Episode Transcript
[00:00:00] Speaker A: Hello and welcome to the Mic'd up show where every mortgage has a story.
This is the ultimate hub where the hidden stories behind the mortgage industry come to life. My name is Michael Kelleher.
[00:00:12] Speaker B: And I am Michael Zhao. Great to see you guys.
[00:00:15] Speaker A: And together like we do every week, we dive deep into the entrepreneurial spirit, the strategic insights and the breakthrough innovations that build the world's greatest mortgage companies. Let's dive in. Today we have a special guest because Illuminati of the mortgage industry a very highly followed. He's a top ranked most followed person in the mortgage industry. He's also a really good friend and he reciprocates. I've been on his show Real Fridays which is on Friday, which really hits hard on the. It's actually the the longest running mortgage show and most followed mortgage show that touches real estate, prop tech and mortgage talks about the items. But today we're talking to him as a leader who has run almost in every part of the industry from technology to the lending side.
Right now he is SVP of retail growth at nfm, a top lender in the industry, especially within distributed retail, but in many channels.
And he has quite a story.
Thank you, Rick. Appreciate you coming on to the show today.
[00:01:29] Speaker C: No, this is great. I appreciate you guys having me on and quite frankly, you know, your show is what inspired, you know, Brock, Jeremy and I to start Real Fridays. Originally that was because you guys had done, in my view, I saw you guys evolve both in content and quality and the overall production of your shows and we were so impressed with what you were doing that we wanted to copy it, we wanted to emulate it, which I, which we really haven't done yet, you know, quite honestly, because I think your, your production quality is, is a lot more organized and much better than ours. But then Real Fridays. But thank you for having me on the show. This is great.
[00:02:07] Speaker A: I appreciate it and we'll hear your story.
Somebody that's been in the industry as long as you have typically will stay inside their comfort zone. I was speaking in front of a group of loan officers. They asked me to participate in a sales summit which was very cool. And I spoke on creating your own podcast and Mike and I really challenged ourselves to see if we could do 10 podcasts and it was nice to have a partner. You had Jeremy and Brock. It was good. It's like being a gym partner. If you don't want to do it, somebody else, you kind of get doing it. But I, I said the stat. 90% of people quit by the fifth episode.
[00:02:48] Speaker C: Oh, yeah.
[00:02:48] Speaker A: And then only 10% of those make it to episode 21. So if you make it to 22, which you're past, you're actually in the 1%. But I asked the loan officers in the crowd, out of 70, who's on episode five or more?
Zero.
So the fact that you've been able to do something that zero in this room and probably many other rooms have done it, how do you find a way to reinvent yourself? And we'll hear your story and kind of work our way back up to present day. But how do you find your way to reinvent yourself and motivate yourself to do something like Real Fridays?
[00:03:19] Speaker C: You know, what's interesting is, you know, so I graduated my undergrad degree in 1995 and I was at an electrical engineering degree.
Electrical engineering student. So.
And I always reflected on my career as, as one that was defined by pivoting. You know, managing your career by pivoting and. Or right. Or riding the wave. Right, because every industry and every economic cycle has a wave that you can ride. You know, higher education was a wave. Fintech is a wave. You know, the mortgage bubble was a wave. You know, dot com was a wave, right?
So I was a dot com kid, right?
So I was with the.com company for six years and it was just the classic boom and bust story where, you know, I came right out of college making way too much money than I really deserved. It was all inflated.
I bounced from one company to the next for that next 30, 40, 50%, 100% pay increase.
And before you know it, it was the classic like boom and bust of like, you know, you get a million dollars worth of stock in a dot com company and you're a millionaire one day and six months later you're broke. Right? And that was sort of a very typical story for me. So when the dot com crash occurred, I was able to jump to a company called Seagate Technology. I was with them for about four years and then I left to start a tech company. And since I grew up in the mortgage arena, my father had a real estate agency and a mortgage company.
I knew the environment.
So when I started, I started a company called SGI, which was a custom CRM solution out of St. Louis Park, Minnesota. And we grew up really fast. You know, a three year run rate grew to about 6, $7 million in revenue. And then a private equity firm bought us in 2005.
And I rolled that money, you know, that my proceeds to the acquisition into a company called pushmx Software, which was a bolt onto Calyx. It was a pipeline management tool that was bolted onto Calyx Point to kind of compete with this rising solution called Encompass.
And we were really effective in combat the growth of encompass in 05, 06, 07 and 08.
But then when 08 occurred, we had clients of New Century. We had about 6% market share, you know, at Pushmax, which was massive. You know, we had, you know, 70% of all loans went through Calyx's platform.
And when, when New Suntry Home123 was a client of ours went under and then ABM AMRO went under in Michigan and WAMU went under several months later in, in Seattle.
You know, our, the pushamax was quickly going out of business. We had raised about $10 million.
And then all of a sudden we went from a real hot growth ticket to, you know, all of our largest clients were going out of business. You know, so the company ended up totally imploding. So I made money on my exit for SGI and then I lost money on the demise of Push Push mx.
