An industry veteran's take on the "chaotic" mortgage market

October 17, 2023 5:45 AM

Paul Hindman, industry veteran, has been in the mortgage space for close to three decades, and what is happening in the industry right now is nothing short of "chaotic," he said.

"The win [for many mortgage companies] right now might just be survival," he said. "When things happen to the level that they've happened, as quickly as they've happened and to go on as long as they've been allowed to go on, it really does impact the psyche of an industry."

Hindman "lives and breathes" everything related to the mortgage industry, which makes it appropriate that many top-ranked mortgage companies and banks rely on him for consulting services, particularly regarding mergers and acquisitions.

Additionally, top-performing loan officers will contact the industry veteran when they are on the hunt for a new job. Because of this, he has a unique view into the inner workings of some of the most notable companies in the industry.

The consultant has worked for a handful of companies throughout his career ranging from Wells Fargo, Citi, JP Morgan Chase to Aurora Loan Services. Most of his experience is in recruiting and finance.

Hindman also has a growing following on LinkedIn, with over 5,000 subscribers to his page, where he writes about trending topics in the housing industry. "I feel like I provoke a little bit of debate. I don't always do that intentionally," he said.

National Mortgage News caught up with Hindman to discuss whether IMBs are still actively hiring loan officers and branches, his predictions on M&A activity and what he thinks about a recent plea from two industry stakeholders asking the Federal Reserve to start buying long-term mortgages.

This interview has been edited and condensed.

Dave Stevens and Scott Olson have asked the Federal Reserve to start buying up long-term mortgages. What are your thoughts on this? If the Fed follows through, will it help the mortgage market?

Personally, I just wonder if the voice is loud enough? Is the influence large enough? Do all of these associations, industry experts, all of those folks that work in various housing industries, do they really carry the weight [to get the attention] of policymakers?

For now the Fed has taken a one trick pony approach – raising rates– and it hasn't yielded the kind of results that gives housing and anything related to housing any relief at all. I feel like policy could help us. But when is it enough and do we have enough of a voice?

If the Fed starts buying long-term mortgages it will help. Absolutely, it will. But again, if the Fed was to go back into a quantitative easing mode for a singular industry, is that demonstrating a bias? Is it saying that housing carries as much weight as a percentage of GDP that we need that kind of singular focus? In all fairness to the Fed, they focus on inflation and what they have in their toolbox to fix inflation. And that does not include a housing policy.

What are the main two issues facing the mortgage space?

The mortgage rates issue is front and center. When you have rates at the trajectory that they have risen in at the shortest amount of time in history…. did we not expect that that would decimate consumer confidence?

There are a lot of people that sort of do this reflection to the great recession and then there's a look back to what happened in the 80's, but in neither one of those times were rates ever cemented at 2% or 3%, so looking back and doing that kind of comparison that doesn't correlate because that dynamic just didn't exist. And for all those experts that say, rates were at a time 18%... that kind of market and those market circumstances that's not what we're living through. Today's market is broken because of abrupt increases in interest rates in a short amount of time, and a lot of destruction in that path.

Inventory is the second issue. So we always think that builders are going to build their way out of this problem. No, they're not. First and foremost during the Great Recession nobody came to the rescue of builders, so they have better discipline now. They're not going to over build. So we have to rely on resales, just like we have always relied on resales, but houses are locked in, they just are. So is the Fed actually going to have a policy to solve for those dynamics?

There has been a lot of talk about repurchases. From speaking with mortgage executives, how big of an issue is this? How is it impacting them?

The interesting thing about buybacks is that they've been around. It is not a new phenomenon.

When you have a strain on resources and when you are constantly in a state of flux, of changing, humans will make errors. And that's always going to be the case, but when it's elevated at certain times, the elevation of errors is a trend because where one mistake happens and it's not solved for in either a compliance or a QC it can go unnoticed until post close.

