Episode Transcript
[00:00:00] Speaker A: Hello and welcome to the Mic'd up show where we say here in season four, every mortgage has a story. We are the ultimate hub where the hidden stories behind the mortgage industry come to life. My name is Michael Kelleher. We have just one Michael here and want to remind you that in every episode we dive deep into the entrepreneurial spirit, the strategic insights and breakthrough innovations that build the world's greatest mortgage companies.
So whether you're advancing your career, scouting for industry leaders or exploring opportunities in fintech or proptech, you're in the right place. So get ready to unlock the story behind every mortgage. This one puts it all together. You have a great industry leader in Paul diamond, who has been working in this industry since 1982.
And he has really helped us understand why it's important to understand everything that goes into a mortgage, especially risk. And by doing that, he's able to have longevity that not many seen. I've been waiting a while for this interview. Paul's been very good to me all the way back to when I first started on the national career. We do this conference so that loan officers, processors or even your fellow leaders who don't always make it to a conference get access to the type of people that are out there and you'll realize they're easy to approach and always willing to help. So thank you Paul, and if you want to give an intro on your company and just what Diamond Residential Mortgage Company is and where are you located?
[00:01:38] Speaker B: Well, thanks for having me here today, Mike, and very honored to be on the, on the podcast on the show and as Mike said, we've known each other for, for quite a while and great to be here. You know drmc, we're located in the Chicago metro area. We're domiciled in a town called Lake Forest, Illinois which is north of the city of Chicago. But we extend out to multiple states. We're licensed in 30 states across the US and we're just a small to mid size independent mortgage banking company.
I've been in the business for a long time. I sometimes feel goofy saying that because I like to think of myself as a young guy. But when I sit and I get to see my picture on the screen, I see this gray hair and it tells me how long I've been in the mortgage business. I've been in the industry since 1982, day one, after I graduated college.
DRMC is a strong mortgage company with a strong balance sheet. I like to think we have state of the art platform. We've been around since 1989.
And we're Fannie, Freddie, Jenny approved.
We do a mix of govy agency lending as well as non prime, we do construction lending and a host of other products like Fannie Renault, Freddie Renault 203K and we're also a servicer. So that's probably enough introduction about the company. I'm very proud of the culture and the people that we have in the company. I'm a very people centric individual.
I certainly believe in technology, embrace technology.
But I also embrace the philosophy that the people that run the technology are more important than the technology.
So we're a people centric culture. So I guess that's good introduction Mike.
[00:03:48] Speaker A: Yeah, that's great. And I think the industry has moved really fast lately with social media and like you said, technology becomes the cool word. But I want to dive into the foundation and say one thing.
DRMC is a company that you're very humble, small to mid size. But you know, you being on the Illinois Mortgage Bankers association meeting you as part of the lenders one co op which at the time it was less access into those pieces. So when you were part of your peers and you were growing your company, you were among people smaller than you, your size and much bigger than you. And I think you are a great indicator of where the puck's going. You're able to benchmark quite a while and at least if whether it's you or somebody else, you're always in the room of somebody going faster than you.
[00:04:37] Speaker B: Or in life that word, humble. One of the things that I've learned after so many years in the mortgage business is the mortgage business is a very humbling business.
You know, when it's good, it's good. When the up times are there, it's great. When it's tough, it's a tough business. So you know, never move away from.
[00:04:56] Speaker A: Being and I think some of that might come from sometimes you have to coach people to be a little humble. If you're going to go shop for your home, you don't want to go up to the top of the DTI. So can you take us just back to 1980-83, 84, 85. What the great lending look like there at that desk level? What were the credit conversations and the documentation and what was the promise about homeownership then?
[00:05:19] Speaker B: You know that's a, that's a great, absolutely great question because you know, I think back to those early years. 82, 83, 84, 85, 86. And you know, what was important then in a lot of respects is the Same things that are important now. You know, it's a different industry. But how you take care of the consumer, what you do to build relationships in the market, to build a following, to make sure that loans get done error free, close on time, that was important then, that's important now. Things are way different, right? A file then maybe was an inch thick, right? It was paper.
A file today where it might have been 100 pages of paper then, okay, you still had to source the business, you still had to take care of the consumer. A loan today, if it was in paper, could be 500 pages. You need a banker box. You know, the industry's changed and you know, I would say it was easier to facilitate a mortgage in the early 80s, the mid-80s and the late 80s than it is today. The complexity of today's world is far more robust, the regulatory environment far more challenging, more detailed. The state licensing, the requirements of 50 regulators. If you're in multiple states, it's a different world. But the principles, the basics, the consumer, the referral partner, what happens, it hasn't changed. You know, marketing's changed, right? We're, we're utilizing more digital marketing, digital means. And in a digital space, in a digital world, consumer democracy has changed, right? In 1982, 83, 84, 85, 86, 87, all the way up into the 90s, you know, a consumer couldn't just click and go to the Internet and learn all about you.