But that's when K said, hey, you know, you understand the mortgage environment, come work for us. You, you know, you know, tech, you know, the mortgage environment, like a mortgage professional, you know. So I always kind of straddled that, the operating side of the mortgage company along with the technical needs. Because I would go into mortgage companies and I would say, and you do this really well, Michael. Like I sit down with tech with mortgage companies and I'm like, forget about technology, like what's the problem you're trying to solve? Let's look at the workflow, let's really understand the business need. And then I'm going to actually sort of twist and contort and configure and customize whatever solution we had to meet the business need. Most companies just, you know, predominantly, you know, consume a demo with just the technology and feature and function. And to me it was, it was, I flipped it. But 80% of the demo was all about the customer, how much money you have in the bank, you know, what is your growth plans, what's your, you know, what's your workflow. Let's go through that. So I made it way more about them and then I would articulate how you could use point to better support those needs.
Obviously those needs change dramatically in light of the crash and the redefining qualities that Dodd Frank introduced into the, into the, into the space and the need for rules and field level rules and that sort of thing that Calyx simply wasn't Doing so when I left Calyx In 2009, 2010, I started Menlo Company, which is my consulting practice and my first customer was Ellie Mae. We've traveled all around the country doing pitches to my old Calyx clients. And we converted tens of thousands of users over from the mortgage brokerage community over into well capitalized mortgage banks. And that's what got me into my journey, both of M and A. It was kind of a confluence of like M and A, you know, technology. Because whenever you merge companies there's always a question, what do you do with the data and what's the system record and how do you migrate data from one CRM to the next and that sort of thing. The accounting systems.
So I got heavily involved in the accounting systems and the technology and the data, heavily involved in the money side for mergers and acquisitions, and then heavily involved in just the overall management and growth post acquisition of what happens after you merge two companies together. And that's what kind of got me in that journey from 201011 to 20, 2021, when I, when I decided to take a W2 role and work for New American Funding.
So I kind of quickly try to give you a timeline from 1995 to 2021 in this, in a, you know, a 9 minute, 8 minute, you know, or maybe 7 minute summary.
[00:09:25] Speaker B: I remember I started being a mortgage broker back in 99 and was dedicated to Calyx and then was super hesitant in 2010 to switch from using Point over to Encompass, mainly because Point was so easy. And then I just thought that, hey, if I switch over to Encompass, it's more expensive, it's more cumbersome, there's more, you know, the learning curve is a little steeper.
But then I was forced to by joining an imbalance shortly, shortly thereafter. And then I'm like, okay, well then if this is the devil that I need to know, then I guess I'm gonna need to know it.
[00:10:08] Speaker C: Yeah, good way of saying it.
I mean, it's true. It's kind of true. I mean Encompass was like the only thing, the only real viable platform if, I mean, I remember having the debate with Doug Chain, the founder of Calyx, saying like Doug, we need rules, we need rules in the Social Security field. Did you know you could text the.
You can type in someone's name in the Social Security field? McDoug, that's a problem. And his, his thought at the time was that was Calyx's strength, was its flexibility. And I said, not in this world, you know, not. There's this guy named Congressman Barney Frank. The late Barney Frank. There's Congressman Chris Dodd. You know, this is an 092010 and they, and much of the framework of the CFPB in the legislation was being crafted and introduced. And we were reading it saying like Doug, we're not ready to support any of this. You know, and you know, from lo comp to respa to docs to reporting and controls, like the system was simply not equipped for it. And Ellie May was really smart. And the one thing that a lot of people don't know is Wiener Brodsky was, was, was the very first.
Mitch Kiter was the very first investor into Ellie May, into Encompass. Right back in, back in 1999, 2000. Right. So all of a sudden I, I was, I was meeting with Jonathan Core in 2007, 8, 9 saying like what are you guys doing over there? And he's like, we're hiring attorneys. I'm like why do you have attorneys on? You're a software company, you know. And, and so they made a very conscious choice to build a solution that was going to help lenders become be compliant or maintain control over staff. Where Calyx was saying, I don't want the liability. I don't want to be blamed for someone being not compliant.
And that was literally the pivotal break right there that the los market share conversation, the genesis of what happened with Ellie Mae and what happened with Calyx occurred in that one singular decision right there.
[00:12:17] Speaker A: I think there's a lot.
[00:12:18] Speaker B: Yeah.
[00:12:19] Speaker A: That you could learn from just talking to everybody in the mortgage industry right now.
I feel the technology wave has them so lost and that is a perfect example there of a company that wasn't going out and hiring the top technology engineer because it seems like the right answer.
Lawyers were the right answer. The technology just happened to be the vessel to get it to market.
Kind of knowing zooming out. So I think that's just a masterclass of zooming out and really understanding and not getting stuck in this tunnel vision of chasing the next technology milestone. How would you explain to like a 30 year old what the dot com bubble is? Because I feel like we're getting far enough away. I was right around then like there were some coaches that were getting pretty rich. Well obviously, you know, like everything was, I don't know much about stock, but I know stocks were going online and everything was moving to buying a domain.
Nobody was comfortable yet putting their credit card.
So that was probably cost the bubble but everybody was at least checking it out. How would you describe this.com bubble?
[00:13:34] Speaker C: So so what's interesting about like so, so the dot com bubble was really Internet 1.0, right? And it was really the, the infrastructural expansion.
Think of prior to, prior to electricity being delivered or, or being deployed to homes. You needed infrastructure, you needed, you needed wires, you needed telephone poles, you needed, you need to lay the infrastructure to actually wireless one, one house and the next to power, right? So you need to create the infrastructure to support that. And that's in essence what the dot com bubble was. From basically 1990 to 2002, there was this massive run up in demand for people to go online. But you didn't, there wasn't the support. You couldn't, you couldn't do voiceover ip, right? You were trying to suck data through a straw, right? So, so there was, so all of the whole infrastructure on delivering data needed to be set up, right? And then once it was set up, then, then it was the, then it was meeting the demand and constantly increasing and upgrading the delivery of information through, through bytes, right? And different in terabytes and in massive volumes of data once you started streaming. I remember when Netflix started In like whatever 1993, 1994, I was in college and I thought it was the dumbest idea, right? But were shipping these, these discs. But then I remember in like 98, 99, they started putting old movies and classics and stuff on the Internet.
