After a tumultuous few years for the mortgage industry, lenders find themselves in the midst of a still-challenging business landscape. Lower co-founder and CEO Dan Snyder joins National Mortgage News to discuss changes and consolidation occurring within home finance, sustaining a business in a notoriously cyclical industry, and planning ahead for peak season in our upcoming live Leaders Forum.
Transcription:
Transcripts are generated using a combination of speech recognition software and human transcribers, and may contain errors. Please check the corresponding audio for the authoritative record.
Spencer Lee (00:09):
And good afternoon. Welcome to the Horizon Leaders Forum. My name is Spencer Lee, a reporter at National Mortgage News. Very happy to have you all here with us today. Our topic of conversation over the next half hour or so is Navigating Change in the mortgage industry and with us I have Dan Snyder, CEO co-founder of Lower Homeland Lower, and he'll be talking a little bit about the state of the mortgage market today, also about what's going on at Lower. They've been busy, so we have a lot to get to over the next 30 minutes or so. But also I just wanted to invite the audience to ask a few questions. As you heard, we'll hopefully have time for some q and a toward the end, so if you have any questions, feel free to type them into that chat box you see on your screen.
(00:54):
Now. First, a little background about Dan and about Lower. He began his career over 20 years ago, so he's seen a lot over two decades, 20 plus years in mortgage, both good and bad. I'm unsure. He started early in his career at Wells Fargo. A few stops along the way before co-founding lower in 2014. So 2024 is a big milestone for the company, the 10 year anniversary, and after founding lower in 2014, he later sent its to CEO. Now, the company has been busy lately, it's been in the news a bit, mostly for m and a activity. They had a big merger at the end of last year, an acquisition of Thrive Mortgage, which more or less I think doubled its national footprint and added a big chunk of production volume to its portfolio and who knows what else might be on the radar. So we have a lot to get to. First of all, here's the man. Thank you, Dan for joining us.
Dan Snyder (01:48):
Hey, thank you very much for having me. It's good to be with you. Okay,
Spencer Lee (01:53):
Now the first thing I wanted to ask about was a little bit about the state of the current market, and I'll pull some numbers just to set this up. One is 4.4 trillion and that was total mortgage origination volume in 2021, a record year, and that's according to the Mortgage Bankers Association and 1.6 trillion. That was last year's number. I think maybe the audience is fully aware of some of these numbers, but just in that two to three year period, the industry lost more than half of its production volume, if I'm doing the math right, but so a big chunk lost just in that two to three year period. The Mortgage Makers Association does expect numbers to improve this year to about 2 trillion, but there's still a ways to go, still some pain to be felt. They've said now in some of our conversations in the past, we've compared this cycle to other down cycles. And one interesting thing you've said is that you think this is tougher than the great financial crisis and other events in the past, and Monash could explain why.
Dan Snyder (03:03):
Well, I think you just nailed it. I mean, the rapid, when the rates went down, the rapid increase in production and then the immediate stop, the red light stop back to higher rates. I mean that was difficult whether you're a loan officer or a branch, a division, a company, it affected everybody. So you had this rapid business uptick immediately filed by a downtick. We didn't see that in the GFC. You saw a lot of loan programs go away, but rates, the Fed lowered rates and rates dropped. So you had some refinance activity and if you're in this still today, we saw what 40% of all loan officers didn't renew their license heading into this year. So at least there's less competition, which I think is good for everybody. And if you're tuning in midday to this conversation, you're grinding through this market and I think that's with less competition, which is a good thing.
Spencer Lee (04:05):
So it just sounded like a big shock to the system. I guess once 2021 rolled around, I remember just how quickly race went up and Does that sound about right?
Dan Snyder (04:14):
Yeah, it's been stressful. I mean, right. We had the pandemic, I remember in 2020 people didn't know. I mean, warehouse banks are wondering how to handle things and then all of a sudden rates go down and everyone kind of booms up. Second homes become popular, moving becomes popular, everyone's busier than ever have been, and we're navigating a global pandemic. And then the Fed raises rates as fast as we've ever done in history, the United States. So it's been a lot to deal with. So I mean hopefully we don't ever see this again in our lifetime.
