March Jobless Claims 3.2 Million
4/2/2020 Jobless Claims 6.4 Million
4/9/2020 Jobless Claims
6.6 Million (Constraints to Consumer access – could have been higher)
Many mortgage originators are talking about FICO scores and DTI in the wake of the Covid-19 emergency. Whether it is apparent to mortgage originators or not, you can be assured the threat to the mortgage industry is not the more conservative program guidelines the industry is adopting; it is the Furloughs, Layoffs, and Terminations that will result from expense reduction strategies by those companies that shut their businesses down for our Country’s economic survival. The unemployment rate is going to spike over the next 30-60 days. Estimates indicate unemployment will reach 15% to 32%. In 1933 it was 24.9% which may foreshadow the potential impact unemployment will have on our economy. The peak unemployment during 2009 was only 10% and everyone remembers the defaults and the impact to the mortgage industry. The cause of the 2009 Great Recession? Risky unsustainable mortgage lending without regard for doing the “Right Thing”.
If you remember, everyone was on the option arm and sub-prime train during 2008-2009. Everyone sold “we have the programs to get you more buyers” etc. Defaults and the implosion that followed put a lot of great builders and mortgage professionals out of work.
This is different. Covid-19 will have a more severe impact for a shorter duration. My advice is do the right thing for your builder and realtor partners. This emergency will pass in 6 months or so and then you can add risk if you choose.
Job loss is going to be the biggest disruptor of mortgage closings and approvals over the next 3-6 months. The reason FICO and DTI is being adjusted industry wide is to narrow pipelines to borrowers who have a lower risk profile and better job stability.
The mortgage market has changed, and the bond and secondary markets are trying to process what the current normal is. Until there is visibility on the current normal and the Government can find the right level of MBS engagement, caution and complying with guidance is the safest path for your clients and partners.
Over promising only creates downstream risk for builder partners and realtors. Stating you can deliver programs that have overlays and unaffordable buy-downs in the hope of engineering a solution later, is not the right thing for a borrower or your partners. Being proactive today will stabilize pipelines and improve your probability of a successful closing tomorrow and 3 months from now. Employment status and probability of employment will be the underlying challenge as we overcome Covid-19 and restart our great economy.
Lunch and Dinner meetings have run their course and real relationships are now built on shared experience and fun. Aspire to friendships and not acquaintances…. Try a new path.
Banks continue to struggle in the Retail Mortgage Business. Profitability and Capital requirements are making Banks rethink the size of their mortgage operations. Smaller complimentary operations are probably the future banking norm. When banks see the retail mortgage business as a declining sector, new graduates, growing population, and a strong economy would suggest the opposite. IMO, Home Ownership is the American Dream and the cornerstone to America! I say it’s a surging industry and our sales would support my belief. GO America!!!! Read More Here.
Vernon Chandler posted this image this morning. It reinforces an important belief that I live by. Vernon, Brandi, Jenna, Corey, Jeffrey and a few others had the opportunity to visit Cuba with a Partner of ours recently. Many would say they are too busy or my favorite TV show comes on tonight, SEM people embrace adventure and experiences. Complacency leaves the “Whatif” unanswered. Because we embrace new experiences and do not make excuses, we try new things. They now have some cool travel street credit. Americans who have visited Cuba and can speak first hand on a unique culture. The US has now closed that door. In life, some doors are only open for a finite time due to timing and opportunity aligning. Always explore, be bold, never regret.
Have you ever heard the phrase, “change your zip code”? This means if your current actions create the same outcome time and time again, you have to change your zip code to get a different outcome.
I learned many lessons from my mentors during my Banking Career. One of the most valuable lessons was the Bank always does what is in the best interest of its Shareholders. It is the fundamental responsibility of a Corporation. Early in my Bank career my mentor granted me stock based on performance and I quickly understood the generous recognition to be a Shareholder. The wealth created by the sale of that stock was life changing and an experience and dynamic I wanted at the core of Southeast Mortgage of Georgia, Inc.
One person cannot build a company, it takes a Village. The Village should benefit. This belief is part of your culture or not. If it’s not, what is your longer term outcome?
Banks can sell many products if mortgage origination is determined not to be in the Shareholders best interest. Read the News, it’s the trend. Southeast Mortgage sells one product and evolves with media and technology. We originate mortgages only and are all in and have been for 25 years. Your career deserves a company that is all in on what your income is dependent on.Over the past 25 years, I have seen a lot of Mortgage Operations go out of business and a few sell. Poor judgment, poorly conceived plans, and unsustainable strategies were the cause and cost good employees their jobs and the valuable time they spent away from their family growing the company. When it comes to taking care of your family or planning for retirement, you need proven leadership that can help you accomplish your goals long term and provide equality. Change your zip code for a path to retirement.
When your Bank or Non-Bank sells and asks you to stay with the company they sold, who’s best interest is it? Yours or the New Shareholders? You basically accept a new job (sometimes with pay cuts) without an interview and without comparing other opportunities. The company being bought and the reasons you worked there ended with the purchase. The new Bank or Non-Bank will do what is in their Shareholder’s best interest in the manner they believe maximizes their Shareholder’s value. Its important to understand your new leadership works for their Shareholders not as your fiduciary. Change your zip code and take a chance on a path to be a Shareholder.
When a Bank or Non-Bank sells you only hear about a few people that got a big check. Search Google, Search Google2, Search Google3, SEC filings are public knowledge and show how many shares and how much each made on the sale and where the expense cuts come from to create efficiencies. Mergers rely on expense cuts to leverage combined revenue into a higher net income for Shareholders. IMO the Hundreds of Millions of Dollars from the sale should also benefit the employees that created the value. The reality? The employees who created the Hundreds of Millions of Dollars in value do not share equitably in the sale. After the close of the sale, employees at the company being bought have to find a new job or hope the new company they were sold to continues in a manner that allows them to make the same income. No Bank operates the same nor has the same strategy. There is a reason one Bank buys another and it is usually about Deposits and cutting non-interest expense to create a higher net income. Expense is always cut from the company being bought. Bank sales are SEC regulated and public knowledge. Read the agreement.
Loyalty is a two-way street. If you are loyal, you should be rewarded when good things happen. If your leader just moves you from company to company 2 – 3 times with the same outcome, turn the page (Change your zip code) and try a better path. You only have a few opportunities in life to make a better path. Change your zip code to a path that makes you the owner.
What do your Shareholder’s look like? Do they represent you? Do you have a path to become an owner? Have you ever met your Shareholders or Board Members?
We work side by side daily. At Southeast Mortgage of Georgia, Inc., our shareholders are our Processors, Underwriters, Closers, Originators, and Administration. Four of our Shareholders have retired comfortably.
This is what our SEM shareholders looks like. Every year we add those that help us grow. From 2 shareholders to 41 is equitable distribution of our success.
They all changed their zip code at some point in their career to make a better path for themselves and their family.
With change comes an opportunity for a better outcome.