Oct. 22: Opinions on the real estate market, industry integrity, and the wholesale channel; Saturday Spotlight: Cenlar FSB
With Finance of America announcing that it is exiting the forward mortgage business yesterday, the industry wonders what’s ahead. M&A is certainly on fire, with the latest example being MSR owner Marlin Mortgage buying consumer direct originator LoanFront. Can publicly held lender stocks go even lower? Chris Whalen in the press is talking about 10 percent mortgage rates. Yikes. What would the impact of that be on the economy? Things are truly bustling here in Nashville, with no clear sign of a slowdown, although I have heard the term “stagflation” a couple times in recent weeks. There’s an old adage, “A recession is when your neighbor is out of a job. A depression is when you’re out of a job.” No one is talking about a depression, fortunately, as the balance sheets of most families and companies are in good shape. Businesses are busy, and unemployment is very low. Will that change? The residential lending industry, including lenders and their counterparties, is not alone in personnel cutbacks. Microsoft, whose stock is down 30 percent this year, is laying off thousands, joining Snap (20% of its workers), Intel, Apple, Oracle and Beyond Meat Inc., and others. Those displaced in the mortgage business can always post their resume for free here where employers can view them for a lengthy period of time for a nominal $75. A recession would push rates lower, but is that what we want? On with the show!
Saturday Spotlight: Cenlar FSB
In 3-5 sentences, describe your company (when was it founded and why, what it does, where, recent growth and plans for near-term future growth).
Cenlar successfully services residential mortgage portfolios for clients across the United States and its territories. We have 100 years of financial services experience, first as a savings and loan, and then as a mortgage company, with decades of that time focused on subservicing. Over the years, we’ve built a diverse portfolio of banks, mortgage companies and credit unions of every size by caring for their unique needs with customized, flexible mortgage servicing solutions.
Tell us about what type of volunteer work employees are encouraged to engage in, or charities your company supports, and why.
Cenlar has been a partner with Habitat for Humanity for more than a decade, and we are committed to helping communities be a better place to live, work and play. Every year, we hold an annual event where our summer interns volunteer at Habitat for Humanity upon completing their internships. We recently gave a sizeable donation of office furniture and other items from a former office location to Habitat for Humanity’s ReStore in Maple Shade, NJ, Hamilton, NJ and Egg Harbor, NJ. ReStore is independently owned and operated by local Habitat for Humanity organizations. ReStore accepts donations to help furnish and refurbish homes. Their goods are available to the public for a fraction of the retail price. Each purchase supports Habitat for Humanity.
We also hold employee food drives to support local food shelters in all of our locations in New Jersey, Pennsylvania, Arizona and Missouri that help to feed communities in need. This month, members of our credit union team are working with a local food pantry to help the community. We support a number of national organizations, including: the American Cancer Society; American Heart Association – Wear Red Day and Toys for Tots Foundation. Each fall, Cenlar delivers backpacks and school supplies to students in need.
What does your company do to help elevate your employees’ growth? Describe any mentoring programs, outside classes or training, in-house training. How does the company help people develop?
At Cenlar, we encourage everyone to follow their career path. Whether employees want to grow in their current role, or they aspire to explore new opportunities within Cenlar, we are committed to supporting everyone. Cenlar’s HR team helps employees grow in their jobs and aligns their development and career goals with the organization’s education goals that, ultimately, advance the company’s business objectives.
We offer a wide variety of educational resources and certification programs for all employees who want to enhance their skill sets and grow their careers. We have a partnership with the Mortgage Bankers Association (MBA) and many of our employees have gone through the MBA and completed their certification programs. Director of Operational Change Management Allyson Kiesel was awarded a Path to Diversity Scholarship through MBA. Chief Control Officer Lynn Tarantino and Chief Accounting Officer John Mezzasalma are part of the MBA’s Future Leaders Program.
Tell us how your company maintains its culture in a hybrid environment.
Our culture and our values – Respect, Trust, Integrity and Caring – have been Cenlar’s North Star throughout different points in our history to where we are today. It’s not simply about what we do, but how we do it. As an employee-owned company, it’s how we work together as one and positively impact our workplace to deliver excellence for our clients and their homeowners – whether in the office or at home – in our now hybrid work environment.
Things you are most proud of that don’t have to do with sales.
It’s our people and culture that we are most proud of. While many organizations say that their people are their greatest asset, Cenlar lives this every day. We are truly impressed by the talent across the organization who work diligently to serve our clients and their homeowners.
We are a people business first. While we have made some major technology enhancements to improve the employee work experience and help them do their jobs better and smarter, we will always have that human touch. Our people are so important to us that we have created an employee recognition program called True Blue to call out those team members who inspire us by living our culture and core values.
Fun fact about Cenlar.
Did you know that Cenlar has a 20-Year Club? The 20-Year Club was formed by former President and Chief Executive Officer Michael W. Young in October 2002. This special group was created to recognize and celebrate our employees who achieve their 20-year tenure at Cenlar.