They couldn't, you know, didn't have the democracy they have today.
Consumer democracy is a big deal. We get regulated in the industry, lots of regulation, but one of the bigger regulators is the Internet. If you don't do things right and you don't take care of things in a good way, it can be out there. So consumer is free to choose. Lots of democracy today, bottom line, it's still about properly taking care of the customer and the referral partner. And one other thing I would add, and I really believe in this being authentic in what you do. You know, we all operate in what's a beautiful business because we help people.
We help people. That's what I always loved about the mortgage business is I felt good and I started on the street.
I started originating when I got into it. I was a young guy, I was on the street originating loans. And I always enjoyed that feeling of taking care of people and helping people.
Sometimes it's easy to lose sight of that, that what is done is really important. It impacts so many people, whether it's the buyers of the home, the borrowers, to the sellers of the homes to all the ancillary people around it. We affect people's lives and we help them. There's good money in the mortgage business, but the money fouls taking care of the consumer, doing right.
[00:08:55] Speaker A: Yeah, the, the one piece that stands out among people that have been in as, as long as you have been on the streets. We had Steve, Stephen A. Milner as well on this show. Kind of reminds me, I think you have a ability because back then you were in more kitchens actually writing down the 1003 understanding maybe the people aspect of it. Today recruiters, they look at units and they go and try and recruit somebody on units. I think you have a faster ability to see the human motive behind the metrics. When you sit down with a loan officer and understand they're bringing their zip code with them. Can you talk about maybe it's your Lake county roots, but the diamond approach, the philanthropy, the commitment to that person's book of business as a person, more than a metric that you try to approach during that lunch with them or dinner.
[00:09:43] Speaker B: Well, look, I think that, you know, everybody that I brought into the company that we have here is big on building community.
They're big on local relationships and the markets they service.
They're big on engagement.
Okay. And I believe that's important. And you know, the industry has changed. I mean, when I was originating loans many years ago, I, I met with every customer I worked with. I sat down with them, I physically took the application.
There was a period of time where we were able to build a good solid framework of a relationship with each other.
It's different today. A lot of it's done online, it's done over the phone, it's done through digital metrics.
I think what's important though, even though it's changed that each originator, if you're in distributive retail, is still constructing and maintaining permanent relationships in the markets they service and that they're involved in the community.
They need to be part of the community. Now that can be hard because there's multi state origination and you know, things happen differently today. Things that didn't happen then that we do today. You could be sitting here in the Chicago area and doing loans in Florida or Texas or any, any, any many states, you know, and, and even though that happens, you still need to. And I mean, we're doing it right now. We can see each other. We're on, you know, a virtual call. There's still ways to build those relationships and build communities and build a following and if you're authentic in what you do and you care about what you do, the consumer, the referral partners, feel that they know it, that you genuinely care. And as you know, and I'm sure there's many loan officers and production folks that watch your podcast as you build a following, you know, you build a following of people over time that you've done a lot of loans with. There's going to be ambassadors in that following. And those ambassadors are the best marketing you can have to build your business. But you got to be authentic in what you do.
[00:11:53] Speaker A: Do you have any tricks to have a gut instinct on who those ambassadors are going to be?
[00:11:59] Speaker B: I mean, that's tough to identify. You never necessarily in my history, you never necessarily know who's the big advocate for you as a production loan officer, production branch manager, they just kind of rise up. But nonetheless, it doesn't matter if you're doing your job and you're staying connected to your following that you build.
And the following is more than just your borrowers. It's realtors, it's builders, it's people in the community that are involved in the real estate industry or housing finance. It can be your competitors.
They pop up. You eventually know who they are.
You eventually learn who they are over time.
And the more you do, I mean, we've got some folks that have gigantic databases. They've done so many loans over the years, they never hurt for business because they built community within those, those large contingent groups of folks they've done business with. So even in markets, it works for them.
[00:13:08] Speaker A: It's interesting, you say that.
You really have to treat every loan like it's going to be that ambassador. You really don't know.
[00:13:15] Speaker B: It's no. And you know what? It doesn't matter where you get it. You can get it through digital marketing. You get a digital generated lead that turns into a loan. You gotta build the relationship.
[00:13:25] Speaker A: So talking on that relationship from how you opened with consumer democracy. Love that.
I'm gonna take that. Your site on research is very you focused culture. So you care about the consumer, you care about showing up for that consumer. What are some internal SLAs or requirements of whatever bringing it is certain escalation path examples or post close touch points? Is there one or two that you can say really came from the you focused culture?
[00:14:00] Speaker B: Well, I think the you focused culture starts with the leadership of the company, really caring about and being focused on the team.
Okay. A servant leadership model where everybody in the group or in the company serves each other.
And if we all serve each other. We don't set a hierarchy mentality.
Then we provide exceptional service for the marketplace.
And I mean, it starts there. And I think it starts with a couple pillars.
You have to be very, very customer service focused.
