Episode Transcript
[00:00:00] Speaker A: All right, welcome, everybody, to another episode of the Mic Duff show. We are here on season three with some phenomenal guests. Um, you know, just having Bill Loman and John headland both in the same presence of us, I think really goes to what we're aiming for, which is a great combination of leaders that have been, that created something basically out of nothing or an origin story. We'll hear climb to the top of the mountain. But we're part of advocacy and moving the industry forward along the way and being able to do both for anybody that's done it.
It's a big obligation of time and money if you decide to throw some of that in too. But definitely advocating is a lot of time. And in addition to running an entire company, I don't know how some of them do it, but we're very thankful they do. And so if you're interested in something like that, please subscribe to the podcast you're listening to today, as well as if you want to see this live. And we do this so that someday, maybe next year, guests can come on, they can comment. We put your comment on there. Good for your branding. Might have a question that's always live at 02:00 p.m. eastern and of course.
[00:01:13] Speaker B: At 11:00 a.m. pacific in sunny San Diego.
[00:01:17] Speaker A: And that would be on LinkedIn Live. YouTube live.
Facebook Live. Though the Facebook's think I have like 500 connections there, so. But you can really find us on that YouTube Live, that LinkedIn Live. And then please tune in on Mondays on our YouTube station. Subscribe. We do what's called a mic drop after every episode and it sums it up in case you want to get something a little bit extra out of it. So without any further ado, John Headland, a leader in the industry who I've seen quite a few times at the conferences and his schedule between the planned people he has to meet with and I don't know, John, every time you're moving from a meeting to meeting, it seems like 18 people are trying to shake your hand. Was it always that way or. Obviously you have an origin story where you started off, you're not canadian, right? You just worked for a canadian bank and then.
[00:02:06] Speaker C: No, I was. I'm originally canadian. I'm still a canadian citizen as well as an american citizen.
[00:02:13] Speaker A: So is that how your journey to RCB came about? Is that like bank in your backyard?
[00:02:21] Speaker C: Yeah. I joined Royal bank of Canada out of college and was destined to be a banking person and did a variety of roles across Canada.
Great company tremendous amount of training, experience, worked with a lot of great leaders.
And we bought a mortgage company out of Chicago, probably 1990 819 99. And about a year or so after we purchased it, I was asked to go down as the first canadian executive and probably really just to oversee them and make sure they weren't doing anything too funky. And I've never left, so stayed in the business from there.
[00:03:02] Speaker A: So we had some planned questions, but as usual, I throw a curveball right away.
Can you explain the difference between a mortgage in Canada and the United States and maybe some of the pros and cons you believe of both sides now that you've been in the industry for so long?
[00:03:20] Speaker C: Yeah, I think if you're american and haven't dealt with other countries on the mortgage side, you may not be aware, but it's a unique and ultimately, I'd say the most innovative model out there with Fannie and Freddie, with Ginny.
So in Canada and most other countries, it's really bank balance sheet lending and the bank would service your mortgage. In Canada, for example, if I went and got my mortgage, RBC and I found out they sold that to CIBC, that would be mayhem. That would not culturally go over well. So the buying and selling of msrs, that's just not a thing in most markets outside of the US, 30 year mortgages, that's not normal because that doesn't work on your balance sheet. From a hedging perspective.
And the biggest impact to Americans, the benefit I see is the ability to not have prepay penalties to refi mortgages. So in Canada, if I have a five year mortgage, so this would be the worst scenario. You just got a new home in Toronto, I should say Vancouver because thats where Im from. And you bought got that in 19 or in 2019 at five and a half, 6%. And then over the next two years it went to two and a half, two and three quarter.
If you wanted to refi out youd had to pay back that interest and make it whole.
So now all of a sudden in 2024, your mortgage is up and now you're getting it back at 6.5%. So you missed out on that ability to refinance your mortgage. That is a uniquely american phenomenon, Preston.
[00:05:04] Speaker A: So that's on the refinance side. How does the cause, I mean, it's in the news right now with Nar and everything and you see them referenced in the UK. There's a lot of people that support that model, that these sellers agents really control everything.
What is the model in Canada and do you think that it dances well with that arm structure?
It makes it different than the United States or is it pretty similar to the United States? Just different mortgage product.