(Contact Chrisman LLC’s Anjelica Nixt for more information on having your firm’s extracurricular activities, employee growth, and your charitable side featured.)
Cautionary thoughts on the industry’s ethics and integrity
I received this note from an originator, written for the industry.
“Dear Mortgage Industry, I am saying this as we simply need to hear it today. Unfortunately, this market is and will continue to motivate those that are committing violations and fraud to push even further in that direction (until caught). It’s important that we all recognize this together and pay attention to what truly is causing it. We must also not be fooled into any sales or rhetoric by master manipulators as so many have been. This will be especially important after we see enforcement actions publicly to expose what most of us should already know is happening today (sadly with many, not just a few).
“I personally believe we are at the lowest point regarding ethics and integrity in the history of primary mortgage origination. Why? Well, I believe it stems from two primary factors today (combined): 1. Ignorance (by both good and bad people as so many are new to the industry today and easily influenced) 2. A Narcissistic Personality Disorder (NPD) in people who have been given ‘fictitious authority’. This disorder can be dangerous if someone can influence a large group of ignorant people (not bad people, just unaware) for their own self-serving financial and personal gain. Some are becoming aware but may still be in denial for a number of reasons.
“At some point, you’re either part of the problem or part of the solution. I am speaking primarily to the new mortgage ‘channel’ today (not retail, but not independent wholesale either). If you serve consumers, we are all accountable to what people and groups we support individually. We need to come together and protect the future of this industry for both consumers and local small businesses.
“Here is some useful information from a Family Therapist on this personality disorder. We are seeing many of these traits in the mortgage space today, primarily in how poorly this disorder mixes with social media. With the aggressive push for self-validation and rhetoric-filled promotion, they are generally derived from deeper-rooted insecurities. In addition, they run from direct conflict or from taking accountability for their actions with a lack of responsibility and no empathy.”
The note wrapped up with, “Please just be aware of it and don’t be naive. As Dr. Fjelstad says: ‘When determining whether someone is a narcissist, most people make it more complicated than it needs to be. I use the duck test… That is, if it looks like a duck and quacks like a duck, it probably is a duck.’”
Thoughts on the broker world
Switching gears, last Saturday’s commentary included an opinion essay by Rocket’s Austin Niemiec on how he believes that America’s mortgage brokers are facing an unprecedented threat. I received a fair number of emails from various parts of the nation on the topic, either agreeing or disagreeing.
Mat Ishbia, President, and CEO of United Wholesale Mortgage, wrote, “Rob, whereas you normally put out a reliable, consistent product for the industry, I was very disappointed that you printed a slanderous, inaccurate post from an officer at Rocket Mortgage in your commentary last Saturday. You printing that makes people think you believe it, and I know you know better. Austin Niemiec has zero relevance in the mortgage industry. I have no response to him or this dishonest post, as me responding to it is like Nick Saban responding to a middle school football coach on what type of offense Alabama is running. It doesn’t warrant a response or deserve one.
“For your information, and so you know what is going on with the broker channel, the data supports that brokers are winning and growing. I live and breathe in the trenches with these LOs at broker shops. We do anything we can to help them win and grow. We are ALL IN with them and always have been. Our tech, tools, speed, service, and pricing have all empowered brokers to grow and win, even in this market. It is happening!! We have grown the channel as partners of brokers for years, and although your friends in the retail channel and at the MBA and other places don’t like UWM and me, brokers do. Brokers Love UWM as we are helping them not only compete, but win. We have been loyal and honest to brokers for years and delivered on helping them grow. Helping them build their business and we will continue to do so for the long term.
“The broker channel was not strong 10 years ago, when all these other companies would prey on the broker’s loans and real estate connections. They put a rate sheet out and told brokers to send them loans, but gave no support, no consistency, no tools to succeed, no partnership and no opportunity to thrive. We changed that at UWM and now the market has shifted to brokers winning. Loan Officers are leaving the retail lenders at a record pace right now, and most of the retail lenders are losing money and laying off people. UWM is actually still hiring and has never done a layoff in history.
“Maybe, just maybe, the mortgage broker market is thriving. Maybe brokers are growing. Maybe UWM is the biggest lender in America now because we have supported brokers? Maybe because of what UWM has done, it has helped brokers grow and win. HMDA data shows brokers save consumers $9,400 per loan vs retail lenders? Why isn’t that talked about? $10,400 for minorities? Maybe brokers are winning?”
Mr. Ishbia’s note finished with, “Rocket is shrinking and is run by people that aren’t doing right by consumers or brokers. They charge inordinate fees to consumers and honestly are not good for our industry. They built their business on refinance only and are paying for it. They treated brokers horribly for years, and have lied to them, and they are paying for it now. I believe that Rocket’s Retail, Wholesale, and Correspondent channels, combined, are not as big as UWM anymore. That is because brokers are winning and will continue to win. You know it, I know it, the industry knows it… So don’t print something that isn’t right or true.”