And I remember thinking like God, you know, that just, you know, it's this, this idea is never going to, you know, stick. It's, it's, you know, but the point was.com 1internet 1.0 was all about the infrastructure and just getting people online.
2.0 was really the, the, the, the, the services that were being put online, whether it was shopping or movies or remember that, remember that one 800 movie phone? You know, you'd call 100, hello, you've reached movie phone. You know now all of a sudden you didn't have to dial an 800 number to determine like when the movie was or buy phone tickets. You could go online, right? So it was just so, so 2.0 of Internet was really putting products and services online to be able to make life easier. And there was massive efficiencies in each step, right? And then of course 3.0 is where you start getting into, you know, broader sort of efficiencies kind of leading into like, you know, you had software as a service and because 1 and 2.0 depended upon you building the infrastructure in your, in your company. Well, 3.0 was all about manage hosting providers and SaaS to say, don't worry about it. Build all the software you want online and we'll host it for you.
Right? And that's where there was that next generation of growth of more apps and more technologies and more solutions being released. And really 4.0 is really the, you know, the dawn of AI because now that you have all this data, right, and the question is, how is this data getting smarter? Rather than being a repository of information where you're constantly going out there and searching for it, now the information itself is becoming smarter and more intuitive to where it now can remind you of what's needed. And it's not through automated workflow, you know, steps, because again, you know, Internet 2.0 and 3.0 was all about building the rules and the architecture and the if, then, else, and the workflow management, right? You know, who does what, when is it supposed to be due, when you know, who's it assigned to, and then alarms and tasks of, of. So you get these big dashboards to manage your companies. Well, Internet 4.0 is now, all of a sudden all that stuff is, is intuitively organized by itself.
And then it tells you what you're missing, that you, that you may not even be asking the question, and that's the intelligence, the intelligent Internet, or essentially and artificially intelligent driven Internet, but effectively it's, it's taking all the data that's out there and then all of a sudden identifying a way to make it all make sense for you.
[00:17:51] Speaker B: Do you think that with the technology that's available out there, has it made the originator less aware?
I'm going to be as polite as I can to the industry because I think that the, the originator has actually gotten less informed because it used to be if before I started using point, I was handwriting on my 1003s, okay? Oh yeah.
I had to go from yellow pad to point and then from yellow pad to point and then from point into. For me, the technology migration was from point to encompass, okay? And. But during that time period, the products change, it was. I had to take 24 months of bank statements, write down all of the deposits on my yellow pad, average them out, take out the big deposits, da, da, da, da da. And now technology. Now there was a point in time or where we had OCR recognition where you could put in bank statements, it would analyze it for you and do as all the. But now the originator doesn't have to do as much work anymore. And so has that taken the awareness away from the originator say, well, I just don't need to. And which is why potentially less originators are using non qm. I, I, I know I went through a whole bunch of stuff here, but really what I'm doing is like, I'm talking about is the dumifying of the
[00:19:12] Speaker C: originator saying that, I mean, no, I think it's actually just, it's just shifting the role of the originator differently, you know. Do you remember your phone number when you grew up?
[00:19:21] Speaker B: Of course.
[00:19:22] Speaker C: Do you know your, do you have children?
[00:19:24] Speaker B: Yeah.
[00:19:25] Speaker C: Do you know their cell phone numbers?
[00:19:26] Speaker B: I do, because I went through that when I went through the system. I grew up knowing I needed to know it.
[00:19:32] Speaker C: I remember my home phone number. I have no idea what my kids cell phone numbers are. Right. And I know that I can find their name on my phone and then click call and it calls them, but I don't really know the number.
Does it make me, am I less dumb now? What I would say is my focus is just on other things. Right. So I, I don't, so I'm kind of with, you know, you hear all these things about, you know, AI is not going to take, you know, jobs. It'll just take the jobs of those who aren't using AI, which I don't necessarily subscribe to, but there's also another moniker that says that in essence AI is going to take over activities or remove activities that humans weren't really designed to do to begin with. Like humans aren't. Yeah, I'm a human. I'm designed to think, to analyze, to reflect, to be philosophical, to kind of provide guidance to understand consumer situations. It's not to 1, 2, 3. These are very mechanistic sort of activities that I can do because I have fingers and I'm able to do it, but that's not really utilizing what makes me uniquely human.
Right. And so AI is just taking away those very activities that, that are things that humans have always done because we've had to, but that aren't really related to who we are as human beings. Right. And what it's going to do, it's going to push humans to actually focus on the very things that make us who we are. You know, that we have a soul, we have a purpose, we, we, you know, we have a calling. You know, we have goals, we have aspirations, you know, you know, people fall in love like, you know, these are all things that, that are all tied to the most important transactions of our life.
Getting married, you know, preparing funerals, you know, when someone gets pregnant and they have a child and you prepare a nursery. Right. And the kind of, you know, delicate touch that only a mother could put on a nursery because she's going to have a baby that's going to come out of her womb. Right. You know, they're going to have a robot that's going to assemble a crib find, you know, that's great.