[00:05:35] Speaker C: It's been a long time since I've been there and bought a home in Canada. So it may have evolved, but it's a much simpler process overall working with your bank. One of the challenges we have, and it makes our industry very complex is the fact that the MSRs get sold and bundled up and package mbSs, et cetera, et cetera. In Canada, you go into the Royal bank, you've got good credit. You could get approved for your loan probably within an hour because they know you. And so that is the benefit on the lending side, on the real estate side, yeah, it's just, it's more akin to the UK model.
[00:06:13] Speaker A: Do more people move because of the adjustable? Like does it force more like. I know we're having like an inventory frozen here in my town. You know, half my friends parents still live in these like by themselves in these huge homes kind of clogging up that, that inventory. And I hear it. Do you think that's because these 30 year fixes sure are nice and even maybe paid off at this point?
[00:06:34] Speaker C: Yeah, I think it is.
What are we calling it? The locked in effect today that I could move out of my 5000 square foot home and I want to move to a 3000 square foot home in a different location and it will cost me more money.
That is a challenge. Now in the canadian model, that's not an issue.
I'm not giving up the 2.5%. I might give up a little bit depending on where the markets move. But it's not as dramatic obviously as we have today. And again, I'd say the pandemic was a phenomena and we're probably not likely to see that massive variance in such a short period of time again. But locked in effect, I think answer your question. Mike is not as strong in Canada, for example.
[00:07:22] Speaker A: All right, final question before I let Mike co host jump in here, you helped explain to our users, or at least I should say, sorry, that's my software background, our viewers that some simple items that I think they can relate to and understand and get absorbed. We typically deal with retail lenders that are selling in a model that's also easy to understand. My loan officer comes, approaches me. You climb to the highest levels in a channel called correspondent in case we dive down here and hear your story. And you could elaborate along the way on how you created a marrow home or at least got to that leadership position, because we wanted to talk about leadership here.
Can you maybe just give some of the talk to me like I'm four years old out there, what correspondent is, in case we get into it so they understand and how it is a very important part of the infrastructure of the mortgage industry, even if they don't. A person doesn't actually go face to face with a correspondent lender.
[00:08:22] Speaker C: Yeah, no, good question. And a lot of people don't get the nuances of it. And we think traditionally of retail, or maybe even wholesale brokers.
I think a correspondent. The easiest way to understand it is we provide liquidity to the actual originator.
Unless you are really large and have well capitalized banks, some of the larger lenders out there that sell direct to Fannie or Freddie and probably retain servicing. The vast majority of mortgage companies sell whole loans and don't retain servicing. And Ameri home being one of the leaders, Pennymac, Nuurez, et cetera, buy whole loans. So we basically facilitate. It's a business to business transaction. At Ameri home, we had over 800 clients, which are mortgage companies, predominantly retail, but wholesale as well, and some with multiple channels across the USA. And they will do a loan, get a borrower, and then they will throw those loans to their investors, that is the Amerah home of the world, and put them up for bid, whether it's a best effort or a bulk purchase, and we will bid on them. Basically at a loan level. You throw ten loans out, we win three. Those loans come into us, we will not re underwrite them, because if it's a delegated relationship, we're relying on the underwriting process. But we will do a QC on those loans. We will underwrite a sample per requirements and basically package those up, send the wire to the borrower when we purchase it, and forward that loan to Fannie or Freddie. And then we retain the servicing. And that's pretty traditional for the larger correspondence. I would say it is. And we might touch on this in other questions. But as we built the company, we all came from countrywide and then b of a when they purchased countrywide, and we really saw a gap in the market with b of a exiting countrywide. And that's really where we founded Ameri home. So we were a group of senior executive, each of us kind of leaders in our own space, that saw that opportunity and kind of ran with it. And I think a key to that is we knew the business well. We knew that the margins are the smallest in the space. Worse than a wholesale, worse than retail, certainly worse than consumer direct in a refi period. But its a scale business. And so to do that, you need to be large to drive down your fixed overhead and your cost per loan. So our intent when we started the company was not to make it. Our intent was to be top five. And that really helped drive how we built the company, whether thats the tech infrastructure, the backhand, the operations, and the degree of people that we look to hire.
[00:11:12] Speaker B: Wow. Going back to our initial topic when we were talking about your experience in Canada and then bringing it forward to your correspondent relationship, what do you think it took for you in order to get the experience necessary to have the mindset of thinking, okay, you enter into the business at RBC and then you're doing your thing over there, and then you come to the United States where banking is done differently as far as mortgages are concerned. And then, you know, between 98 to 2008, there were two, two major economic events and then marijuana. So what were some of the events that you think you went through in order to go from, I don't know anything about lending to here I am in Canada doing the lending thing, here I am in the United States doing the lending thing, and I'm going to be a top five, not just a lender, but a correspondent to everybody else, a purchaser. So I'm going to go from, I don't know, anything to, I'm going to be, you know, king of the world.