You can't survive if you're not. So you better be profitability focused, you better be quality focused in what you do in your organization.
And you really need to have happy employees. So you have to be happy employee focused in your culture. And I think if you hit on those four legs to the stool, you're going to weather good markets and you're going to weather the bad markets. Good markets are easy. Bad ad market's not so easy. But those, you know, pillars to the, to the stool are critically important, you know, because, you know, the one thing I've learned about the mortgage business, it can be a very hard business. I mean, it can be in a good market. Doing loans is not easy. I mean, people's lives can be very complex.
They don't always tell the whole story. You know, you've got to be able to work the loans through and people need to come out of that feeling that it was a good experience for them. So it's even harder in the tough markets. Right?
And then it becomes more psychological, particularly if you're on the sales side, because you start, you might start questioning yourself, saying, golly, I did so much business before, what's going on now? Am I doing something wrong? But the markets, you know, it's a super cyclical business with incredible ups and, you know, incredible downs too. And I've seen those cycles over all the years. I can go through every down cycle I've been through and every upcycle. So I remember them well. I remember 1986, which was a refi blizzard. You know, you sat there with a notepad, you could, you couldn't, you couldn't handle what was coming in because the market was coming off, you know, 15%, 16%, 17%, race fund 80, 81, 82 during the Volcker period. And it dropped, believe it or not, eight and a half.
Eight and a half. We think rates are high today.
[00:16:39] Speaker A: Right?
[00:16:39] Speaker B: That was what it dropped to.
So obviously loan amounts were smaller, but, you know, the cycles are wild.
[00:16:49] Speaker A: How does a loan officer that you've seen over the years, whether it's now or back in, I guess, 87, the year after the Blizzard of 86. So after good, bad, what, what do you think the hardest mind shift reset is for a loan officer? Is it having to cut back the branding lifestyle they created or Is it more like you said, the self doubt that their sales ideas were more the abundance model than actual.
[00:17:15] Speaker B: I'm in a unique position because I have two sons that are in the mortgage business and you know, and I have a lot of other folks that are here that I kind of look at them as though they're my children as well. And you know, I try to make sure that folks understand, look, when it's good, don't, you know, don't read your press clippings too much, stay humble, you know, don't, don't overspend, put your earnings away, put it in the bank. Because the business isn't always good and you need to be prepared for that. And I try to help our folks to psychologically understand that when the market's difficult, you have to work harder. There is business, but don't take it so personally. It is harder.
There is less business, it is harder.
So you know, you got to keep moving forward, don't look backwards, move forward, don't, don't, you know, give up, work harder, keep doing what you know you should do. And by the way, you're not going to find loans in the desk drawer and you got to get out. You gotta, you gotta, you know, you gotta network. You've got to continue to work and you know, you're planting seeds and those seeds were blossom when the market improves. So I mean, obviously the last three years in the mortgage business hasn't been the easiest years. And I will tell you know, everybody on your podcast, I've been through a lot of these cycles. This was a long cycle.
This was not a Chandler coming out of the COVID cycle which was very low interest rates. This one elongated itself and I think psychologically, I think it's been very hard on, on production and you know, production loan officers, they, they feel it, they start questioning themselves, you know, but we will come out of it. We are coming out of it. And you know there's, there's great opportunity on the other side of this cycle. Just like there's been on every other.
[00:19:14] Speaker A: Down cycle historically there are great leaders that run top 200, 100 lending companies today that came, that actually started during the toughest times, say post financial crisis. So there's no reason not to think 10, 15 years, the same people, we do try to have this show a little bit to help people on their long journey of being the next leader that starts maybe as a, a branch manager today.
And I'll leave this open area because it is a sensitive subject so you can take it wherever you'd like, but it seems this industry is very cyclical, but it seems the regulation is not cyclical. It's always tough and a lot and eight different, you know, advocacy, I should say regulators and then different states.
What would you recommend to somebody that is trying to transition to own their own company someday learns from the four pillars you described before and now maybe just give them the two level class of. There's a little bit more to this than just originating at that point.
[00:20:19] Speaker B: You know, it's, it's an interesting question because I did a presentation to the Illinois, to the, at the Illinois Mortgage Bankers Business Summit some years ago and you know, one of the topics was, you know, should you open your own company? And at the time I said don't do it because it was coming right after Trid, you know, right after the implementation of Trid. And I was like, so shell shopped. Opening a company and having to deal with first lo Comp, the lo comp rule and then Trid and of course the hud. One change into a new HUD and all the technology challenges and all the regulatory challenges. I feel a little bit different today.
You know, I, I feel like the market is open for new entrants and for new companies to come in.
And I think it would be good. I think competition is good. And we've had so much consolidation over the last three years. I mean, you know, the independent mortgage bankers that existed prior to 2022 into 23 and that exists now is far smaller.
So you know, folks, if, you know, if they want to go in and open a company, you know, first you gotta start generally small.