That might free up the mom to be able to do all the stuff that we forget to do, like taking photographs and newspaper clippings and all the things that we want to do to save all these artifacts of a child's life, but we're so busy doing all the other stuff that we don't have time to do any of it. Right.
So I think that this new age of, of AI is going to positively push us in a direction that's going to make us far more intimate, far more intuitive and acute with respect to the needs of the consumer than we've ever had the time to even know or understand.
[00:22:22] Speaker A: Before we go to commercial, I just wanted to ask with what you said. So that's like present, but back to the theme of the dot com crash, the bubble crash. Right.
Do you think housing crash, which will inevitably happen if history repeats itself. Right. Or if you don't.
[00:22:44] Speaker C: Let's, I mean, how many housing crashes have there been?
[00:22:49] Speaker A: 92. Right.
[00:22:50] Speaker C: I mean, that wasn't really a crash. I mean, we had a recession.
You know, we, we had a, you
[00:22:56] Speaker A: know, I had people, I had a whole family move into their grandparents next door, but I guess he. They had houses. But I mean, I mean, we had
[00:23:03] Speaker C: a recession, but there wasn't really a housing CR Crash. Right. Because recessions affect specific parts of the economy, you know, and, you know, and we had the savings and loan crash, you know, within that particular segment, but we really haven't had, we've had one major housing crash. Right.
And, and to be fair, prior to the 19, late 1940s, early 1950s, I mean, home ownership was, was, was, was. I'd have to look back at the actual homeownership rates, but they weren't 68 or 66 and a half percent that they are today.
[00:23:37] Speaker A: And I'll agree, like, I think there's only four years housing's ever gone down, but they've gone down pretty significantly in, in those four years.
So I'm saying if that happens, do you think it slows down everything? Like, and, and people like, we're obviously at a meteor pace. We are pontificating that AI is going to change how people get homes. How it's going to almost predict.
Yeah. Or you can take a mortgage and move it from home to home or something innovative is going to come because of AI. Does a 18 equity correction slow things down for 4? Like just based on what you saw with the dot com bubble, what you saw in 0708, do people overreact? Do they contract so much? Does Zillow say let's get out of mortgage for a little while, stay back in the, the game and, and everything kind of just halts for five years? Or do you think that doesn't happen this time?
[00:24:34] Speaker C: I don't really see that. I mean, I, I definitely see that there's going to be these micro corrections that are going to be geographic in nature.
You know, I think that, but, but I don't see just, I don't see a massive universal down downdraft like we saw in 2009 and 10.
[00:24:55] Speaker A: Right.
[00:24:56] Speaker C: I mean, there was a massive depreciation in every market, in every MSA that affected everyone. And it just really affected those who were in the wrong products for it to affect, that hurt them the most.
Right.
But I just don't, I just don't see that. I just don't see that the demand is there, number one. Okay. There's still a tremendous amount of demand. You look at the demographics of, of millennials and Gen Z, and then Gen Alphas are massive cohorts. They're much bigger than the baby boom cohorts, you know, and, and these are largely cohorts that are, that, that haven't even started to really own homes yet. I mean, they're in the high teens as far as homeownership. You know, they got to get to 60, 65, 70%.
So I just don't see it. I just don't see it.
I think the demand is going to be there. It'll, it'll soften certain markets where like in Cape Coral, Florida, it boomed and then it started to really drop by 15, 18%. You know, but I, I really don't, I really don't see it.
I really don't see it. I think we're gonna, I think we're in a very, very healthy trajectory in the mortgage business as a business and as a, as a sector.
I think the, I think the, the, the, the industry itself is going to look a lot different 10 years from now than it does today.
But I think that, but homeownership will continue to be where it's at. I mean, you gotta understand, in 1975, it was 65%. I mean we're at like 64. I mean we've been, we've been sort of hovering and it's gone up a little bit, up to the peak of close to 70%, 68 cents, 69% of in 19, in 2007.
But in 1975 it was, it was 65, 66%.
So that's the right number because there's gonna be a certain percentage of the population that doesn't wanna own a home. Right. Those are eligible home buyers, but they're too migrant, they're too transient in their work or not quite situated in their work or they're single and they don't wanna own a home. And that's okay.
Right?
Go ahead.
[00:27:02] Speaker B: I think they don't wanna own a home because they think they can't or they're fearful that something is going to happen again. When I talk to my kids.
[00:27:10] Speaker C: Well, both, go ahead.
[00:27:11] Speaker B: No, no, when I talk to my, my kids are in their 20s and they're, they're white collar professionals and they're saying, oh, we're not going to own a home. I said, well, yeah, but you know, one of my, you know, one of my, one of my kids already has a six figure income. And, and he's like, I don't know if I could do this. And I'm like, I think that the, the narrative was that for her, for, for his, for the parents who came, we came out of this crash in 2012 and it just struggled in the decade thereafter, especially since I'm in the mortgage industry. And then we came out of this high interest rate environment. Oh, even with the high interest rate environment, still can't own and this, that and the other. There's still a lack of fiscal literacy within our own industry and also within the general, within that generation. So what, what can we do as an industry to increase the amount of education? Because we've asked this, we had Dave Savage on before, we had semesterly and so on and so forth.
[00:28:07] Speaker C: But honestly the best, the best education is to encourage them to get married and have a family.
You know, the reason why, the reason why a lot of, a lot of kids aren't that, you know, marriage is getting pushed off, you know, as a result. The, the, the desire, the need, the push to having your own space, to not living with a bunch of guys and you know, to actually own a home is getting pushed out.
