’s Day theme continues…

An elderly couple had dinner at another couple’s house, and after eating, the wives left the table and went into the kitchen.

The two gentlemen were talking, and one said, “Last night we went out to a new restaurant, and it was really great. I would highly recommend it.”

The other man asked, “What is the name of the restaurant?”

The first man thought and thought and finally said, “What is the name of that flower you give to someone you love? You know…. The one that’s red and has thorns.”

“Do you mean a rose?”

“Yes, that’s the one,” replied the man. He then turned towards the kitchen and yelled, “Rose, what’s the name of that restaurant we went to last night?”

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. STRATMOR’s current blog is titled, “It’s 2024: Do You Know Where Your Servicing Is?” The Commentary’s podcast is live and at any place you obtain your podcasts (like Apple or Spotify).

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(Market data provided in partnership with MBS Live. For free job postings and to view candidate resumes visit LenderNews. This newsletter is for sophisticated mortgage professionals only. There are no paid endorsements by me. For up-to-date mortgage news visit Mortgage News Daily. For archived commentaries, or to subscribe, go to www.robchrisman.com. Copyright 2024 Chrisman LLC. All rights reserved. Occasional paid job & product listings do appear. This report or any portion hereof may not be reprinted, sold, or redistributed without the written consent of Rob Chrisman.)

Rob Chrisman