Diagnose the Right Problem Before Treating Mortgage Maladies

Category: National Mortgage News
Published: Wednesday, 17 December 2014
Written by Admin

The past few weeks will likely go down in history as the tense time period when two famous people suffered health ailments that at first seemed very serious but later turned out to be false health alarms.

The first is one that all readers of this column have probably heard about. Our own president ended up in the hospital recently to undergo a CT scan for a sore throat. As anyone with kids will tell you, sore throats are serious things, but fortunately our Commander in Chief was diagnosed with symptoms of acid reflux — or what you and I refer to as heartburn. His medical team concluded that his condition may have been caused by something he ate, which some cable news forecasters will surely use to project the president blaming his wife Michelle for her lack of culinary ability. I have a feeling he may be suffering from eating crow after the most recent midterm elections.

The second victim of a recent medical overreaction was me. Yes, I, the famous weekly columnist for National Mortgage News known far and wide to relatives and those who find my work in this prestigious publication, was also stricken by what first appeared to be a quite serious medical malady. Not that I want to encourage you to compare me to our Democratic president too much, especially since hes been dealing with months of post-midterm doldrums while Ive been having a great time on the road, making speeches to friendly crowds at two MBA conventions and completely avoiding anyone threatening to impeach me.

But there are similarities. I also spent some time in the hospital after experiencing chest pains during a recent visit to Boston. Like Barack, Im also inclined to blame my wife as I would have just toughed it out if she hadn’t been with me (tough may be the wrong word; my wife would use irresponsible). I figure the president and I should be on a first name basis due to our similar ailments. Anyway, I ended up in a Cambridge hospital where my Harvard educated doctors forced me to endure a battery of tests, over 24 hours, and then prescribed...a Tums. Well, it wasnt quite that simple, but they did figure out it was not my heart (or lack thereof) and, exactly like Obama, it was acid reflux. Its now cured, as I chomp on a chalky tablet when needed and avoid hospitals as much as possible.

So, what do these thrilling tales have to do with our wonderful mortgage business? Actually, Ive been struggling with that and hope some of you kind readers will send me your ideas via LinkedIn. Im kidding (not about the send me a message part)!

These stories are all about overreacting when we’re under stress, and we’re always under stress, at least here in the mortgage lending business. As we close out the year, mortgage executives all over the country are going to be reading over their reports and comparing their company’s performance to last years and their lofty goals for this year. There’s going to be some heartburn. But dont let it put you in the hospital.

You see, sometimes in our industry we know what the symptoms are, we know what we’re feeling, but when we analyze it we come up with a much more complicated diagnosis than is necessary. It causes a lot of extra stress and acid reflux. Let me give you a couple of examples.

Lets say your loan production executive brings in the year-end totals for origination volume and theyre not what you were hoping for, not even close. You could jump to the conclusion that you just dont have enough loan officers and start making plans for more office space and computers and software and gearing up for recruiting expenses and all of the additional costs that come with more people. Your company might end up in the ER.

The truth may be that you have exactly the right number of loan officer slots, but the wrong loan officers in them. Maybe you need to provide more training to the ones you already have. A small increase in conversion at any point in the borrower loan buy cycle will make a huge difference in profitability, with little or no heartburn. Of course, the key here is knowing who you have in your shop and how theyre doing. Thats not as easy as it sounds, but there are tools available to help you do it — and they cost a lot less than a new building for more LOs.

And maybe its not a personnel problem at all. It might have to do with technology. Studies have made it very clear that unless you implement technology correctly, you will never get the results you expect, just more heartburn. There is no magic Tums for a bad technology platform that will suddenly undo years of abuse. Ill have a lot more to say on that early next year when the new Stratmor technology survey results are available.

I could use compliance as a classic example of malady overreaction, but thats way too easy.

Its hard not to overreact when failure to act in accordance with the requirements of so many overlapping jurisdictions can mean the loss of your company. I get that. But when it comes to the health of your company, you need to get the diagnosis right, make the required changes and only those that are necessary to get you to your goals. It may feel like your throat is on fire sometimes but more likely than not, you’re just full of gas and need to change your diet. I know thats what they told me and Barry. So, thats what I’m telling you. Think of it as a New Years resolution.

Thanks for reading this year. I wish you all a very happy holiday season and great success in the year ahead. Meanwhile, I am stocking up on antacids.

Garth Graham is a partner with Stratmor Group and has over 25 years of mortgage experience.