You know, you gotta plant your, your incorporation, your, Your seed.
And then you've got to work on, you know, gradually working into bank, the banking side warehousing the ability to fund, moving through that you, you need good partners to sell loans to.
We went down that whole path. I mean, we started out with scratch zero. You know, we had to go out, we had to get all the licensing. We did a private placement offering, structured the company and really we were a captive lender. We had one line. We think we sold our loans to one place. We've worked it through over time to get them through the Fannie approval, the Freddie approval, the Jenny approval, setting up, servicing, hedging.
But it's a progression.
You learn what you don't know and you learn as, unfortunately you learn as you go along. And there's an old saying, the little boy walks into the bank president and says, who are you? And he says, I'm the bank president, he says, well, how do you become the bank president?
Right decisions? And says, well, how do you learn to make right decisions, wrong decisions? You know, and that's, you know, so there is challenges and you make a lot of mistakes and you work them through. But I encourage entrepreneurship.
We need young people in our industry. We need, we need a robust industry. We need competition.
So I mean, and I always tell people, anybody that wants to talk to me about what we did, how we did it, the challenges, I'm open, you know, I'm here, you know, I mean, we've gone through all of it, you know, even, even, you know, hedging and figuring that out. And we've had good people around us to help.
You know, I'd like to say we got it all now, but we're still learning.
[00:23:44] Speaker A: Yeah, I think there's going to be a resurgence of people hopefully taking up on that offer. Understand, but with, it's gotten to the point now where the consolidation is unhealthy. You know, it's, it's not mid sized teaming up. It's just the big one getting another small, another medium sized one.
[00:24:05] Speaker B: Mike, maybe, maybe it's creating an opportunity because a good solid independent mortgage banker can be quick and flexible, a big giant lender. And look, I love the big companies, they're so big with so many employees.
To move quick and be flexible is much more difficult. There's a niche underneath them. And then of course we have this upsurgence of the brokerage industry. Right. I mean there's a tremendous growth on the broker side. And brokering works, it works, you know, and we do a little bit of brokering.
But there is a caveat to brokering.
It's called you don't really have complete control of the transaction.
So there's a niche between the very large and the brokers that an independent mortgage banker can fill. As long as you maintain a very flexible environment that can move quickly, that can seize on opportunities, that can have diversified products that is focused on constructing, maintaining, building, fostering a customer, intimate relationships with the folks you do business with. I think there's a great niche and I think there's opportunity.
[00:25:32] Speaker A: Yeah, I think people want authenticity, they want to be heard. It's hard to really say you're authentic in your own brand if you only see your boss three times a year. Right. And maybe once ever in, in, in person, like at the very, very top. And there's a lot of maybe never, maybe, maybe never. Right. Yet.
So.
And then on the other side you have the brokers, which I think is seeing a resurgence one because technology allows them to do a little bit more. Who doesn't want their own logo? It's fun to have in your, in your town, but I think that middle David Goladic, let's start winning again. I think you're going to see a lot of that with IMBs and a younger, more, younger youth.
When the branding's right, we'll actually want to join those companies versus the big and small right in the middle. Like you said, thread the needle.
[00:26:24] Speaker B: I agree. I mean I think we're, we're in a kind of an odd position right now in the market because, excuse me, the market, you know, I mean it's not a really strong market, let's face it, it's a, it's a difficult market.
But that changes can change very quickly and I believe it will.
And we've kind of wound out a lot of infrastructure and as the volume begins to pick up, there's less players in the market and opportunities come. And with those opportunities, more revenue comes which allows companies that are small to mid size independent mortgage bankers the ability to kind of spread their wings and dig deeper.
And I think there's good opportunities for companies that have built good platforms, that have experienced good technical staffs.
There is a challenge though in our industry and that's finding talent and it's a complex business and it's not always easy to find the necessary staff.
[00:27:40] Speaker A: No, especially on the sales side, especially on the relationship side because you can't, you can't just turn on relationships like you, like we talked about on the, on the show, you have to build them. If you are going to start though, you're going to need some good vendor partners. So we'll take this quick break right here to hear four of our sponsors that allow us to keep going and have the quality show we do. Then on the other side, just really want to jump into some of the programs that Paul's been able to put out in his area to build the access, trust and growth and then ask him, you know, where we're going next down the line.
[00:28:15] Speaker B: Verifying income for all your applicants means.
[00:28:18] Speaker A: You need roughly 23 different vendors and.
[00:28:21] Speaker B: Waste hours and hours of your team's time.
[00:28:25] Speaker A: But with true work, it's just a.
[00:28:27] Speaker B: Single place for all your income verification needs. So you get the most advanced voie solution. Truark combines all major verification methods into a single easy to use platform to give you a completion rate of 75% cutting your cost by up to 50%. And getting real results for your team. TrueWerk your one stop shop for income verification click Verify Repeat where the company can do the configurability so we have no code on this so they can go in their settings. They can set it up all the way down to loan officer if they want to. We also have a customer support team that's assigned to each account if they want. They can overhaul everything if they wanted to. They have a new product especially dynamic apps. With dynamic apps we can fit multiple we can fix the Fannie Freddie loans, we can new construction one time clothes HELOCs, you know whatever those workflows are they can design that workflow for each individual app. Now what's going to take it to the next level is the AI and the OCR piece.