[00:12:18] Speaker C: Well, um, certainly a lot of learnings along the way, good and bad, I think to give credit to the Royal bank of Canada when I joined there in 87. So a few years ago, it was done differently and they invested a ton in their management talent. So I had an opportunity. A lot of this was around leadership, to get hundreds of hours of leadership training, and no bank, no large company really does that anymore. That models gone. And that was very impactful. I also, which is common in banking, if youve got some game, had a lot of jobs a year here, a year here, two years here. And they were in different functional areas and different business areas. I worked in HR, Ive worked in operations, Ive worked in product, Ive worked in sales, Ive worked in branch leadership, area management. And all of that was fantastic. Training in Canada.
Coming down to the US out of Chicago, a very different business model, much more entrepreneurial, much less capitalized, much more antiquated. When I showed up there, we had literally hundreds of files and boxes in the basement of the building.
We're right near the river fires, all kinds of issues. So just less regulation at that time, compliance, very, very different.
Had the opportunity to work there for several years. We sold the company, as we were talking earlier, to new century. So at RBC, we were largely a distributed retail, brick and mortar branches. We had a wholesale platform that we bought from bank one, but traditionally prime mortgages, as we called them at that time, in the distributed retail model, got a lot of experience there, worked with great leaders, great mentors, and then went to new century. And while that didnt end well, it was kind of the start of the beginning of the end for the industry.
It was a great experience. Again, a very entrepreneurial company, 1015 years old, went from nothing and grew to be second largest in that space until it blew up. So not every experience needs to be great to learn from. And I learned a lot from that.
I learned a lot from the founders and the executive team. They're still colleagues of mine today. So then I went to countrywide and got into the correspondence space. Heavy. And one great thing about countrywide, it was full of really smart people, and they were very detail oriented from Angelo on down. And that was a great learning and a great discipline about how to run the business well, how to understand it, how to think about it differently. And that really, you know, helped round out my career.
[00:15:13] Speaker B: It wasn't just countrywide. It was like they had credit, they had appraisal, they had title, they had. And really, correspondent is even different from, from retail, from wholesale. So was there very much communication between the various branches of countrywide? And, and how much did you communicate with the other branches within the countrywide family? Whether it was title, appraisal, escrow, retail, wholesale, correspondence, it, so that it could bring you a better knowledge basis on how you could create a better model as you migrated from countrywide into a marijuana.
[00:15:50] Speaker C: I would say, for all the positives of countrywide, that information sharing amongst the various channels was not their strong suit.
It was a little more silo driven than would probably be my approach now. Certainly at, you know, the senior levels. They talked, obviously, but, but it was more competitive than collaborative in many, many ways.
[00:16:17] Speaker B: Do you think that you, knowing that they didn't communicate, that you, that you attempted to bring more of a communication avenue? And how did you attempt to do that?
[00:16:27] Speaker C: Through amerahome for a marijole, for sure. And I deal with this in my current consulting advisory business. I think one of the things we did well at Ameri home, because we started from nothing, basically, day one, we went over to the Home Depot behind our office and bought card tables and deck chairs. I actually had to buy a computer to start that company.
So it was very much a startup.
And from the start we were very thoughtful, the founders of the company, around who we hired, how we hired, ensuring we were collaborative. And while we all had our own areas of expertise, whether it was finance or in my case the business or capital markets or risk management, et cetera, the four of us were very collaborative and really involved in every strategic decision, in addition to our day job, for lack of a better term. And I think we carried that on throughout the whole process. When I see companies today get very silo driven, not sharing information, not having good reporting throughout the business, it's very tough to pull this off. I think about running a mortgage company, or really any company for that matter. It's a massive jigsaw puzzle and the pieces need to fit together. And when people aren't communicating and having, you know, I used to say this a lot to all the staff and all the team at Ameri home. The second we stop dealing with tough issues, we're not going to be great and we'll have a hard time even being good. And so never be afraid to have a hard conversation. That doesn't mean attacking the people, but attacking the broken process or the broken problem. And that's how you solve stuff together and that's really important for all companies to think about. And I see it talking to people all the time and well, operations and sales are on the wrong page.