Spencer Lee (04:54):
It's challenging. I know we read about it every day.
Dan Snyder (04:56):
I say normal levels. Yeah, I mean it's been good reading material.
Spencer Lee (05:03):
Okay, well thank you. Thank you for reading. Now, market conditions like this though generally lead to elevated m and a activity, and I know Lower has no stranger to that. Aside from the Thrive acquisition, I know last year there was also the deal with I think Universal Lending in Colorado around the same time we've written over the past couple of years. I know there's been plenty more, I can't remember all of them. I know there's Hamilton, there were a few others that I'm not thinking of. What can you say about the merger opportunities? How have those mergers gone and what about the opportunities ahead?
Dan Snyder (05:41):
I mean, I think great businesses are built in these hard cycles and I mean I just mentioned mean if you're in this now you're grinding through it, more than likely you're, you're going to come out ahead. That's how we feel like it as a company. And just to level set the audience, you don't know us like Lower. We are a multi-channel. We believe meeting the customers where they want to transact. We have an online digital offering through lower.com offline through distributed retail. And then our power TPO is the third party offering from an m and a perspective, I mean you look at it, I know it's destabilizing if you're getting acquired or a merger happens, but at the same time there was with less production, the economies of scale have to happen and we're seeing a lot of coming together for a better total company culture.
(06:36):
We're pretty particular on who we're looking at and trying to align with. Thrive was a great example, great company, good leadership, universal Home Lending, longest standing Mortgage Bank in Colorado. I mean, so there's some real gems out there. NTFN we just brought in great leadership team, great squad, Hamilton, of course, we've been at this for 10 years. Myself, my co-founders, we started as originators and we have the background knowledge on how to integrate properly. And at the same time we have some institutional backing Excel, Silicon Valley representative of the future in tech. And then by way of this Thrive merger, we brought in Verex Bank, which is publicly traded on the nasdaq and they're kind of a mortgage banking specialty. So it really gives us a really good platform. But I mean you see it happening with other competitors of ours consolidating the market, and I think ultimately the customers win. I think the team wins. I know it's nerve wracking, but from my standpoint, just focus on the customer, focus on the business. It's a hard enough job as it is, just try to win your own market share.
Spencer Lee (08:02):
Now, when it comes to m and a, you talked about some of the companies you acquired. I know Thrive was a good match in part to do geography, but what makes a good, it's not just like those dating apps, swiping rights, swiping left, there's a lot more have to, you look at geography. I think sometimes the term I hear from other leaders is a creative, it adds to the company. Is that what your strategy is in m and a?
Dan Snyder (08:32):
Yeah, I mean I think we're a people business. It all comes down to people. So you get a good feeling if you meet some of the key counterparts, you talk to the branches, you get a feeling like is there solid tenure at the company? Are they in a good geographic region? For us, we've got a lot. We're not the biggest company in the country. I think we do a really good job. We've got a lot of territory to still go after, so it's a huge opportunity for those joining our platform to take advantage of that. I also think from a product perspective, product mix is important. You, it's like do we offer something complimentary? Do they bring something that's solid? And then we found a lot of economies of scale on the platform perspective. Can you plug into our technology? Can you plug into our products?
(09:30):
Can we help you win more business? That's really at the end of the day, what we're focused on. I know that. And can we have a good support system for the exiting founders? I mean, I can relate to that. My founders can relate to that. I mean, you've built a company and you don't want the legacy to die. You want to roll in and continue the journey, and we try to provide a really clear path to that to keep the legacy going in brand and in continuity and just try to do what's right for all the people involved.
Spencer Lee (10:08):
No, just mentioning branding. I know with some of the mergers, I believe the companies kept their own branding. I mean, they are under the lower umbrella and some are folded in under the lower name. And does that offer opportunity? Is there value in just these different brands?