There's nothing, there's no greater sense of you. If you ask a 22 year old who gets married, the very first thing they're going to say is they're saving up for a home because in a few short years they're going to have a baby.
And that's when, you know, any, any couple is going to start nesting and is going to start creating a home for themselves. You know, the best education around a mortgage is really to help foster and encourage people to, to, to settle in relationships and to get married and have kids. Right?
And that's kind of a, you know, but, but I do believe sociologically that's taken the foot off the pedal when it comes to homeownership with this particular generation, number one. Number two, this is a generation that's lived through a lot, right? They've lived through 2000, you know, they've lived through the 9, 11, they lived through 08, the housing crash. They've seen their parents, you know, lose their jobs, get evicted. We had the, you know, the largest foreclosure crisis in 2009, 10, 11, 12.
So, you know, this generation's been through a lot, right? So I think that, that, that, that we need to dumb down our expectations a little bit around the type of home that, that, that this generation is ready to buy. But that's why I also think tiny homes is the right way to go. These, you know, 800 square foot, thousand square foot, 1300 square foot, 1500 square foot homes are the best starter homes. And we should be creating really cute, innovative, not cookie cutter, but kind of like the Sears back in the 1930s. Sears and 1940 Sears had their own, they had their, you know, their home in a box. Right. And that to be able to facilitate the, the, the soldiers coming home after World War II right. In 1940 and 1950. So I suspect there's going to be something similar to that Amazon or some, or some, I mean it could be a Tesla that's going to, that's going to assign 3 billion, 4 billion, $6 billion toward an effort of putting, you know, 10,000 homes in every, in every state in the United States. They could do that easily.
[00:30:44] Speaker A: Yeah, I think that's a very profound answer. I would, if I were to say my hunch. It has a lot to do with social media like Instagram, Facebook, our government letting them build a secretly addictive platform to basically make those type of homes something that you can't put on your feed. But I think that generation is starting to outgrow and realize that a lot of that is superficial and I take my picture doesn't mean I'm actually having a great time. As soon as I turn the camera off. And so I think you're going to see a big swing of those generations in the homes or in the homes you're describing and have no problem with it. And then volume will really increase and I think it'll snowball and it'll be at the point where every lender, especially ones your size, which we'll talk about after. Yeah, we'll need the best technology so we're going to go quickly to our sponsors who provide that best technology and if you're listening please and our sponsor, we just added a couple new AI sponsors to our platform that we'll be releasing next week or the week after. But enjoy our sponsors who we have today.
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Dude, that was next level. I love it. And trueork is a great platform. You know, trueork is, I really love what they're doing over there a great deal. It's so efficient and so smart and
[00:35:23] Speaker A: their parent company, Checker. Yeah and I, and I have a couple other stories in mortgage like this but since they're not sponsoring I won't give them the flowers and tell the story. But I don't. You know that verification world is starting to grow up in mortgage and find a niche and expand in other levels whether it's SBA or auto or consumer. And I, I saw checkers doing a great job of not just true work in in Mort.
They found some sweet niche and, and really, really lit it up. It's kind of like that story where Calyx's demise a little bit around the crash not only did encompass do well, but mortgage cadence happened to just have a button that was needed by lenders to handle some of the foreclosure and had a top bank in this country that just kept clicking it to mail it off and was even though that's not really what the LOS was built for. And next thing they know they're looking at their bank account. $8 times hundreds of thousands a month, just someone's clicking them to get out some sort of loss mitigation file because it was the fastest way to do it.
Some things are great, innovative, like easy mortgage apps, some are bad business decisions like easy mortgage apps. And some are a lot of luck like the one I just explained about clicking the button and then some are you stay in it long enough and you maybe it's a little bit of luck and just be hanging around long enough with all that. Rick, you've been in all of it. So we could go really any direction here. But I think with what I do right now where I'm consulting and I'm going company to company, you have found your home. So we're excited to hear about nfm. But as someone who didn't grow up through nfm, how do you encourage the loan officers there to start to understand this? This. I mean we Have a lot of guests, and you are right there with the best of the best as far as your knowledge, your ability to articulate, your ability to feel comfortable in just sounding more consultative. How do you encourage now these loan officers to see you are a leader that is approachable, your door is open. Even if you weren't the one that brought it in through M and A, they, they can reach out to you. How are you taking on that leadership role at NFM or encouraging others to see that you are their leader?
[00:38:04] Speaker C: Yeah, no, you. Look, I mean, there's a, there's a lot of capable leaders. I think I'm just a spoke in a wheel at NFM. You know, Greg's been there 27 years. You, for the most part. And, and, and I say for the most part. He started at NFM, left, started his own company for 10 years, and then he rolled that company into NFM, back into NFM. So collectively, he's been there 27 years. Latash has been there 10 or 12, 13 years.
Bob, Bob Tyson, CEO, has been there for maybe seven or eight years, I think. And then, of course, David Silverman started the company 30 years ago. So, I mean, you know, it's, it's, it's a sophisticated company. There's a lot of, there's a lot of room for the company to grow as far as to mature.
Think it's kind of a late bloomer. You know, it's a company that I think grew late in its, in its, in its development.
It really didn't become a major player until probably 2022, 2023 in the national landscape.