Thats not a great business model and eventually its going to lead to problems in your business.
[00:18:33] Speaker B: Whats an example then? Because obviously if countrywide is broken, then there are other companies that may not even know that theyre broken in their communication process. What would be an example that you think you could in your advisory service that you could, I mean, for example, if everybody communicates via Microsoft Teams, just for example sake, and they just don't like communicating that because their preferred method, and this might be a real thing, their preferred method might be Zoom call versus teams. I mean type teams, text teams versus teams, video call. I mean, how do you bridge that? The communication gaps where someone wants to be visual versus someone who wants to be audio versus someone who wants to be hands on in person.
[00:19:21] Speaker A: And also, I'll take it. And data, like the sharing of data obviously has been a little too siloed recently because it's become so new to be able to get it out of your system.
[00:19:32] Speaker C: Well, yeah, great question. First, I wouldn't say that countrywide had a problem with it. Number one, that was just their business operating model. And if you go back in time, remember GE and Jack? Well, thats how he ran it. They had 1015 businesses. And basically he said, youre all competing for capital, and im going to put capital where I get the return. So my point wasnt that it was a bad business model. It was ultimately, I guess they had challenges which are bigger than this, but it worked well for them. But back to a smaller, normal mortgage company. And your questions, I think all of those examples of communication are valuable and needed. I don't think I would want to rely on any one of them. The one you didn't mention is in person communication, whether that's via Zoom and from the leadership and talking. I think companies work best and or, sorry, people work best when they know what the plan is, they know what the vision is, they know what the objective is. And that can be as far as a vision. This is where we want to be at the end of the year, in two years and five years. But it needs to be more tactical and granular than that. This is our plan for the week. This our plan for next two weeks. This is our plan for the month, how we do, and here's where we're falling behind. And I think you can communicate in all of those forms and fashions. And Mike, you raised a great point. The reporting is critical.
One of the biggest things that I see, I saw with my clients at Amerihome, and I certainly see in Adnac advisory group, is a lack of quality reporting at all levels in a company. And I was talking to a client yesterday, and they talked about, well, we have, departments are creating their own reports. Well, that's a horrible model. I mean, it's better than nothing, but it's probably not coming from the same database. It's probably not the same time load. So I'm looking at a report as an executive, and then I'm talking to my team, and the reports don't line up. They think they're doing great. I think they're doing shitty or not well. And so I think having a common database of reports that are shared, different, subtly different reports, but they all tie out that the executive team's looking at that day to day management's looking at and line employees are looking at is critical. And not only with the actuals, because if I see an actual without any contacts, I don't know if it's good or bad. I need to know what my goal is, and I equate that to, you're in San Diego, I said, drive to New York youd eventually get there because youre a smart guy. But if I gave you a map or gps, im guaranteeing youre going to get there quicker and faster. Right. So give people the map, show them where youre going, help them get there, and then theyve got to make it happen. Yeah.
[00:22:35] Speaker A: A great example of connectivity at the housing wire conference. I just came from Michael Dubeck, who runs Planet home lending. You have a company that those correspondent services like you said. And he came up with this triangle model that I think everybody should learn from in that space. And it was the ability to look at your existing customers that are paying their mortgage, analyze their data, feed it to marketing so that marketing can market specific to the loan program that the data chose, and then feed that to the call center when the call is ready. Most mortgage companies, in my guess, are more of a straight line than a triangle, meaning they'll monitor the data and when they think there's a refi, they'll tell the call center to call. They don't include some sort of peppering of a, of a message to that consumer before they pick up. So it's almost subliminal. And that is an example to me of opening up silo. Right. Like marketing would be over here and they would just never, would be in meetings every, every month together. And if you can bring them together. So thats an example. My question because we referenced good to great and you really referenced it right there.
You get the who because, you know, even if the what changes if you have the right who on the bus, youre going to be able to accomplish it when you created your company, Amerihome. So at this point now youve been successful and, you know, the other executives that you have a little advantage. Like all of your founders were very successful and you guys were able to pair up in a perfect team. Get the who in this environment here, some people are changing roles. They were leaders of 500 person companies. They might have a chance to team up now and start something new in the next couple of years when they see it. What do you recommend for experienced people getting together? The whos. And when they do get together, stop being so distracted. And actually, because this is what I do wrong, you know, you get distracted with all these ideas, get the who and kind of stick to the communication needed to accomplish something that's easy to follow, like be the number one or top five correspondent lender. We don't need to be the best correspondent lender and have the best mobile app in the industry.