Dan Snyder (10:32):
I think over time, I mean with social media and if you're a salesperson in your market, the home purchase market especially is so you are the face then your company. And we try to embrace that. I mean certainly powered by lower and we want to have some continuity to the customer and at the same time, thrive's a great brand. Universal is a great brand and all the others, in fact, we will create, if you're a sizable enough and you've got a desire, we have a whole private label sector where we'll create our brand team is phenomenal. They'll create an entire company for you within our platform because our teams know the markets locally much better than we do at corporate. And that's how we've been embracing it instead of, and it's been successful. I mean, our house brand, lower local has been really successful on the retail side and our private label, whether it's Thrive through acquisition or other groups joining us, we just want what's best for that local market to thrive, pun intended.
Spencer Lee (11:57):
Now given you mentioned product mix a minute ago, and I wanted to focus a little bit on that as a revenue driving opportunity. I mean, how important is not just having product mix? I know you have multiple channels, you mentioned all of them and you don't, I think you have different pipelines of business, some tech offerings and stuff. How important is that in a market like this to diversify?
Dan Snyder (12:24):
I think more important than it ever has been, I think during the pandemic boom, I think a lot of companies narrowed their product offering to try to streamline operations. I mean, we certainly did. And then now we're sitting with, it's a hard purchase market. It's a hard refi market. Customers are getting blocked out of homes and you have to have a wide portfolio in order to serve your customer. And so from an m and a perspective, thrive has a fantastic builder program, construction program. We have a solid one, but they have been doing a lot of it. So that was very complimentary to what Net. So now at Lower in our family of companies, we are working to, we're like two weeks from the actual closing of that deal, but it's like how do you integrate transition and then an offer, all of that to our total company. These are things that we're working hard on doing.
Spencer Lee (13:31):
What about partnerships? How do they play in your strategy? I think you have one with Opendoor, which sort of led to the development. I think, I don't know what came first, chicken Egg, but mortgage as a service. How do those figure out?
Dan Snyder (13:46):
Yeah, I mean, one of our long-term goals is to be able to offer a home loan As easy as it is for some of the other fintechs to offer a credit card. We feel like there's, Opendoor is a good example. They have, it's not their core business, but they want to be able to offer that home buying solution, a mortgage solution to their customers. We fulfill that through our APIs and our platform Home Lights. Another a good example of that, and we have a whole number of others and others in the pipeline. I think right now it's probably everyone's focused on their core business, not how to monetize ancillary business. But our mortgage service platform we're really bullish on over the next five to seven years. I mean, this is a long-term longterm view company. We're not going to conquer the world in the next six months, 12 months. We're just how ambitious do we really keep moving? Yeah, we're ambitious, and if you're a loan officer today or you're a realtor, anybody, if you're not ambitious and willing to grind in this market, then what are you doing? And so we just keep trying to push the status quo and keep modernizing.
Spencer Lee (15:14):
No, I wanted to pivot a little bit talking about ambition and pivot a little bit about the history of Lower. I did mention it is your 10 year anniversary this year. I think that makes you officially a tween, but you started the company 2014, the country was emerging from the great financial crisis. I think it might've been officially over, but it's not like everyone was sitting around drinking margaritas. I mean, it was still a tough time, especially in the mortgage industry all possible times. What made you think, okay, now I'm going to start a mortgage business? Now's the best time.
Dan Snyder (15:50):
Yeah, it's a good question. My partners and I wanted to fundamentally, we all worked, most of us worked at a bank and the bank, nothing against 'em, but they were not 100% focused on that mortgage customer. And that becomes a distraction. It becomes like you disband the team when times are bad and you barely celebrate the team when times are good. And so we looked at like, okay, can we build a company that we really wanted to work for? And that's what we did. I mean, it was less of a lifelong dream and more of just, let's see if we can't build a great company to work for that we'd enjoy working for. And that along with a really, really, really good team. We have had success over the last 10 years. Like anybody tuning in here today or working in this industry today, you're going to ultimately in the next this year, it's probably going to still be hard, but eventually things are going to ease up and you will be one of the few you'll have gained market share and opportunity.