I think social media was a big part of that. I think Greg was a huge part of that. I think some of the acquisitions and production growth, you know, that I've done is, has been a big part of that. And, and we've had pillars of production that have really driven the company's growth in the years prior that are still growing. Daniel Saw out of Columbus and Ryan Sandel out of Arizona, and we have Main Street Home Loans out of Virginia. That's incredible. It's a $2 billion division that we have.
So there's five divisions at NFM that make up most of the production. Probably 7 or 8 billion of our production are, are with 5 groups. That's it. And then there's, then there's a, a legacy core retail group that does about two and a half billion a year, but everything else is really broken up across five divisions. And they're incredible leaders, you know, really incredible leaders. So to Me, you know, I'm just a, I'm just a spoken wheel trying to, trying to put pressure on the right as, you know, areas of the company for growth.
You know, in some cases it's welcomed, in other cases it's not.
But, but, you know, I. Part of what our job is as leaders. We're not Michael. I mean, we know this. We're only in this industry for a short time. I mean, truly, I mean, Dave Stevens passed away however many years ago.
I mean, he had an incredible run, you know, a good, solid, massive career. But, but he became in my leadership focus about 15 years ago.
Now he's gone.
Right? And we, we all will be too. Right? And others will, will lead, you know, in our, in our place. So, you know, that to me is a call to urgency for people not to tread water or to sit idle. You know, you know, it's time especially people like you, Michael and Mike, and you've been in the business a long time, Michael, both you, Mike. I don't know who's Mike and who's Michael, but, but call you guys both by your baptism names.
But you know, the point is, you guys have all been in the business a long time and it's not. You can be respectful, but you don't have to play it safe.
You don't have to play it safe and, and there's too many people that play it safe and then they cease to lead.
[00:41:25] Speaker B: What is the trait that you think that another independent mortgage banking leader needs to expand more in order for the industry to have greater respect, recognition and growth so that we can be better as an industry? We've talked a lot on our show with various leaders and some leaders are awesome. Most of them are very good. And, but, but what's the trait that you think still needs to be. Needs to happen to be expanded so that we can be a better industry?
[00:42:00] Speaker C: Well, being a better industry.
So, so I'm assuming when you say the word better, are you talking about like, better as in more ethical Better
[00:42:08] Speaker B: as I think better in the form of, of greater recognition in government.
The NAR has great recognition through their political action committee. And, and we, and we as an industry could do better in recognition in government.
So as leadership, what can we do to. So that we can get more recognition? Because we're, we're in the money industry. We're selling money.
And, and you know, honestly, for the
[00:42:36] Speaker C: very in, in Kelleher introduced me to the legislative conference in D.C. and I think every top producer in every state in all 50 states, and you Know, maybe add Puerto Rico and Guam to that should be showing up every year at their local representatives as well as it in, in D.C. at the NBA every year. Because, you know, you have this. Yep.
There is this quality about the industry where the real practitioners have their head down in the sand and they don't collaborate, they don't, they don't advocate, they're not really involved. And then you get people who are more paper pushers are the ones and they're further away from the, they're further away from the problems or, and, or the solutions to really speak to them at a really confident and passionate level. So, so when they're creating policies and procedures or when they're advocating or working with legislators to, you know, to, to, to craft policies and procedures with FHFA or with HUD or with Congress men and women in the U.S. house or the U.S. senate, you're, they're not, they're not getting, they're not getting the real, They're not getting the real practitioner's voice about what's, what's passionately going to benefit the consumer or harm the consumer.
You know, and there's nothing like when you're talking to Elizabeth Warren and If you're doing 5, 10, 20, 30 units a month and you're working with FHA borrowers in Springfield, Massachusetts or in downtown Atlanta or whatever the case may be, there's nobody who has better solutions as to how to serve those borrowers better than the loan officers doing the job. And the problem is you get somebody who's further away from that front line, some general in an army, like a director of mortgage or a director of retail. And if they're not really, like, if they're not really paying attention, they're not really giving the advice necessary that legislators need to improve the lives of consumers out in trenches. And they're not really advocating, I think, effectively for our industry.
So I just think being way more involved, like the people who are serious, passionate, really good at their jobs need to be also they need to carve out a piece of time to get involved on the state level like Michael is, or at the federal level like Michael is like in D.C.
working, speaking directly to these issues.
[00:45:07] Speaker B: So are you calling out, for example, like if you're a top 10 Scotsman originator?
[00:45:11] Speaker C: Yeah, I think, I think all, I think the top 10 or 15 or 20 or 25 originators in every state should be, should, should really be personally invited to come to. And I even think in some cases probably the number one producer in every state should be personally flown to D.C. you know, to meet with these legislators in their respective states to really weigh in on specific proposals and forms and processes that are being proposed by. By bureaucrats that end up. That they end up getting affected by in the end anyways.
And if they don't weigh in on it and don't massage it and don't influence it in a way that is best suited for their clients and themselves, they'll end up being negatively impacted by it. And what will they do? They'll just complain.
Oh, shoot. Treads a mess. Oh, the timing requirements is a mess. Well, fine. Well, where were you?
You know, where was I? I wasn't active back then. Where was I in meeting with Barney Frank in 2011, 12 and 13 saying, this is screwed up. You know, we, we need to have a better process for this. And this is why, you know, if our goal is to better, you know, a more educated, informed, educated or a more informed, educated consumer so they, they have the knowledge to. To. Of. Of what it is that they're actually getting into.
Does do what we have actually accomplish that goal?
And I think most would say it's just gotten more complex and the consumer is even more confused than they were then. 2008, they asked me to speak for
[00:46:45] Speaker A: First Home IQ because I've been to 10 years of this.