[00:24:59] Speaker C: Yeah, I think, you know, getting the right team is critical.
I think you touched on it, and we believe this. At Ameri home, when we started, we were very doing a thousand things. So we boiled down and said, we realized, I guess, early on, how important culture was. And so between the four of us at the time, we made an agreement that let's really be thoughtful with our first hundred hires and what are we looking for? And very simplistically, we wanted passionate people.
And by that, I mean people that gave a darn when they were at work, right, cared about the client, cared about the business. They wanted to see it successful. So trying to find that passion versus I'm just coming in and doing my job. The second thing is we look for people that were smarter than average, right? This is a complicated business.
I believe the more smart people you have, the better your outcomes are going to be. A lot of this is talking about tech. Tech is great and it's required and it's evolving daily. And we can use it to improve our efficiencies, we can use it to improve customer service, we can use it to improve connectivity, our data breakdowns.
But in and of itself, if you don't have smart people operating it and have it elegantly implemented and executed into your existing processes, you won't get the benefit that you're looking for in the ROI. So, smart people.
And lastly, I think it's a very collaborative environment, whether you're somewhat remote or not remote. So we talked about people that were good teammates and could communicate well and weren't on their own. Now, obviously, there's some roles where you can have kind of that sole guy working on his job, and that's great, whether it's a data engineer or whether it's an underwriter, as two examples. But ultimately, people that could communicate, particularly at the leadership level. So we use those three simple rules and interviewed the first hundred people together. And then the concept was, once we've got a base, much like a sports team or an organization, once you have that core group that has a culture, if were bringing in people that are close, theyll basically default to that culture. That turned out to be very successful for us. We also had a benefit, to be quite honest, when we started, of having the ability to pull our past employees as bank of America was ramping down. So our offices were where we strategically put our office where a lot of the people lived and pulled folks from that environment. And we knew who they were. So we brought in people that liked us, we liked them, we knew their work habits, we knew their relationships. Um, and we knew that they met those criteria and then we just grew from there.
[00:27:52] Speaker B: That's interesting because um, Logan Motoshami goes and talks about like, hey, the more the, the real estate market is like playing hungry or hungry hippos and you only have one ball, right. But I think that when it comes to hiring people in the way that you're talking about, you're not playing hungry hungry hippos, right. Because you see what's in front of you. It's almost like playing operation. You know exactly who this pool of workers are already through the bank of America in your previous life there. And then you can pick and choose who you want. Did you still believe at that point of fire fast, higher, slow? Did you hire slow during that operations process? And the reason im asking right now is because interest rates had been dropping recently and I think other independent mortgage bankers are looking at ramping up in anticipation of either a refinance boom or because inventory is also increasing an increased purchase boom. So knowing what we know now about what has happened in the past and then looking into that future, how do you think that other leaders should be looking at hiring into this next phase of potential increased business?
Hiring slow, hiring fast? Or is it going to be the same thing, same thing as production? Up and down, up and down, up and down. How do you think that other leaders can help navigate through that? Steven?
[00:29:12] Speaker C: Yeah, its a tough topic for leaders and its hard to nail it because the market is really hard to predict. Right. So we thought rates were going down, how much? They come down a little, but not a ton. You still got 78% of loans below 5% plus or minus.
So if we come down a little bit, what have we done in the last year? Over seven year or two? So there's a little bit of a refi boomlet, but I wouldn't call it a refi boom coming anytime soon. I think the guys that are ramping up from a staffing perspective are largely the MSR consumer direct shops because they're tapping those clients. And there's some of that for the traditional guys.
I think it goes back to a conversation we had a minute ago. One, you should have some experience and have some predictive analytics that shows where you're at, whether you are just an independent mortgage broker or you do own MSRs and have the consumer direct capabilities. But it's a tough deal because we've spent three years letting people go and that is probably the worst part of a leader's job.
And so I think people are going to be cautious. We had a simple model when we started and the pandemic wrecked it. But we used to have operationally in the fulfillment areas I'd run with 2030 40% contractors and it was a great model when there was capacity on the staffing side because we could basically test drive the employee and if they were great, we'd bring them in full time and make them that. And if they weren't, we would move on and it didn't have the same impact, particularly if you're a large public company, as a major layoff.