Spencer Lee (17:14):
Yeah, I wanted to ask about that. I mean, just translating the 2014 experience into today's market. So I guess down markets represent opportunity. I mean, it might definitely a challenge, but it means they're brighter days ahead. Knock on wood.
Dan Snyder (17:33):
Yeah, look, I don't think the US housing market does not favor well in stable times. It likes stable markets. You're already starting to see a little bit of that. I mean, inventory is improved by 20%, but we have to have, it needs to be more even. We're not going to have rates down to threes, but we need to have rates in the mid fives, like high fives to create more consistency instead of this whipsaw. I mean, the whipsaw is not good for our business, and we're starting to get into the point where it's getting a little bit more even, but I think there's better days ahead for sure.
Spencer Lee (18:16):
Now just talking about that whipsaw effect, I mean, what is your take during a boom cycle? We had a few years ago, many companies ramped up. I mean there was tons of growth, but I think some companies just have the philosophy, we're going to build up to meet current demand and not think about that future. Is that a smart approach versus just maybe taking a more measured response knowing that what comes up will definitely have to come down, and we're seeing that now and then we see companies get into trouble. Do you have a particular view on that?
Dan Snyder (18:53):
I think that for most CEOs or team leads that have experienced what had to happen, I mean, there's a lot of folks that we were just too big. I mean, in terms of the industry, we were a 4 trillion market. We went down to a one point some trillion market. So that's painful. So what's my read on this? I think that at lower, at least we're building how can we asymmetrically scale without having to add thousands and thousands of team members? So how do we get our current team members to do more without having to work triple the hours? It's like how do you use tech? How do you use ai? How do you have your systems in a place that's easier to digest? How do you go back into your documentation, do zero based documentation in terms of what really is required to sell a loan to Fannie Mae, to service a loan, et cetera, instead of what's always been done? Because things have changed a lot. So how do you make it more efficient? We have this thing, this goal of one to a hundred.
(20:10):
How do we make our talented team a hundred times more effective and then we work backwards to try to solve it? Are we there? No, we're not, but we are making, and we've been making a ton of progress. We've got a fantastic engineering team, product team that's hard at work building these things so that when rates do fall, we can serve our customers without having to scale up. We had to do it in 2021. I think there's other companies doing that. I think it was, if you don't learn from what we just went through, then you don't have your pulse on the business. And that goes for every probably layer of whether you're a loan officer, branch or executive at a company.
Spencer Lee (21:04):
Yeah, it's tough to know what that secret sauce is. So I also wanted to ask a little bit about leadership as a CEO of any company. You're kind of a public figure, I think. I imagine you're kind of, well-known in the Columbus area where, or at least lower is definitely a very well known where you are. But during weak times, we've had the past two or three years. How do you get motivated? How do you deal with the hard situations and how do you keep your staff motivated? Maybe that's important. Yeah,
Dan Snyder (21:45):
Look, you have to love the grind. You got to love the journey, especially coming off a lot of the highs and then getting into the lows and then building back. You have to love being a builder. You have to love that. I personally do. I like trying to sort out and change new strategies, and you have to be willing to be criticized. I think a lot. I mean, it's not all the industry or my fault or anyone's fault, it's just that we went through some challenging times and your word bleak. I mean, one of our core values is optimism. It doesn't mean that every day is going to be a 3% rate day, but at the same time, you have to have a good forward looking viewpoint on, okay, how is this going to all end and land with a glass full, not half empty? If you're already coming in today half empty. I mean, you're going to have a really hard time getting through that day. So it is about optimism. It's about just loving the journey. How can you take advantage of a current down market? Those are the things that I'm focused on relentlessly every day and our team.
Spencer Lee (23:11):
Very nice. Yeah, just have a few more questions. I only have a few more minutes. This come by really quickly, but I want to invite the audience. If you do have any questions, feel free to pop 'em in the q and a box. We have a few more minutes left. I have a few more questions if you don't. So I do want to talk a little bit about the next few months. You mentioned it still might be a challenging period, but there is optimism in the air. Just looking at consumer sentiment, the Fannie Mae home, HPS, I can't remember, the home purchase sentiment index I believe is looking upward. But are there any new strategies for spring home buying season that you think are worthwhile to pursue this year at lower?