[00:29:32] Speaker A: Cyber and Wire fraud Can you afford the risk? Today's automation and technology based trends demand solutions to fraud threats. Funding shield provides lenders and investors real time transaction level verification. Certified wire fraud protection to protect loss of funds at closing due to cyber based and other threats. We help improve your bottom line through fraud prevention, risk management and validating the the parties and documents involved in mortgage closings prevent fraud and theft on your closings.
And we do want to thank Paulie big sponsor, new sponsor of ours. PPEs are in the news so might be a good time to reach out to them.
So Paul, I think as we were talking about the benefits of a lender, let's say an imb. It is the ability to over time understand how you can modify or create specific programs for an area or a demographic to give more access to housing and have the underwriting and the dependency that somebody believes in it enough to give you more access as an investor to it so that you can give it to your customers and people. Can you Talk about since 1982 obviously the message in our industry if we go to the conferences is constantly homeownership is how you build generational wealth. The amount of people that you've actually probably seen now to prove it, where you're giving the mortgage to their kids and you know that they can afford a home because that you got their parents. It must be very warm and rewarding.
I saw on your site and sometimes these things are a little bit above my head, so correct me if I'm wrong, but you have these programs that either target tracks or structure different underwriting overlays. Maybe your competitors don't have.
You obviously don't want to compromise credit quality, but it seems like you are going out there and saying let us be a vehicle to help more people into more homes. Is that true?
[00:31:23] Speaker B: Absolutely. And I've always believed as an independent mortgage banker, one of the niches is the underserved markets, the low to moderate income markets that classically we have skill sets that can service those markets, whether that's through FHA financing or in the rural areas, USDA financing.
So we're there heavily, we were aggressively in those markets.
We're in multiple mortgage revenue bond programs and participate in many, many down payment assistance programs.
We've even put together special purpose lending programs in certain markets that are underserved markets that we feel that we need to service more effectively.
So you know, I think that when I talk about flexibility and what an IMB can do to, so to speak out, flex some of the other folks out there, you know, that's one area, that's one niche. There are many niches and we become very diverse in our product set and even that rolls into things like renovation lending. Whether it's 203k, whether it's direct delivery to Fannie on Renault or Freddie Mac Renault and maintaining the msr.
We're into that market as well. I'd like to penetrate that market more.
It's a difficult, difficult market technically, but we're working just about every way we possibly can, including in the, in the non prime space with you know, debt service coverage ratio lending, bank statement lending. We've been in that for a long time and now every, everybody wants to jump into it but, but we've been there for, since the, like the doors open years ago. I remember sitting in New York with one of the larger current investors on Beanbag shares when they were just opening the doors and where they were talking about well we're going to do this thing. I said oh, will that work?
And so we try to be very diverse in our product set so that we can meet the needs of many, many markets. You know, whether, whether it's underserved census tracts, whether it's even the higher end market, you know. And so we're, we're approaching it in every way we possibly can and we're going to continue to do that.
[00:34:02] Speaker A: Can you educate us a little bit on that? So consumer neighbor says I got an FHA loan and then I call a place and they have FHA loans too. Can you talk about like what overlays are and how there's different types like a Renault and how over time it's, they become different or where longevity allows you to have more options?
[00:34:24] Speaker B: I think optionality is key for a company and the way we operate, and I don't think it's unique, we have multiple aggregators that we can sell many products to, but specifically we're talking about government loans or FHA that we can sell FHA loans to.
They've got a myriad of overlays, right? Everybody's got a little bit different temperature that they buy.
And we've got our system set up where underwriters can go through a loan and they can say, well, eligibility is X, Y and Z. We're going to put it into our hedge. We can sell it multiple places so we can find a way that a loan will fit. But short of that, because we're Jennie Mae approved, let's say, you know, it's a good loan, but it isn't going to necessarily fit the overlays that exist out there or execution gets hit really, really hard, we can put it into a Jennie Mae pool and we can securitize it and we can retain the msr. So we really try not to use a lot of overlays within our company.
We try to leverage off of existing overlays and also have optionality to figure out how to make a loan work, how do we make it work for the consumer.
So we try to keep a very flexible system. Now we do have one area that we do overlay and that's fico.
We do take a look at FICO and you know, if it's A below, you know, 600 or below, you know, you've got to be respectful of your, your neighborhood watch number with hud. You know, you don't want to do dumb things. And you know, there are loans that, you know, are going to be potentially performance challenges.