From the East Coast Anthony Casa, President and CEO of UMortgage, sent, “The piece in your commentary on the future of third-party origination (broker/correspondent) is very one sided. This, in combination with your daily newsletter on 10/1 that featured a very negative slant on the channel, feels like you are creating a ‘the world is coming to an end’ for third party origination narrative that only benefits retail mortgage bankers who are losing loan originators by the hundreds every week to players in these channels; these views create fear that isn’t substantiated and/or lacks the level of depth to give readers a balanced perspective.
“For example, I looked at a snapshot of our September fundings: 266 units with 12 different TPO lenders. If that is not enough lender diversification, we locked 343 loans in September with 15 different TPO lenders. During this period UWMs wallet share dropped from over 70% (based on September fundings) to just over 50 percent of our September locks.
“The wholesale and correspondent channels have always been ‘opportunistic’ channels for a percentage of the lenders in the space that come in and out of the market based on the performance of their other origination channels and the current economic environment in these channels. For every LoanDepot, Finance of America, and Amerisave that exits TPO, you’ll see lenders like PennyMac, NewRez, and Windsor increase their investments in these channels.
“The current trends developing in TPO are no different than the current trends developing in retail, the well capitalized established market leaders who have invested in their platforms are aggressively growing market share through customer acquisition(recruiting) or M&A. In this cycle those players are CrossCountry, Movement Mortgage, GRate, and Cardinal; this is resulting in weaker or less committed competitors to exit/shrink: Finance of America, Stearns, Caliber, LendUs, with many more to come.
“Stan Middleman once told me that the top five market share leaders in all channels change every 8 years, and I believe if you look at the historical data, you’ll find this to be true. There is no lack of access to product, lender optionality, or competitive pricing for originators in the TPO space, which is one of the reasons why a record number of LOs have joined companies in these channels each month for the last five months. I would be happy to introduce you to several of our loan originators that transitioned from large retail lenders to UMortgage and are thriving in our model.
“Please note my opinion is not to defend UWM, my opinion is to provide the appropriate representation on the health of third-party origination supported by actual data; at a time when loan originators need accurate information when evaluating what platforms and channels are the best for the future of their business. I hope my opinion along with the information provided broadens your perspective and helps inform future commentary on third party origination.”
Report from the real estate trenches
Bob Ravasio, a leading real estate agent in Marin County, California, and who has a good way of keeping things in perspective, writes, “If you like to see sales increase on a monthly basis for Marin County, then September was not your month. The number of sales for the month was off 37 percent from September of 2021, which is a large drop. But as always, perspective is important.
“This has been a long, and large run up in sales and prices. An extraordinary run, actually. The average sale price for a Marin home in 2018, four years ago, was $1,448,188. This year to date so far it is $1,998,248. So that is 38% increase in the average sale price since the end of 2018!
“The number of monthly sales is off versus the same month last year, which was a Covid-fueled market with very high sales. We have been characterizing this as a return to normal, and that is what we continue to see. This is normally a slower time of year, with the weather starting to turn, and many of the buyers looking for school systems have already bought or are waiting for next spring.
“Clearly there is more pressure on the higher end of the market, which is pretty typical when things slow down. When markets slow down, inventory increases. And that is certainly happening in Marin. In April 2022, there were 453 homes available for sale, and most were already in contract. April is normally one of the highest inventory months. Today, there are 643 homes available, the highest it has been this year, and pretty typical for what we see this time of year. So as noted last month what we are seeing here is largely a return to a normal market.
“Inventory is rising throughout the County. Homes are staying on market longer, and many transactions are what we used to consider ‘normal’: The buyer puts in an offer at or slightly below asking; the buyer does some investigations; a negotiation ensues between seller and buyer based on the findings, and the deal closes, usually around 30 days.
“The difference in the market vs. one year ago is amazing. At our open houses, the feel is totally different. A year ago, buyers crowded into an open house, often somewhat frantic, and had a thousand questions: ‘How many packages are out? When are you looking at offers? What does the seller want?’ Now, open houses are again, normal. Buyers walk in, we tell them a little about the house, they look around, maybe ask some questions, and we ask if they are interested in disclosures. No one is in a hurry. Everyone is just evaluating the home, and their options.
“We have been counseling our buyers to stay vigilant as we move into the holidays and consider intermediate ARMs. Typically, the market slows down as buyers take care of family obligations, and sellers pull homes from the market during the holidays so they can spend them at home uninterrupted. But if a home is on the market during the holiday period, you can bet that they want to sell. So, it is a good time to look, as competition is less, and any sellers are usually pretty serious about wanting to sell their home.”
I went to the cemetery last weekend to lay some flowers on a grave.
As I was standing there, I noticed 4 grave diggers walking around with a coffin.
Three hours later and they’re still walking about with it.
I thought to myself, they’ve lost the plot!!
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, “Mergers and Acquisitions Continue On.” The Commentary’s podcast is live and at any place you obtain your podcasts (like Apple or Spotify).
(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 2022 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.)