The other thing is I know I could get 15% to 20% excess capacity out of overtime. So that's my first lever to pull is I see it going up, we just go overtime, voluntary first, then mandatory, then weekends. And people haven't made a lot of money over the last two, three years. So for a period of time they're going to like that and they'll be willing to do it. Now this thing lasts, you've got to start hiring. So that's kind of, we'd add contractors, we'd go to overtime and then we'd start. If it sustainable, then I'd start adding staff.
[00:31:38] Speaker B: Is that very similar when there was a ton of companies closing down in 2008 to 2012 when Ameri home was beginning to ramp up, and then, you know, in the last year and a half, two years, there was a lot of layoffs or voluntary removals due to lack of production.
Do you think there's very much similarity to where initially you had this black swan event in 2008 and then we had this second black swan event in 2022. And do you think it's very similar in the way that there were layoffs and do you think there's any difference in hiring back?
[00:32:14] Speaker C: Well this was rough, right? We went through eight quarters of industry losses, so it was pretty rough, but I still dont think it was as bad as the great Recession.
Companies were wiped out, losses, bad reputation on the news every night. So I think that was tougher. Now the difference was the government, the GSEs, FHFA spurred a lot of volume and a lot of refi activity with the Hamps and the harp programs back then. And that got mortgage companies kind of back on their feet.
1112 13 kind of timeframe if Im remembering correctly.
So those were differences from this where were kind of on our own. But I think after two plus years of losses, consolidation and companies going out of business and what I just said, we have a still, while theres a few more homes in the market, its you got to look at numbers versus percentages or compare percentages to 2019, not last year because last year was horrible. So we're up 30% year over year refis. But that's from an extremely historically low base. So you got to cut the data and get into real numbers and think to yourself, if you look at Fannie's forecasts, NBA forecast, they don't have rates dropping considerably. I think in a year and a half to two years, maybe it's in the high fives. Well, thats some volume thats better than we had before. But were going to be in two years. If those are correct, a $2.5 trillion market. When you adjust that to units, that would be one of the third worst years in 25 years.
[00:33:59] Speaker B: You referenced Jack Welsh and how you put the silo then to the product or to the part thats going to produce the greatest amount of rate of return.
And so along those same lines then agency business isn't making that much money yet. If you look at an independent mortgage banker, it's 90% of their business.
So then if the silo that makes the greatest amount of return currently is non QM. Last week we had quantic talking about non QM business. And so if the non QM literally makes you six times as much on a gross level, not on a net, then what do you think that the industry leaders to the originator as far as an education level can go to and also then to the public to increase the productivity in that non QM type of business so that we can. That's the silo that makes the greatest ROI.
So what do you done to educate from your level? To educate as a correspondent, to educate the IMB, to educate the originator at the main street level.
[00:35:09] Speaker C: I think just thinking about non QM and you're correct and there's buyers for it because the yields are better, right. So they like it as an asset.
However, there's a reason 80 or 90% of the business is govian conventional because that's what most people qualify for and it's generally cheaper. So I think if people are thinking of getting into that space, I think one of the challenges I think companies and we certainly did this at a marijuana I think having focus is really important.
It's hard to be really good at everything. And when we started Ameri home, we were correspondent delegated correspondent lender. Now over time we added consumer direct because we own 70, 80, $90 billion of msrs. We ended up adding non delegated to gets that leverage our brand name, the whole growth cycle and ultimately open up some retail, traditional retail, but not until we mastered the one and moved to the next. And I call it leadership shiny object syndrome. I dont think theres a panacea out there. Theres nothing thats going to change your life and make you a huge amount of money overnight. Theyre all hard. And if youre traditionally a larger shop and are thinking of adding non QM, I think thats fine. The challenge is non QM lenders tend to be fairly specific, and this one is great at this, this ones great at this. So now I have a bunch of other investors thats complicated on the underwriting side, the processing side. It takes time. You make mistakes, and that capital can be somewhat flighty when the market moves dramatically and they no longer like that. And I'm left holding the bag and I'm selling loans at $0.80 on the dollar. So I think kind of where I'm going in that is, I think it's fine to have it as an extra, but you're probably never going to compete with people that are niche and focus on that market. And that's who their sales force is, that's who their underwriters are. That's how they're set up. And it just becomes a challenge for companies. It's nice incremental revenue, but if we had a bunch more companies go into that space, for example, the denominator is not that big and the margins would go down, a simple supply and demand. So if we had more people out there focused on that market, which I think was kind of your point, uh, the margin goes down because now there's just more competition for that. And I don't have to pay as much to own that loan.