The industry has been stressed now for the longest period of time. If you talk to executives, they will flat out tell you 'I've been doing this for 30, 35 years, 40 years and I've not seen this dynamic be as bad as it is today.' Well, that level of stress takes its toll on resources. And when you go to work everyday thinking that your company is not going to make it because you're being told that the industry isn't making any money and you're being asked to report losses, your activity, your value…but there isn't enough volume to go around. That is stressful. Working in that level of stress, you're going to make mistakes.

When executives from mortgage shops come to you, what are they asking? What are they most worried about?

I was [recently] asked to join a call for a top 20 bank-owned mortgage company and there were 50 leaders and the focus was recruiting and navigating the challenge of recruiting in today's market. What I took away from that is we're just operating in a very unique time in the industry. and there are people out there that are fearful that we're not going to get relief.

And, and so on one hand, there's the job loss aspect of this. But right now, the win for most just may be survival because when things happen to the level that they've happened, as quick as they've happened and to go on as long as they've been allowed to go on, it really does impact the psyche of an industry. So our psyche, in this industry, is not as optimistic as maybe it should be.

But there's still business to be had. There's always going to be business out there.

Are companies still recruiting loan officers and branches? What is the benefit of doing so during this market?

Of course. No company is ever going to turn their back on a verified top-producer or top team. They're never going to do that. They're going to always recruit where they feel there's value. The issue is to recruit and grow and deploy capital, while at the same time you are contracting and turnover is happening and you are shrinking in certain markets or with certain people.

Those two dynamics can happen simultaneously and navigating that is extremely difficult. Chaos always creates opportunity if you have the capital to deploy, so servicing allows certain companies to pay for the growth that they deploy their capital toward in originations. Servicing has always been a hedge for origination and vice versa. I believe that companies that have a certain amount of servicing that a certain risk component is present. I don't want to get too technical, but the duration of all these higher rates is a risk.

Let's talk about layoffs. How are mortgage professionals and companies thinking about this?

For any level of management, if you don't know if you're paying for yourself, that's on you. You need to find out. If you're not paying for yourself, you need to be talking to anybody and everybody and figure out ways in which you can help create value, so that you can pay for yourself because if you pay for yourself, you're not at risk.

Companies have the habit of letting employees go without even asking them if they'd accept less. I don't want to pick on operations versus sales, but I'll just say that at the height of the market was also the height of the cost of resources, but we're not there anymore. I'm sure [most employees who love their company and want to work for that company] would take less if somebody would just have asked them.

When mortgage shops let people go, the main thing I would recommend is for them to be thoughtful. Don't do what Better did and just lay people off with a phone call.

There are companies struggling to make ends meet at this point in time, what advice would you give to management?

Be humble, quick and over communicate. Don't go into the shadows as a leader, don't hide behind the curtains. You're going to have to walk with the people that you walk with every day. If you don't share, they're going to look elsewhere. And they would much rather trust somebody they don't know versus somebody who's not talking to them.

Do you have any advice for an LO trying to find their footing in this market?

It starts with relationships and developing relationships outside of [your comfort zone]. You're going to have to go and walk the streets and meet with people and go to open houses, realtor events and builder events. Really just doing anything to be involved in the community where you live. If you take Shant Banosian of Guaranteed Rate, he gives back as much as he gets from the business that he does. He's always doing something to help the community in some charitable form. And there are plenty of others. I don't want to just point to him because he does get $2 billion in volume. This guy's a machine clearly, but he's a top performer for a reason.

Stratmor Group predicted that 2023 would see a surge of M&A activity, do you expect this trend to continue going into the next year?

[As a mortgage company] you're always talking [about M&A] but talking and actually pulling the trigger are two different things. We're talking about people that are considering selling their life's work and that's not an easy decision. Some mortgage companies actually sometimes just let the company fall apart rather than making the nimble and quick decision to sell. Companies can run out the clock on M&A because they just can't get their arms around the negotiation or see a benefit and value that somebody tries to take advantage of because the market is chaotic. Everybody's looking for a deal. So yes, lots of activity, lots of chatter, lots of talk, but pulling the trigger is an entirely different situation.