End of the Servicing Behemoth Era? Not Quite

Category: National Mortgage News
Published: Tuesday, 16 December 2014
Written by Admin

Conventional wisdom dictates that the era of the servicing behemoths is over, and that no companies will dominate mortgage collections the way the Big Four of Countrywide, Chase, Bank of America and Wells Fargo did before the housing crash.

But that might not be the case quite yet.

Its true there no longer are $2 trillion servicers, as Wells was back in the day. And its also true that nonbank servicers have advanced into the ranks of the top 10 (Nationstar, Ocwen Loan Servicing and Walter Investment Management), making for quite a non-traditional leaderboard. But Wells has quietly moved into a commanding market share twice its nearest rival Chase, and the top five servicers control more than 56% of the market, much as they did in the old days, according the data from NMNs MortgageStats.com.

Looking at industry niches shows even more commanding market shares. In Ginnie Mae servicing, Wells handles more than twice as much volume as second-ranked Chase. And in commercial servicing, one firm, PNC Real Estate (Midland Loan Services) has an amazing 82% of the market, nearly 10 times its closest competitor, Walker Dunlop.

Will this domination continue? It depends. Jay Brinkmann, principal at BrinkEcon in New Orleans and former chief economist of the Mortgage Bankers Association, said the current top three have shed a lot of servicing out of their retail footprints. But, he added, Wells, Chase, and Bank of America remain interested in adding servicing to their footprints and growth will depend on how much servicing they generate in-house or through acquisitions.

But the nonbanks, which have come on strongly in recent years and are chasing the big bank servicers, have their own hurdles to face. The chief one is regulatory attention.

How much can they grow in the current regulatory environment? Brinkmann asked.

As of the second quarter of 2014, Wells Fargo commanded $1.8 trillion in servicing, according to MortgageStats.com. Thats down 3% from the second quarter of 2013, but still represents gains on Chase and B of A, which lost a higher percentage of servicing during the period. Chase dropped 8% to $980 billion, while B of A continued to shed servicing rapidly, down 23% to $760 billion.

Despite the surge in non-traditional servicers, the most robust of them, Nationstar Mortgage of Lewisville, Texas, still has only half the portfolio of third-ranked Bank of America, which has been dumping servicing from its disastrous acquisition of Countrywide for years. Nationstar had $380 billion of servicing at the end of the second quarter to come in fourth, growing a hefty 19% in a year.

Even though it is a reduced universe (commercial and residential servicing currently is estimated at about $8 trillion, down from more than $10 trillion at the peak), the top three still have a dominating 46.4% share.

In Ginnie Mae servicing, Wells continues to reign supreme. Its $415 billion of servicing as of Sept. 30 is more than the next seven Ginnie servicers combined. Ginnie Maes most recent uncollected principal balance table shows about $1.5 trillion as of October. That would mean Wells controls more than a quarter of the market. (Chase and B of A are ranked second and third in this category, as well.)

In commercial servicing, longtime leader PNC had $385 billion in servicing at the end of the second quarter, or an 82% share of a total market estimated at $467 billion. The only big gainer was fifth-ranked Jones Lang LaSalle Operations, up 83% in a year to $4.6 trillion.

The influence of defaults on servicing should continue to slow. Brinkmann noted delinquencies are down and foreclosure numbers are falling, albeit slowly. Impact depends on what the economy looks like in 2015-16, he said.

Brinkmann thinks the first half of 2015 will be robust, but if theres a slowdown in the second half, Federal Housing Administration and prime servicing could move into default. Thats if we see a real backup in the economy.

According to the most recent default numbers from the MBA, delinquencies have scaled back to precrisis levels, with delinquencies and foreclosures each falling more than 50 basis points from Sept. 30, 2013 to Sept. 30 of this year.

Mark Fogarty, Editor at Large at National Mortgage News, brings more than 30 years of experience to his analyses of the mortgage market.



National Health IT Week to Tout HIT Benefits

Category: National Mortgage News
Published: Friday, 17 October 2014
Written by Admin
banking
  • American Banker
  • Bank Technology News
  • American Banker Magazine
  • Credit Union Journal
MORTGAGES
  • National Mortgage News
PAYMENTS
  • PaymentsSource
  • Collections Credit Risk
  • ISO Agent


Fiduciary Advocates Push for Best Practices

Category: National Mortgage News
Published: Friday, 17 October 2014
Written by Admin
banking
  • American Banker
  • Bank Technology News
  • American Banker Magazine
  • Credit Union Journal
MORTGAGES
  • National Mortgage News
PAYMENTS
  • PaymentsSource
  • Collections Credit Risk
  • ISO Agent