June 10: Retail jobs, MLO & TRID training; thoughts on what kind of lender will survive & thrive in a no-growth industry?

Yes, TRID is impacting lending, and thus borrowers. Wells Fargo’s correspondent group announced the end of its “Single Close Construction” program for its correspondent customers: the bank will no longer purchase Single Close Construction loans for applications after August 1. (See the Newsflash for complete details; Wells will still buy construction-to-permanent loans where the permanent financing replaces interim construction financing.) In essence this dries up another source for that banks have used where they may make the construction loan and modify the note into permanent financing instead of a more expensive two-time close with a refinance replacing interim financing. Granted, volume was reportedly light, but remind me why the consumer is better off?


Check out Roadrunner Solutions FREE service to help you connect your pre-approved borrowers with local Real Estate professionals that will reinforce your relationship with the borrower. “Roadrunner has a large network of Realtors that will respect the relationship between the LO and their borrower. This service will improve your closure rate and help deliver the high level of customer service required for the purchase money borrower. If you are a Call Center LO, run a Call Center Platform, originate loans outside of your local area, or just struggle to find quality Realtors, Roadrunner is a great service for you to try with no fees or any cost to the borrower.  Roadrunner has also added website design and support to their product offering. If you would like to find out more, e-mail us at RoadRunner.


And Greenlight Loans (a division of Nationstar Mortgage) is looking for Mortgage Professionals (Loan Officers) and Closing Coordinators (Processors) with strong customer service skills and proven success for its Irvine, CA and Coppell, TX locations. “Nationstar has a fully integrated loan origination platform to complement and enhance its expanding servicing portfolio. Our primary focus is re-origination of our existing borrowers where we currently retain the servicing rights. If you’re a quality candidate we offer an existing and expanding customer servicing base of over 2.4 million customers, fantastic income potential, company matched 401K benefits, bonuses and full medical benefits. Our portfolio customers come to us first to refinance and purchase properties. More of the benefits include no locking, appraisal, or upfront fees, and a goal of a one to one processor to loan officer ratio. Please visit our careers site to apply.”


55% of the time. That’s how often real estate agents recommend a specific mortgage provider. Are you the top name on their list? Get practical tips on how to be the first choice. Check out the latest 30-minute webinar from Vantage Production on Tuesday, June 16 at 1PM EDT. It’s called Smart Marketing for MLOs Part 2: Expand your network with Lucky 13. You’ll get 6 tactics to expand your referral partner network and 7 ways to approach real estate agents.


Are you ready for the TILA RESPA Integrated Disclosure (TRID) rule? While TRID enforcement won’t start right away, the August 1 compliance deadline remains firm and time is running out. The MBA Compliance Essentials TRID Forum in Denver on June 23 is your last chance to get live guidance on TRID compliance issues before the deadline. Register today and be prepared. Be sure to also keep an eye out for MBA’s other TRID-related resources, such the MBA Compliance Essentials TRID Resource Guide, the Regulatory Compliance Conference September 20-22 in Washington, DC and our four-part Compliance Essentials TRID Self-Study Web Course (coming soon). Compliance presents all sorts of challenges, requiring large-scale operational changes for lenders, title companies and many more.


(For the next several days “guest writers” are doing the bulk of the 6-day a week commentary, some queued up in advance but in random order, and I hope that readers enjoy the change of pace as well as the interesting perspectives. I am sure everyone understands that there could be considerable delays in me responding to any e-mails, and you can write to the contributors directly.)


This from Dr. Matt Lind of STRATMOR:


In February 2002, Ken Posner, at that time a highly respected mortgage industry equity analyst at Morgan Stanley, published a widely read and admired research report entitled US Mortgage Finance, The American Dream Industry: 2002 – 2020 in which he wrote: “We project 7-8% annually compounded growth from 2002 through 2020, driven by consumer preference for higher mortgage leverage, as well as lower processing costs and more flexible underwriting.” Posner went on to say that, “Our work suggests that banks and thrifts can’t compete with the GSE’s cost leadership in the investment function, and they are generally less efficient originators than independent brokers and [mortgage] bankers.”


But today, just thirteen years after Posner’s report, the mortgage industry is decidedly not a growth industry; the GSE’s may soon be replaced by private sector guarantors; flexible underwriting and higher leverage are generally out the window; increased compliance costs have more than offset what otherwise would be more efficient and lower cost processing; and the competitive strength of banks and thrifts relative to independent brokers and mortgage bankers has never been stronger.


In general, STRATMOR believes that the longer-term outlook for the mortgage industry will be relatively slow for several key reasons.


Unfavorable demographic trends.  Faced with an aging population, growth in household formations — a key driver of housing — will slow, with immigration, a powerful contributor to housing and mortgage growth from 1970 through 2008, being something of a wildcard as Congress continues its seemingly endless debates on immigration reform.


An increasing mismatch between the supply of and demand for housing. An aging population coupled with decreasing family size, slower household income growth and high energy costs all point to smaller, higher-density housing located closer to workplaces in order to reduce both commuting time and costs. This is in sharp contrast to the housing stock sought by baby boomers and their children. These generations pushed out to the suburbs and bought relatively large detached homes to house their relatively large families; and typically commuted to work by car over relatively long distances. Theirs is not likely to be the type of housing that will be sought by Millennials and future generations of home buyers. Thus, long-term price inflation for much of the existing housing stock is likely to be low; and new housing is likely to be smaller and cost less in order to be more affordable by less affluent future generations.