Slept on the couch of my mom's friend because d. The hardest part is the hotel price in D.C. and so it was just a story that could resonate anybody getting started. But they asked me what, like, what keeps you going to it or why?
And I said simply, like, if I don't do it, who's gonna do it? And it really goes to what you're saying, Rick. If the top producers, the. The big, the big push we're gonna make is lo comp. That's their whole livelihood. That's how much money they're making. If the top producers who make money by lo comp aren't gonna show up, then who's gonna like if. If they're not, if they don't want to show up, then who really is going to show up? So like, if somebody like me stops, then somebody else stops.
But I think you really like, hit it on the head. Why not now what A wake up call, A national voice like yours to say it.
And so I'm kind of calling out. I've been having a lot of calls now because I do C level and you're an M and A. So I'm just really curious. It fits the, the theme of our show and we're coming up here on the end, so we'll just ask a couple questions and we'll stop. But I've been talking to some of the people I've respected growing up forever in this industry, the, the godfathers of the, the industry. And we'll get on about technology advice.
But they maybe have a plan to give it down to their daughter or son or they have an ethos of six people and they don't want to let them down. So they don't want to sell their company yet.
And they're not taking my advice because not only do they not have a. They're overthinking like technology is solving it. And I think they're not, they don't have a culture. Not a culture. They have some of the best culture in the world. They're like the old school, my dad or down at the bocce club. Not that kind of culture. But to recruit, I think you need to sell a platform for loan officers these days. And they don't have anything. They don't have like I would give a podcast, podcast studio, like a platform like that to be different or to prevent, you know, or maybe they should start attending again like they used to, these conferences and bring people down. So they're never going to leave because they feel like they're part of something greater. And that's your message. Like we're going to be all in on advocacy, not motivating them. You did very well in that speech. There's a wake up call for everybody. But when you look at these IMBs out there that are treading water.
Yeah, what, what's the difference between those that are deciding that they can scale up and have a better experience with a company like nfm? And then what do you think? Those that are waiting it out three years, why can't they see what I'm. Let's assume they should scale up.
But like, why do you think they're not seeing what I'm saying?
[00:49:40] Speaker C: Apathy is so, is so prevalent in our business. You know, I think especially when it comes to money, people just tend to sort of put their heads in the sand.
And there's nothing wrong with that per se. Right.
I think where it's now, where the argument comes into play is we're essentially an extension of public trust. We're leveraging money that is largely taxpayer funded or in part underwritten by the US taxpayer to serve and support and to drive homeownership because homeownership sociologically has all kinds of benefits to communities. Across the country. And so, so the idea of communities being more stable, educational environments, be more stable around metrics of home ownership.
And so the US Government, through a public and private partnership with private industry, has, has partnered with, with, with the, through programs and through this partnership with Fannie, Freddie and Ginny, through this quasi partnership in putting the good faith and trust of the United States government behind it. So I feel like there's a, there's a, a much greater obligation that, that mortgage companies, especially when you get your Fannie, Freddie and your Jenny, when you get your GSEs. I think there is a, a public obligation to, to expand homeownership and not to take the most conservative approach. I think there should be, you know, maybe not so much a CRA requirement, but I think there should be. Well, I think it's a disgrace that the average credit score is 720, 715, 728 for most, for pretty much every mortgage company in the United States, right? When, when most consumers have a credit score of 640, 645, 650, you know, who doesn't want to mitigate the risk by only lending to a paper Consumers. Right? So, and I'm not saying that you don't, that people don't have the right to do that, but once you start using public money, that's a different ballgame.
Either directly or indirectly, that's a different ball game. And I think there, there, and there must be a much greater obligation and expectation that that's levied on consumer or on mortgage companies to get involved, to expand homeownership, to come up with innovative solutions to put people into a level of homeownership that may not be, quote, unquote, full blown, but it gets them out of running. And maybe it enables them to, to maybe, maybe there's some innovative mechanism to create equity, you know, and much smaller chunks or nuggets and maybe smaller units of, of, of ownership of homes or whatever the case may be. You know, I don't necessarily know, but there's not enough. We're so used to feeding off the trough of Fannie and Freddie and your vanilla conventional products that, and we make millions of dollars doing it. But is that really serving the public good? And I don't think it is.
[00:52:33] Speaker B: No, it's not. I think the problem that we generally have at the sales level is that we're teaching people how to save. And the problem with teaching people how to save, it's not what. And I tell this to my investor clients of whom I mainly deal with it's not what you earn, it's what you keep.
And if what you get.
And it's easy to say but harder to do because it's always about after tax dollars.
And so the key component to asking that question not only to the consumer who's going to buy a home, it's also about talking to the originator. As a business person, whether you're W2 or whether you're 1099 is irrelevant because we're all self employed just purely by those in sales, that is purely by the fact that you have to originate new business.
And if it's about what you keep, then you're sitting there going okay, outside of fiscally speaking, this is what I keep before, before taxes. But then for the education, what are we keeping. Do we get to keep our business? How are we generating referral sources? How do we, how are we generating in the, in the social, social economics of what do we get to keep in our database? Whether it's our referral sources or whether it's our processors or whether it's our assistants or the entire team of how business is being, is being done. I don't think there's a general, I don't think there's, there's really a what we keep mental attitude. In fact there's more of us a fear based industry of like oh, we're not getting enough business or, or we're going to take this realtor from this other loan officer instead of sharing the wealth. Well, you can do this and I can do this and, and figuring out how we can work together. We are so lecherous in the way that we did our business right now on the sales level that we fail to see the, the, the forest through the trees. I think even in business as well when, when there's competition from business from one to another.