And our role in mortgage banking isn't to set people up to fail to make a loan. So we set people up to fail. We make a loan that's going to fail. We're just hurting the consumer. So when we get into areas where the FICO score drops below 600, we don't just say, well, that is a loan we're not going to do. We're going to look at it very closely. We're going to look at why. Why is there credit impairment and is that credit impairment solved?
Obviously it's a referral file requiring manual underwriting. Generally these are not going to be a US Approved.
Does the borrower have reserves?
How's the employment? Is this a loan that's going to perform? And we're going to try to make, you know, somewhat a rational decision on that loan. We do have places to sell Those obviously, or we can, we can put them in one of our Jennie Mae pools.
So we do keep that overlay because we really believe that it's important as you get into, you know, anything sub 600 or even if it's in that border area 600 to 620 that you give a good thorough review of the file, where's the down payment money coming from?
And then we have a, we don't summarily, we don't allow summarily declined loans in the company in order, we allow suspensions. We have a layered approach. If somebody, before anybody's going to ever decline a loan or suspend a loan, it automatically goes upstream and there's multiple layers. We're going to look at a loan hard. We want to make good, fair decisions for the consumer and we want to give them every opportunity to succeed. So, so, you know, you know, overlays, obviously there's, there's a time and a place for those, but we try to be a very flexible and open, open minded in how we review loan files.
[00:38:15] Speaker A: It's like you say on your site, every file is a person, not a pipeline stage. And your first promise is responsiveness. Do you have an example of that in the scenario you said where you were able to escalate and maybe help somebody get a loan or you were able to talk about it as a new loan program and why, why you're doing it the way you are?
[00:38:39] Speaker B: You know, I, I, I, I would be able to just give you specific examples, but I can tell you that we deal with it every day. I mean, I have loans that get pushed upstream all the way to maintenance.
You know, I mean, I'm an old timer in the bill, right? I've seen everything, you name it, I've seen it through the years.
Sometimes they end up on my desk. And I'll look at it, I'll look at what, you know, what's the issue here?
Is this a good loan?
You know, and you know, I want to be fair to the consumer.
People's lives aren't always perfect. They have things that happen, you know, and you want to be fair, give it a fair look, you know, and we all have biases too, whether we want to admit it or not. And sometimes there's an underwriter that, you know, maybe something that affected them in their life, they don't even know it. When they look at a loan, they see something different. So we push a lot of loans into secondary review or third layer review to find a way. These, you know, these aren't always Cookie, cookie. Definitely not cookie cutter lawns. I mean, we want to, you know, make sure that we respect the fact that there's a human being involved, there's a family involved.
Sometimes these families have children, they've got plans. It's their dream. You know, they want to move into this, this house. Maybe they're coming out of an apartment. And, and you know, I can, I can give you a quick story. You know, we've got one gal that worked for us. She worked with a borrower probably for, for six, eight months some years ago.
And you know, this individual was in a, was a single mother and she was in a special program to get back into the workforce and she went through a training program and so worked with her through it might have been even a year. She worked with her, she worked with this individual, got her all the way through, through.
Eventually it got to the point where she could get a mortgage, get a home, which she did.
And the originator furnished the home for her. Okay. She went out and bought the furniture because she got the loan. She really had money. She had three kids. She didn't have the money to really furnish it properly.
So I mean, I think you got to get down in the weeds and realize, you know, it's about people.
Dollars foul. You do very well in this mortgage business. Don't get too hung up on the dollars. They foul. Doing the right thing.
[00:41:18] Speaker A: And so you've done the right thing for over 30,000 people, over 6 billion funded. Is there a. When we talked again and again here about the consumer, at the end of the day, do you have a daily ritual that keeps you closest to these borrower outcomes or has been able to keep your brand consistent since I met you?
[00:41:40] Speaker B: You know, we, you know, and I can say as the, the president of the company, something that I wouldn't say it's a daily ritual, but it's a ritual whenever I, you know, and you probably hear it on this call, whenever I speak to folks or whenever we have like we do a Monday morning meeting at 10 o' clock every Monday. It's 30 minute meeting with all of our salespeople.
Okay. We invite ops people. 30 minutes, no longer than 30 minutes. We call it a kickstart call. It's a call we do to kickstart a week. Monday morning, 10 o'. Clock. Okay.
I will always emphasize the importance of the customer.
I will always emphasize the importance of our referral partners.
And I will always emphasize that what we do as a service is a big deal and we need to do it well, we need to be respectful, we need to be honest, we need to be forthright, and we need to be humble in what we do. We need to care.
Got to care.
And you know what? If, if, if I think it starts with leadership because not everybody thinks like that. You know, maybe I didn't think exactly like that when I was 24 years old, 25 years old.
Okay. I mean, back then I thought like when I was going to go skiing next, you know, when's the next time I'm heading out to Colorado or, you know, I thought about different things. But right now, in my elderly age, I can phrase it that way, I hate to think that way. But, you know, I, I understand it a little bit more about the real importance of what we do. You know, it's authentic. And if you care, you're going to have a great life.