[00:37:40] Speaker A: And the numbers that they set at the housing wire, um, one in every 20 loans last year was a non QM. So theres the numbers.
[00:37:48] Speaker C: Jumbo is a bigger piece, right, particularly in the states where we all live. So Jumbo is a bigger market than non QM today, and theres some benefit to that. But jumbo buyers tend to be fairly savvy and shop great rates. They have some cash, they move it to banks, and thats where that market kind of ends up.
[00:38:10] Speaker A: And I'm going to switch gears with a question, but before I do, is this specifically meaning the whole market suite of what you could be, should be and what John would be offering if he ran your company? Is that where your advisory is today, or is your advisory. I know you have a, I feel like you've been wanting to bring innovation to the market for a long time. But when you run a company as big as yours, change management and kind of stick with what's working, have you, is this more passion and kind of bring in what you've been waiting to tell the industry for years, or is it more what you're an expert at and just helping them get more revenue and return out of what they're doing today, and who is your customer? And then I'll switch gears with one question.
[00:38:55] Speaker C: Okay, great. Thank you.
I think, just going back to Marilyn, I think we always tried to be, maybe not bleeding edge, but we tried to be involved and focused. You know, if you think about the corresponding business, I said earlier, it is a very low margin scale business, but if you do $40 to $80 billion in our best year and you make, you know, teens basis points, it's real money. So that's kind of the mindset there. So our focus was always on getting cost out, whether that was in the early days offshoring or over the last five, six years, just automation. And we've used a lot of great partners to do that and to drive that down and to integrate that with our people and with our processes as seamlessly as possible. So, to the Adnac advisor. So I'd like to say I've gotten more involved in the tech side since I've left Western Alliance bank and Ameri home on a couple advisory boards, three or four of those in various roles. But I've always had infinity for it and recognizing the value of technology not as a standalone, but as I said before, integrating it into your process with your people in a very thoughtful and elegant way. And that's one of the things that I focus on at ad NAC advisory in my consulting role, because a lot of companies, I think, don't take the time, the effort to implement technology thoughtfully into their company. And by that, I mean taking the time, number one, to have full management on board and supportive, having defined project management processes, procedures, working with the vendor. And really, to use the three little pigs analogy, you need to build the brick house, not the straw house. And a few extra months will yield dividends for years in terms of returns and ROI and happiness. I talked to a lot of folks in the space today, and theyre unhappy with a lot of their vendors. When you boil that down, I put a lot on the actual way that it was executed and implemented. It's not to be given to the tech guys to implement without the business people or vice versa, to be quite honest. You really need to put a lot of time and effort into your tech evaluation, your partners, and then ultimately how you implement that to get the returns that you're looking for. And we're guaranteed and promised. So I think a lot of the vendors get blamed for stuff that is probably the lender's issue to some degree.
[00:41:44] Speaker A: I couldn't agree more with all of that. That's really in the world that I make recommendations on. On the other side, everything you hit on the head is, is absolutely correct. And hopefully lenders don't get discouraged because of decisions of yesterday, but are still optimistic for tomorrow. Switching gears, you know, entrepreneurs and you've been won multiple now often say that the process they enjoyed more than the destination. And I think it's not the money and the exit. I'm sure everybody loves that different way of, but you exit and then you, four weeks later, you're out of the sales cycle and you're like, oh, that was like, that was the end. And then you go back and you reminisce all over the next couple of years, and most of it is on something that happened during the process, during your process. Adam Marijolm, do you have one takeaway within the industry, you know, that you really enjoyed and then maybe one outside of the industry, meaning something you gave back to your customers or a mission you had or just something you really were enjoyed while you were doing it?
[00:42:56] Speaker C: Yeah, that's a great question. I think from a marijole perspective, it certainly wasn't, uh, straight uphill. You know, think of the stock market. We had some down days, down weeks where it was pretty tough, down markets. Um, thankfully, not much of it was self imposed, but we certainly made mistakes along the way. Um, but arguably, we made more good decisions than bad decisions. But as I think back, it really was, you know, building this and, and seeing the passion in the people and the excitement as we reached a milestone, whatever that was. We went from those card tables on November 1 to buying our first loan in April, 4 months later, and that was pretty cool. Now we had 15 people watching us process one loan and hit the wire button at the end. But that was pretty exciting. So I will forever remember those days. And we have many, many individuals that we hired in that first year that still work there today and have increased their career exponentially and growing. And so I take a lot of pride out of that. I'm happy for them. I'm happy for their families.