Dan Snyder (23:57):
I think that the one thing that is in all of our favors is the fact that when rates or any sort of price accelerates like it did from 3% to 7%, it's going to take a little bit of time for the customer mentality to align with that new price. So now that we have rates that have been in that six to seven and a half percent range, people are going to move, they're going to move for family, they're going to move for work, they're going to move. And I think that that coupled with less competition, coupled with 20% more inventory, it does sit well for those that have been working hard, building relationships with their realtors, keeping their data tight, keeping their customer book tight. So for us, it's just a matter of making sure our teams were integrated. Easier said than done, keeping an eye out for other potential acquisition opportunities, making sure that our team has the right products to succeed in their local markets, and then making sure that we're really good to the customer. We're closing loans on time quickly and taking advantage of finally and more normalized home purchase market this spring.
Spencer Lee (25:19):
Now, one thing I wanted to touch on briefly, because it has been in the news lately, but Biden's State of Union focused a lot on housing more than we're used to hearing from a state of the Union address. Do you have any thoughts about the mortgage proposals, the 10,000? I mean, there is a proposal both for buyers and sellers just to generate activity in the market. I think $10,000, not for everybody, but for first time buyers, I think some sellers,
Dan Snyder (25:45):
I mean, look, I think that anytime that we're mentioned in the State of the Union or I mean it's a good thing for our industry. At the same time, I'm not going to pretend to know all of the details of it, but from what I've read, it doesn't look like these initiatives are going to make their way through Congress. And so only time will tell, is it just buzzworthy? Is that why it was mentioned? But at least it's sparking conversation, which is what I think all of us really want. It's like, how can we help more home buyers buy? How can we get more sellers to sell so that they're future buyers? And then as an industry, we all have to lean in and try to help change happen. We're an important industry
Spencer Lee (26:42):
And we're seeing its effect on the economy right now. The housing industry, mortgage industry is very important. We do have one question in the q and a, kind of addressed this earlier, but if you have any additional thoughts, are you still looking for new acquisitions? And if so, what is your ideal acquisition target? They're not going easy on you.
Dan Snyder (27:07):
I mean, we are from the standpoint, but I caution that just with the fact that where's it located? What's the team dynamic? I mean, we're seeing right now the companies that are around between that 500 million to one and a half billion are looking to, they're operating well, they're efficient, and yet though they need more economies of scale to navigate these times, and those are typically the most popular. I think those are the most perfect for us. Those companies can come and have a seat at the table. They can come in, they can enjoy what we have in terms of our platform. They're not getting swallowed up by some behemoth, and so we are still looking for one.
Spencer Lee (28:04):
In a way, it's like a marriage almost. Is that a good comparison? Maybe that's not a good comparison, but it has to be a good match.
Dan Snyder (28:14):
Yeah, it does. I mean, here's a question and Thomas Murphy says rhetorical question, but what's the definition of a So-called normal market today? That's a great question. Maybe we're seeing what the new normal is, which is just buckle up and do your best. But I look back at 2019 as a pretty, as a comp for a normal market where we had, we didn't have super low rates, we didn't have high rates. Rates were steady, and you could count on what you projected was what was going to win. But look, I mean the MBAs come for 20% increase. So we look at that as we better beat that prediction as a company. If you're a salesperson, you should be doing the same thing and there's not much else you can control.
Spencer Lee (29:17):
Well, that about does it for us on time. Funnel it all over, but this is a rich topic and it's still gone for another half hour. So I really enjoyed this. Enjoyed speaking to you, Dan. I hope the audience enjoyed this. Appreciate your time. Thank you very much. Dan Schneider, our CEO and co-founder of Lower. Also. Thank you to the audience and have a very good afternoon.
Dan Snyder (29:38):
Thanks, Spencer.