You're going to have a great life. If you don't care and it's just a transaction to you and, you know, it's just money, you know, I don't know how good your life's going to be.
Maybe it's fine, I don't know. But I like to think about, you know, what I do, and I like our people to think about what they do is authentic. Do a good job, care, and things are better.
I think it starts with leadership.
I mean, I really do, I really believe it has to start with, you know, if, if, if I lead that way, then, you know, our supervisors lead that way. And it permeates through the organization.
[00:44:07] Speaker A: Knowing that and knowing the, the way the industry's changing and they call them the backpack boys, but somebody that has no mortgage experience out of Stanford creates a mortgage vendor product, right, that, that you get pitched for.
Is there one that you're, that frustrates you every time you hear it, or is there just one that's really small that you feel software can't replace the person in the transaction and that's why you kind of refuse to use it.
[00:44:34] Speaker B: You know, and we're in some pretty heavy dialogue on, on that topic right now.
Relative. I mean, we're certainly, we're focusing on the future and AI agents and, you know, the degree that, you know, you want to embed AI agents into your organization. And I can only speak on a personal basis, you know, as I get involved with or some organizations today outside of mortgage, and I get on the call and they say, press 1, press 2, press 3, press 4. I get auto attendance and AI agents and I'm trying to work through a problem and how Frustrated I get with that and how much I don't like it. Okay. Now maybe the reality of tomorrow, but it's here today. And I think as an industry and you know, I can't speak for how all mortgage companies will operate in the future.
I can only speak for myself and how I see it for this company.
And in my time horizon, which, you know, probably isn't as long as somebody 30 years old in the industry, we're going to use artificial intelligence or we're going to use AI and we may use some agents, but I want that as invisible from our customers as possible.
I don't want them calling overseas and talking to somebody that doesn't really get it. I don't want them talking to an AI agent if I can avoid it.
Okay, so if that answers your question, I want them talking to a human being.
I mean, we're a relationship based organization, We're a relationship based, to a large extent, industry.
And you know, unless the technology and it's there. These agents are pretty sophisticated now, but they're still not a real human being.
[00:46:24] Speaker A: Yeah. I think the dichotomy of it, or if our conversation is a microcosm of where I think the industry is faltering, is they're using AI where it's easier or the echo chamber told them to use AI, which is the frustrating places there and they should be using it on. Actually, it took me a while to kind of put this together. It's almost opportunity cost. You're putting all your AI over there when really you should be using and exploring ways that AI can help you deliver exclusive products and somehow convince the investor that this is. If you trust it, we'll sell it. We'll just package it the way your machine wants to. I think you can have call agents all you want, but if you can tell a realtor that for certain deals you're a quarter percent lower than the rest of the market, it's going to outperform the AI bot. I think at the end of the day, especially if the AI bots being built by somebody that doesn't respect referral partners, which a lot of these AI companies are only consumer driven.
[00:47:22] Speaker B: Yeah. You know, and I've been involved with through my career a lot of real estate agents and a lot of builders. And I don't see them as folks that will be really respectful of making a call into the mortgage company and getting an AI agent and getting shuffled around a little bit. I mean, they want to talk to a human being and they want real answers. They want Real answers now, you know, I think AI, there is a place for AI agents if it's invisible to your referral partners and invisible to the consumer and to a large extent within your internal support system and personnel system. You know, if you've got, you know, an information system in HR and folks need to call in and they need to get answers on certain policies and you utilize AI agents or you know, different internal functionality, you know, scenario desks and things that it's within your employment group but you know, the external side I think, I mean we will use them but we're going to be hyper careful with that.
[00:48:30] Speaker A: Very smart. I know your background. I think we're in the honeymoon phase of AI. People are forgetting that it, the answer you get from it next year will be totally different than this year. But they haven't had these bots long enough that they, they don't realize it's about to teach itself wrong stuff and, or the person in charge of it's going to move on to a different company and now you're not managing it correctly. And so.
[00:48:54] Speaker B: But it sure is mystifying. It's amazing.
I mean I am amazed by what's happening.
And you know, and I, and I, I've lived through it all. I mean I remember when there was no technology in the mortgage industry, it was an IBM Selectric 2 typewriter, you know, and, and you know, you typed up your loan files to where we're at today, you know, and right down to when a fax machine came in. I remember buying our first fax machine years ago with micro film paper in it and where we're at and now we're at the stage of AI.
I mean I think it's going to do amazing things.
I just think we need to exercise tremendous care how we deal with the consumer. Now in a digital origination world where let's say you're an online lender and you develop a specific model where you integrate AI agents in there, there's probably a place for it. And the consumer, when they enter that world, they know the world they're entering.
[00:50:00] Speaker A: Yep.
[00:50:00] Speaker B: But distributive retail, you know, pure sales. I think you need to be extra careful.
[00:50:06] Speaker A: Yeah. When you bought that fax machine back then, is that something like a door to door business person comes and sells you on or were they at like conferences or do you just go to.
