Risky Business

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Feature risk, the compliance risk, the regulatory risk. Those three things all by themselves are huge . . . . It's a heck of a balancing act, to me." Of course, compliance isn't simply a cross for the industry to bear; there's a practicality to it that many firms might miss as they stress over the costs. Salazar explained that adherence to new guidelines is a competitive advantage in its own right, as "a company that's in the news for the wrong reasons" is unlikely to attract the kind of business it wants. In a sense, good compliance is an effective shield against bad headlines. Then again, why choose at all? "I don't think it's an either/ or question. I think [the ideal candidate] is somebody that can grow a business even during the times of increased regulations," Raneri said. "Successful leaders are watching the market in terms of what the interest rates are for mortgages right now; they're watching what's developing in specific geographical areas as home equities start to rise. It's still imperative that lenders recognize that with the low interest rates and with the property values, they've got to continue to grow their business, and really the time is now to do that." Staffing Up W ith a clear destination in mind, the next step is making sure the right people— "peripherals" in tech terms—are in place to see the plan through. For some companies, this can be the toughest step. According to the unnamed risk manager, many businesses are putting their plans on hold while they wait for the fog to lift on rules that still remain to be passed down. "A number of [compliance risks] have been defined, but there's probably the majority of them that still haven't been defined," she said. "And I think there's a great deal of waiting going on before businesses really feel like they're prepared and are able to move forward with plans." For his part, Salazar recommended looking toward candidates who have a background grappling with regulatory and compliance issues. "I think at this point, you need to have . . . people in all positions with a good background in regulated industries. Ideally, financial services, but there are others— people who come from a culture of compliance," he said. "The mortgage industry is complex and has a great deal of specialized knowledge that's necessary in order to be successful. But today, without the overlay of understanding regulatory compliance, that's just not enough anymore." While industry experience is important, the circumstances surrounding that experience are even more crucial. In other words, it's easy to be successful when times are good, but the most valuable potential employees are those who saw their companies through the hardest situations. "Do research on people that you're looking to hire, in particular [their performance] during the credit crunch and during the time right after the bubble, to see what their performance is during the times of hardship," Raneri explained. "A lot of people were doing really well when the market was doing really well, but Addressing the Mortgage Industry's Talent Crisis An old adage rings especially true these days: "It's hard to find good help." Caldwell Partners, an executive recruitment agency, released a white paper in March detailing the ongoing troubles mortgage firms are experiencing as they search for talent in a sector growing more competitive by the day. "Banks, hedge funds, private equity firms, law firms, and accounting firms are all scrambling to find senior-level executives who can operate in a more regulated 28 | environment," the paper reads. "In short, the mortgage banking industry is in danger of losing the recruiting battle, based on recent experience in securing top-level talent for mortgage banks." Part of the problem, the paper says, is that the industry hasn't been in a position to groom its next generation of leaders. "Since the start of this malaise . . . [mortgage banks] haven't really existed since then in an institutional and organized way that has space and trajectory for younger people," said Carol Hartman, partner at Caldwell and co-author of the white paper. While not every firm can compete at the same level as major banks and hedge firms in terms of executive compensation, Hartman said they can start by creating greater transparency, thus the gauge is when the market was at rest." Moving Forward W hile there are many parallels that can be drawn between a corporate entity and a piece of machinery, there's a major difference: A machinist most often builds from scratch, but company leaders don't get the luxury of putting operations on hold while they rebuild. While companies work to get through the murky waters ahead, they might be able to take a few cues from those who have already had to navigate the same straits. "The mortgage business has changed dramatically, and it is much more like the banking world than it ever has been and will continue to move in that direction," Salazar noted. "And that is a cultural shift for the mortgage industry." "I think probably what's more important right now than anything else is clarity. Right now, there's so much confusion," Dykken said. "Compliance is coming at people. Are you providing clear leadership?" bringing more positive attention to a profession that's drawn more than its share of public scrutiny in recent years. "We've got a generation of young people who don't see that as a viable career option," she explained. "We need an efficient, respected financial services industry. We have to stop making these professionals 'bad people.'" In the meantime, mortgage banks are forced to look outside their own industry to the broader population of banks, broker-dealers, regulators, and institutional investors. So, who's the biggest commodity in the financial services sector today? "The risk people are in such demand; they're really driving the competition up high," Hartman said. "It's very competitive for the top risk people." The M Report M

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