MReport January 2020

TheMReport — News and strategies for the evolving mortgage marketplace.

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M R EP O RT | 5 INDUSTRY VOICES INSIGHTS FROM MREPORT'S EDITORIAL ADVISORY BOARD business coming from cash-out. But, we are planning to sig- nificantly increase our purchase business and also our home equity lending as well. M // How can lenders adjust their approach so they have that ability to remain nimble and adapt to changes in the market? STUBBS // Your question shouldn't be how many con- forming first mortgage refis I can originate next year. It's the wrong starting question. And it was a question for a long time. Platforms were so siloed. When I got into the business, consum- er-direct was a refi shop—full stop. That's what they do. Your purchase business is all coming from Realtors. In 2019, rounding the bend in 2020, that's just not true. It has way more to do with the customer and what their interests are and how they want to transact. So, the first answer to agility is having the widest product set that can meet the needs of the broadest base of custom- ers. Your question shouldn't be "How many refis am I going to originate next year?" I'm not even interested in the question. It's how many customers am I going to be able to engage with somewhere in my product set. It has to do with having the largest array of products avail- able. That means being profi- cient at purchase, and at refi, and having a stable of home equity products within your first mortgage set. People have siloed themselves, saying, "I'm a government lender," or "I'm a conforming lender. Oh, we do jumbo loans." Your goal should be to get the widest product set possible to meet the needs of the maximum number of customers possible. That's how you build agility. If you don't do that because you're not focused on it or you decide by intention that you're going to be a niche player, then you are emphatically foregoing agility, and you're going to be way, way more subject to market condi- tions than the ones who choose to organize their business the way that I said. With agility, you can ride whichever wave that the market is going to give us that year. We need to be jacks of all trades … and masters of all. It is that simple. Specialization is important, but you want to build up the capability and proficiency in each area, and you need to be able to flex into them. There's nothing wrong with having a purchase specialist team, but it is unwise to not have a mecha- nism to convert your refi loan officers into purchase specialists. There's no agility in overspecial- izing. Organize your machine in a way where you're providing special services, and you've built the mechanisms to scale up and down rapidly either way. At Flagstar, we used to have home equity as a separate siloed team. It was a specialty team, meaning that person would only originate home equity. A little clunky, right, because we would have loan officers, we'd have customers who were seeking cash- out, we had both products, and we'd have to transfer them from multiple quotes. It was a clunky customer service experience. Fast-forward to a few years later: now 100% of our loan of- ficers are also originating home equity. So it's completely fun- gible. We decided to just train everybody in all the competen- cies. Let's upgrade our technolo- gy in a way where we can quote both simply. It's just a matter of getting cross-functional capabilities and doing them with proficiency. Just acceptable proficiency, that is feeding your agility in a really good way. We still have home equity specialists because we always have enough volume, so I can always keep at least 10 home equity specialists fully pressur- ized. But now I have a whole mortgage sales force who can come in flexibly and scale up and down into that. Sometimes it's enough for 12 full-time em- ployees, sometimes it's enough for 25 full-time employees. It doesn't matter what the day throws me because I've got the capacity for that. "We need to be jacks of all trades … and masters of all. It is that simple. Specialization is important, but you want to build up the capability and proficiency in each area, and you need to be able to flex into them."

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