And so really, I think, like anything, I think about the people the most, and I still miss a lot of them and the environment and the excitement of it. So that was kind of my big thing there was just, it worked. Ultimately the vision turned into reality.
Now the exit was nice too. So now personally, I was fortunate to get involved. You had Bill on earlier. Bill and I are longtime colleagues and buddies and Bill got me into residential board of governors several years ago, probably eight, nine years ago. I ultimately chaired that and ended up spending time on the MBA board many, many years there.
I got into the California MBA, was chair there, got built into that. And I've met tremendous amount of people, put a lot of time and effort in advocating both in state of California where I live and where our company was, but also nationally with the MBA. I'm also currently chair of Mismo, which is the mortgage industry standards organization and all of those.
We're both great personal experiences, great relationships, a lot of colleagues in the industry, but we did a lot of work on behalf of the industry and I'm very proud of that.
[00:45:31] Speaker A: Yeah. One sort of story about you is messaged you over the years on LinkedIn like many people and not much that's mixed in with all the other vendors. And then I'd see you down at the conferences. But it really wasn't until went to, because more PAC has different levels. You can go to the more PAC event. Anybody going to Denver, I would encourage you to go. They welcome everybody. You just need a badge and the willingness to contribute $100 or, or thousand or more. Then you can donate at different levels. And if you, you can also go like I think I've been to nine straight advocacy conferences, people will appreciate that as much as paying because you need, you need numbers. But I went to a more packed dinner in DC and at the tables, Bill, who was on the show, Loman, Willie Newman, Christy Fergo, Al Blank from Union home. Right. And you, and I think really since then you'd take the time to say hello, walking by. So I think what would your message be to some of these lenders that are on their way up? Because there are some younger ones on their way up. I could name a couple that now are getting top 150. Others are being acquired so they're moving up. What is that secret world that sort of gets unlocked when you guys can tell who are part of MorPAc, when people are contributing authentically versus just trying to solve a problem in one year and get there that way? Like what? Can you just, yeah, we just love more pack here. So any endorsement you can give on why that is so important, maybe then.
[00:47:06] Speaker C: Show, I mean both more PaC and for the California folks campac or whatever state you're in, all of the states have them. And that's really important. That is how we get noticed. That's how we have an impact in Sacramento or DC.
And I think to your question about how would others get involved, I think giving is important. It shows your commitment to the industry. Consistent giving year after year is very important versus there's an issue this year and I want to give and get noticed. But more important than that is getting involved. And so yes, there's Rezbog, which is the residential side, the policy group for the national MBA. There's Kalmbaug on the commercial side we have commercial listeners and then the MBA board. But each of the states, California, obviously we have the California Mortgage Bank association, but most of the states, whether they're affiliated regionally or state driven, all have those. So I would just encourage people to get involved. The board is one aspect, but there's all kinds of committees that people can get involved if they want to ultimately get on a board or just to serve and give back to the industry, whether it's nationally or in your state, there are laws intended or unintended that impact your livelihood. And the more people that we have supporting the industry, being members of those organizations and giving to the Campax and the MoRPACs, the bigger impact we have. That is how state and federal governments work. And the national, we talked about nar tremendous group. They have an extremely strong lobby. We are decent in both the federal, state, federally and at the state level, but we could be stronger.
And we pay California, we don't have staff people like we do in the national MBA. So we outsource this to local people that lobby on our behalf and that costs money and time and again, so great, thanks for giving me that opportunity. I just encourage people, if you are such that way, get involved, look it up. There's lots of places to go for more information and we need more people that are willing to give their time on behalf of the industry versus their self interest.
[00:49:35] Speaker A: Thank you again, John. Any final thoughts? Mike, I guess my final thought is if you're listening, please give us a like or a subscribe. It allows us to go out and get better guests, to bring you guys better value. And we really do believe in pushing the industry forward. And that last two minutes just summed up everything that you need to know about what happens, not just on a national level, but how you can just start at the state.
[00:50:00] Speaker C: Yeah.
[00:50:01] Speaker B: Appreciate your time. And of course, we're here every Thursday at 11:00 a.m. pacific here in San.
[00:50:06] Speaker A: Diego and 02:00 p.m. eastern.