[00:50:17] Speaker B: Like was this new thing, I mean it was this new thing and I said oh, we got to get one of those but nobody else had them. And I remember it cost $2,000 for this stupid little fax machine. Eventually it started to get adopted. I mean, I remember, you know, when I was an originator in the early 80s, the first bag phone, and I had a bag phone in my car, you know, and you went from a pager to all of a sudden you had a phone, it was in a bag, you know. And all the way through the whole progression of the industry.
I mean, I remember when we went from everything was typed on an IBM Selectric 2 typewriter with correcto ribbon to the advent of computers and we started bringing them in. The first area was closing. When we started getting, you know, closing packages prepared by computers before there were even wires done. And you had to write a physical check and you send a check to the table at a closing. Now everything's done obviously by wires and, you know, everything's technologically done through technology.
So it's been a long road. There has been tons of changes in the industry. It's amazing.
You know, the industry has been very slow to adapt technology compared to a lot of other, other industries.
But what I see going on now with AI, it blows my mind, you know, it just blows my mind what I see. And I remember I spent a lot of years with CTX Mortgage.
And I remember at the end of the 90s when Y2K was coming and all we were focused, I was in executive management, was, oh, the Internet's gonna, it's gonna, it's gonna create commoditization of the mortgage industry and it's just gonna kill us. We've got to figure out how to deal with this. And I was in graduate school, I went back to graduate school and it was all about consumer democracy and the Internet and it's going to just change. And it has, it really has. But they thought it was going to happen like that, right? It's happening today and in four years, three years, everything's going to change. Well, it took a lot longer, but it's happening, it's happening, it's happening heavily. I think AI is going to change things, but it's not going to be that quick. It's going to take time to come in. And I just think we need to be really careful and smart.
Depending upon your model, how you utilize it, whether you want a consumer facing or you don't want a consumer facing and what degree.
[00:52:51] Speaker A: Profound points there. Couldn't agree more. And I always love the good history lesson. So appreciate you coming on, Paul, I really do. You know, I always enjoy talking to you. I guess I'll end With being here.
[00:53:03] Speaker B: Yeah, you know, and, you know, hopefully I had a little bit of wisdom, you know, so I think you have.
[00:53:12] Speaker A: A lot of wisdom and the viewers will know that in the next cycle. The last question, in the next cycle, the lenders who win will be the ones who dot, dot, dot.
[00:53:24] Speaker B: I think the lenders that, that, that win are going to be lenders that are focused on their cost structure and their efficiencies, utilizing technology, the revenue streams, product diversification, and understanding that you need to be able to meet the needs and ask yourself what the needs are of the specific marketplaces that you service, those lenders that are flexible, that can move quickly and can seize on opportunities as they present themselves. You know, you want to go where the puck is going, not where the puck's been.
Okay. So you need to be able to move quickly when you see the opportunity and change.
And I think if you, you know, focus on, and those fall into those pillars, you know, be customer service focused, be profitability focused, be quality focused, that means, you know, you need a good compliance management system. Don't play around with compliance.
Sync your life, your company and a happy employee mentality. Do, do the right things to make sure that your, your team is, is feels good.
You're going to succeed, you're going to do well, you're going to do well. You know.
You know, I don't think there's any, I've never believed in, in magic dust that there's some secret sauce or magic dust you sprinkle and life is good. I mean, it comes from hard work. You got to work, you got to work. You know, it's. Loans aren't just going to fall from. Well, sometimes they do fall from the sky. Right. When rates drop to 3%.
[00:55:03] Speaker A: Right.
[00:55:04] Speaker B: During COVID they just, it just kind of ran loans down or 86. Yeah, it was beautiful. You know, it's like, oh, wow, it's, it's, it's raining loans. But that is a typical. Loans come from hard work and from doing the right thing and building relationships and maintaining those relationships. And so, yeah, I mean, I think those are all ingredients to succeed. I don't think there's, you know, I don't think there's magic in the woods. I don't think there's magic. There may be, there may be some secret ingredient out there digitally that you can, you know, you can, you know, capture the market.
Maybe I'm missing it. I'm, I'm, I don't know what that is. I wish I did. I wish I knew what the magic secret was, you know, out there that's that's coming, but I don't have that.
[00:55:53] Speaker A: Anybody listen the last 5, 10 minutes. Who builds pieces for the mortgage industry? That's probably a better blue book or a better roadmap than probably anything you're doing. Whiteboarding. And so I hope you learned through listening what we promised you in the beginning and what we were able to deliver here is really a journey into the heart of mortgage innovation. And I hope everybody remembers that. Every mortgage has a story, or if Paul says it, it's every loan is a person, not a milestone. And we're here to help you write yours. So if you enjoyed today's insights, please subscribe, share with your network, and connect with us on social media.
Until next time, keep pushing the boundaries and uncovering the stories that drive our industry forward.
