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10 | TH E M R EP O RT TAKE 5 Adam Thorpe, CEO, Castle & Cooke Mortgage, LLC, oversees the company's corporate operations and loan production while also administering its relationships with key counterparties including, investors, agencies, warehouse lenders, and State and Federal regulators. Prior to his current position, Thorpe served as the Chief Risk Officer for Castle & Cooke Mortgage where he managed the strategic, reputational, operational, financial, and compliance-related risks. Prior to joining Castle & Cooke Mortgage, Thorpe was the Chief Legal Officer and General Counsel at Sun West Mortgage Company. Thorpe spoke to MReport about some of the likely trends in the mortgage market as well as the risks associated with underwriting loans in today's market environment. * * * * * M // What trends are likely to emerge in the mortgage market as we approach the second quarter of 2019? THORPE // The headwinds for loan production will be a sig- nificant, ongoing factor across the industry. The Mortgage Bankers Association projects that refinance activity will continue to fall (com- pared to last year), and purchase loans will improve slightly, although not nearly enough to make up for the drop off in refinancing. Additionally, macroeconomic factors like unemployment and interest rate activity will weigh on lenders and consumers. If unemployment re- mains at or near 4 percent and the Fed holds off on further increases, lenders should be able to stay healthy. However, if either of those two factors begin to lean in the oth- er direction, it will only compound the challenges we already face. As a result, smaller players will continue to struggle to remain profitable. This will drive further consolida- tion across the industry. On the bright side, tech- nological improvements and innovations are springing up everywhere. Technologies like Day 1 Certainty, for example, give lenders and originators the ability to approve loans faster and provide a better customer experience. Automated marketing platforms give lenders the ability to control marketing activity (keeping it compliant) and free up time to prospect and generate new business. M // How can lenders meet the challenges of staffing in a low origination environment? THORPE // There is no room for inefficiencies. It is crucial for lenders to manage support staff to set performance metrics at every position and with every function. Lenders must under- stand how deviations can cause inefficiencies and take proactive steps to ensure that staffing meets current production levels and established performance metrics. They should also be investing (if they aren't already) in automated systems and machine learning to assist in identifying inefficien- cies and finding ways to keep staff (humans) focused only on processes and functions that can't be programmed. M // What are some of the risks associated with underwriting loans in today's market? THORPE // With production vol- umes dropping, loans are harder at every level. Maintaining high loan quality in a difficult market will be a challenge for some lend- ers. It is crucial to keep a close eye on originators who are sus- ceptible to pushing the envelope when it comes to risk. No lender can afford a buyback during a growth period, and repurchase in this market could be fatal. Balancing Risk and Profitability A low origination environment comes with its own set of challenges. How do lenders walk the tightrope between maintaining profitability and writing high- quality loans?