Health care costs may sharply reduce home purchase affordability. Up until recently, health care cost inflation has far exceeded the general rate of inflation, pushing health care costs to almost 18% of GDP. While the impact of the Affordable Care Act on health care cost inflation remains uncertain, a return to the previously high rates of health care cost inflation would push health care costs to 30% of GDP by 2030. At that level and given the fact that health care expenditures are largely non-discretionary, consumers will have much less disposable income for housing, education and other core household expenses.


Recent regulatory changes have both increased the cost and reduced the availability of residential mortgage financing. Included here are regulations for the Qualified Mortgage (“QM”), the Qualified Residential Mortgage (“QRM”), RESPA-TILA, and Basel III regulations. These regulations are the final “nail-in-the-coffin” for exotic mortgages and will likely make high LTV loans less affordable and available to a wide range of borrowers, especially first-time homebuyer segments.


The big take-away from the above is that since the start of the industry “meltdown” in 2007 — just 8 years ago — the whole competitive paradigm for the mortgage industry has changed from “a rising tide lifts all boats” environment to one in which winners will be lenders that can “steal share” from competitors. So, what will be the key success factors for “stealing share?


Our list includes the following.


  1. Financial strength. Included here is the ability to fund loans at closing, portfolio select loans when appropriate and retain servicing rights. Lenders that can fund loans at closing, i.e., warehouse their own production, will not be exposed to the uncertainties and risks associated with third-party warehouse banks, e.g., rate changes, pulling or contracting the line, etc. Lenders with the capacity and appetite to buy loans for portfolio will be able to create specialty loans and absorb loans that may not otherwise be salable. Finally, financially strong lenders will be able to retain servicing which can improve both customer retention and the cross-sell of other products and services as discussed further below.


  1. A “trusted” brand. Many mortgage lenders have sustained a severe loss of trust among consumers as a result of foreclosure misdeeds, overcharging, steering, misrepresentations and other abuses of their customers. Indeed, Dodd-Frank and the creation of the CFPB are responses to these abuses. Consumers are now highly sensitized to the fact that not all lenders are the same; that the process of getting a loan matters and can vary widely from lender to lender; that choosing a lender involves a lot more than just the interest rate. And the market is moving in a direction whereby lender performance, as measured by borrower satisfaction, will be easily available to prospective borrowers via the Web and other sources. Therefore, going forward, a trusted and respected brand will be a key success factor.


  1. Access to affiliated customer bases.   Lenders that are associated or affiliated with a bank or other financial service institution will have a significant marketing advantage over lenders that don’t. Especially where the affiliated institution has a strong and trusted brand, empirical experience shows that a mortgage lender will have much higher response rates and success in soliciting mortgages from customers of the affiliate than with new customers. Consumers are much more likely to open a letter or email or return a phone call from their bank or bank affiliate than they are from an entity with which they have no relationship and no brand recognition.


  1. Skill in data base marketing and lead management. While access to affiliated customer bases is a powerful competitive advantage for a mortgage lender, it must be combined with superior data base marketing and lead management methods to result in mortgage applications. The typical homeowner needs a new mortgage every 7-10 years and is actively in the market for just 1-2 months. Finding such consumers is therefore akin to finding the proverbial “needle in a haystack.” Yet, a variety of database marketing and Web-based methods exist for doing just that. But even when an “in-the-market” or “likely-to-be-in-the-market” consumer has been identified, i.e., a lead has been created, the response to a lead — the way it is managed — is critical to converting the lead into a mortgage application.


A key customer segment for applying data base marketing tools is a lender’s existing mortgage customers. Customers whose loans are being serviced by a lender are unarguably the lender’s best source of new loans. Being a customer’s existing lender offers big competitive advantages for “customer retention.” First, the consumer information known to the existing lender facilitates knowing when a borrower might or should be in the market for a new loan. Second, an existing lender typically has an existing borrower’s telephone number and email address and is not on the borrower’s “do not call list.” Third, as with customers of an affiliated entity, a borrower is more likely to open a solicitation letter or accept or respond to an outbound telephone call from their existing lender than from a new lender.


These key success factors suggest to us a new business model for mortgage lending that favors mid-sized regional and larger bank lenders having a good brand and a sizable base of non-mortgage bank customers. In this model, the mortgage operation originates loans primarily from its existing customers, i.e., through customer retention, and by capturing the mortgage business from the customer base of an affiliated bank or financial service entity, a customer base which will itself be expanding through a combination of organic growth and the acquisition of other banking or financial service institutions.


This new model does not suggest, for example, that a bank’s in-house or affiliate mortgage operation should not pursue new customers — consumers having no account relationships with the bank — but that marketing efforts are best spent on retaining existing borrowers and harvesting the mortgage business of bank customers. We are also not suggesting that independent mortgage lenders will disappear. Surely, there will always be outstanding independent mortgage bankers that thrive based on some combination of marketing, sales and operational excellence. But to our way of thinking, larger banks should be in the “catbird” seat. Of course, banks have a history of “looking a gift horse in the mouth.” But we wouldn’t count on it!


Bopping over to the markets, rates decided to head higher Tuesday – and the only reason I saw was that some second tier economic news (Job Openings and Labor Turnover Survey – JOLTS) echoed Friday’s strong labor market information. It seems that job openings at their highest level since December 2000. The 10-yr T-note has been sitting around 2.40% much of the week but ended at 2.42% with agency MBS prices worsening about .125.


For excitement today we’ll have… the MBA’s mortgage applications data? I am typing this before it comes out, and anecdotal reports have lock desks reporting a continued slow down. Later we’ll also have the Treasury selling off $21 billion in 10-year notes.



Thought for the day: Some people are like Slinkys – not really good for anything but they bring a smile to your face when they tumble down the stairs.





(Copyright 2015 Chrisman LLC. All rights reserved. Occasional paid job 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