So how can we talk about what is that we can keep collectively versus what do we get to keep indiv. Individually.
[00:54:33] Speaker C: That's really well said.
Yeah, yeah, I agree. I think it's really well said.
[00:54:45] Speaker A: If you want to, I'll ask you differently as, as we segue out of here.
Final question.
[00:54:51] Speaker C: Yeah.
[00:54:52] Speaker A: To build off what Mike said, one is a loan officer that's choosing between two companies right now that wants to move and didn't even think of NFM just because of all the noise.
[00:55:07] Speaker C: Yeah.
[00:55:07] Speaker A: What would you, what would you say to them as a reason to join the team? And then before we outro the second question for our YouTube station, now this is a new feature we're doing we want big leaders in this industry to answer simple questions.
Just one piece of advice for a homeowner when they're looking at a mortgage. Something to think about. Something, something for a high school person would understand that we can clip and just ride on our you to the general public. Just advice from somebody high up on looking for a home like down payment this or go 15 year over 30 or go for an arm or, or don't forget to ask about down payment assistance. Just anything that comes off the top of your head.
We're trying to clip something like that at the end. So question about nfm.
[00:56:01] Speaker C: Yeah.
[00:56:03] Speaker A: And then something. Some general advice.
[00:56:07] Speaker C: My advice to loan officers would be to obviously do your due diligence and to try to determine whether or not the company you're looking for and looking at really lines up with your goals, lines up with your desire to be best supported for your, both personal and your professional growth. And if that's nfm, and if you determine that to be nfm, which I, I think is a really good, a good choice for, for a lot of loan officers, I, I think that. And then that's great. If it's another company that serves that purpose, then that's great too. You know, I think that these types of decisions are so personal and they're so unique that there are, you know, I wouldn't say that NFM is the best lender in the United States. You know, I think it really kind of depends on, on the person and it depends on whether or not NFM is a good match for that person's needs.
And I would say that across the board, to any of the quote unquote, top lenders in the, in the United States. I think we're all, we're all, you know, it's like a horse race. We're all effectively the same. We all have some qualities that are a little bit better in some days and maybe a little bit worse in other days than our peers.
But for the most part, we're all as an elite performer, as an elite lender like NFM or any of our competitive peers. We're all elite players. We're all good at what we do. Right? So whether or not we're the best match for a respective top producer or top producing team really depends on them. It doesn't really depend on us, you know, because, yes, we're going to talk about our, you know, how we're one of the best AI providers in the United States that we're going to, that we're, we have a leaner Flat management style, you know, that we have aggressive compensation structures, innovative culture, very social, socially forward marketing strategies.
But ultimately if none of those things are hot buttons or things that you, that resonate within you, we may not be, you know, the best lender for that individual. Right? So, but NFM is an elite lender. It's an elite lender and there's, and there's a handful of elite lenders. There's probably a dozen to 15 elite lenders that really make up that top tier category of lenders. And then that's where the, you know, the 1500 meter race really separates between the front pack and then, and then everybody else. You know, as far as, as far as, for consumers, my advice for every consumer in America is really to focus on getting into a, as quickly as you possibly can. Could be a one bedroom, two bedroom, a three bedroom home. Get into a single family home as fast as you can and you can get in with 1 1/2% down because there are matching programs, matching grants, there's down payment assistant programs. Get into a home, don't even worry about the economics. Get into the home, make sure you can afford the monthly payment, but don't worry about the rate. Don't worry about, you know, what you're going to do because the reality is in three or four years you're either going to sell and move somewhere else or you're going to end up doing upgrade to that home and then that home is going to gain an equity. But get into a home. I was Talking to a 20, 26 year old, you know, just, just yesterday and I was telling her, you need to just get into a home. You know, she's renting right now in a two bedroom. She's paying $3,000 a month in Charlotte, North Carolina. And I said, you know what I can buy, I can get you into a $350,000 home with about $14,000 down. There'll be about 20 or so thousand dollars in, in closing costs. But you can, but your monthly payment's going to be about $2,600 a month. You gotta, you get a roommate, you could, you could rent one room out for 13, 14, 1500 dollars a month and pretty much cut your mortgage payment in half for you as the owner and you're building equity and you have a home and you're able to take care of something and then we can, I can help you, you know, plug you into contractors that can, that can improve the kitchen and improve the bathroom, build a porch, do all the upgrades necessary to increase equity. But the biggest thing is to get into a home, you know, doesn't have to be the best neighborhood because all neighborhoods appreciate in every five to eight years, especially the rougher neighborhoods, the up and coming neighborhoods will appreciate the fastest.
So just get into a home.
[01:00:42] Speaker A: Appreciate that. I know Mike, Michael Zhao totally agrees and we'll be talking about it on the post live show on Twitch. We have right after this show. Rick, we want to thank you for coming out today and we want to thank our audience for joining us on the journey into the heart of mortgage innovation. Remember what we said, every mortgage has a story. We're here to help you write yours. If you enjoyed today's insights, please subscribe, whether it's on the live show or our audio where we're gaining ground. It'll help if you share it with your network, you comment, connect with us on social media. We will reach back out. We will thank you.
Until next time, keep pushing the boundaries and uncovering the stories that drive our industry forward.
[01:01:26] Speaker C: Thank you guys.
