Steve Ozonian is president and chief operating officer
of Williston Financial Group (WFG). He also is chairman
of WEST, a WFG company. Ozonian built the world’s first
national real estate search portal while CEO of REALTOR.
com. He has held top executive positions with Prudential
Real Estate and Relocation Services, Coldwell Banker, Bank
of America and one of the industry’s largest title underwriters. Ozonian also serves on the boards of Lending Tree,
Global Mobility Solutions, Realty Mogul and WFG.
Reach him at firstname.lastname@example.org.
An Overdue Change of Perspective
The leaders of our revenue-driven industry are beginning to get creative
By Steve Ozonian
Alook at the mortgage industry headlines of today in contrast to those from 10 to 15 years ago shows that our industry is changing. Headlines today discuss topics
rarely mentioned by industry professionals of the past,
such as vendor-management systems, application and
underwriting technology, and automating processes to
improve sales opportunities.
Years ago, virtually every headline not devoted to
announcing record loan-origination volumes or record-low interest rates was devoted to sales, markets
and opportunities. The mortgage industry — along
with its supporting businesses — has always been
When business was good, things like profit margins
were only given lip service. After almost a decade of
record refinance numbers, it felt like originators just
had to get more fish to jump into the boat if costs
began to rise.
Today, however, it seems everyone’s focus is on improving process, increasing efficiency and, above all,
lowering costs. What changed — and why?
A look at the “go-go” days from about 2002 to 2008
provides an excellent snapshot of how the mortgage
industry tends to function in strong market cycles.
It is true that this period was historically good, but the
traits exhibited were much the same.
For many mortgage-related businesses in the years
prior to the housing-market crash, priorities were similar and were driven by the primary characteristics of
the market: speed and volume to satiate the increasingly voracious appetite of the secondary market.
Finding the next emerging market, such as the reverse
mortgage or “nontraditional” borrowers, was a paramount concern for originators seeking a competitive
differentiator at a time when almost every lending
business was succeeding.
In addition, uneven enforcement of existing regulations encouraged some companies to cut corners in underwriting, sales practices and even quality control. This
put even more pressure on those who did follow the
rules to increase their efforts even more. And if production costs did rise a little, there were always enough fish
in the ocean to simply outpace costs with more sales.
The subprime meltdown
Then, of course, came the meltdown of 2008. Seemingly invincible giants like Bear Stearns, Countrywide
and Argent simply collapsed under the weight of unsustainable practices that had fueled their wild — and
temporary — successes of the previous five years.
“Subprime” became a dirty word.
In addition, the government-sponsored enterprises
(GSEs) themselves, core engines for the entire U.S.
economy in many ways, had to be rescued and put
into federal conservatorship. In the wake of this crisis,
mortgage brokers fled the industry by the thousands
and an era of record foreclosures began.
The aftermath of that meltdown is well documented. Fair or not, the mortgage industry was assigned
the majority of the fault for the fire that triggered the
Great Recession. From Wall Street and mega-lenders
down to mortgage originators and appraisers, anything that had to do with the mortgage industry in any
way was viewed unfavorably by “main street” folk.
The Dodd Frank Act and the Consumer Financial
Protection Bureau created to enforce the act ushered
in an era of new regulation and active enforcement.
In addition, regulatory scrutiny increased dramatically
at the state level as well.
New regulations designed to protect consumers
from some of the unsavory practices of the early 2000s
also brought tremendous costs and changes to those
businesses able to sustain them. A series of regulations
with acronyms like QM/ATR, TRID and HMDA drove
lenders to spend unprecedented amounts of capital
on nonrevenue-producing programs — programs
which, if not initiated, could lead to their demise.
The industry shifted from an age of unrestrained sales
to one of seemingly unproductive and unchecked costs.
With the concurrent — and long delayed — shift from
a refinance cycle to a more inherently competitive sales
cycle, and with the largest potential homebuying market (millennials) appearing to be more “white whale”
than impending savior, mortgage companies and their
partners finally turned their attention to one of the few
things they could control: operating expenses.
Mortgage lending is a simple business, really. When a
company isn’t confident in the sustainability of a sales
cycle, as happened throughout the refinance boom,
it naturally seeks new sales channels or new product
offerings. But in this highly regulated and strictly constrained industry, simply “inventing” a new type of
mortgage loan is rarely possible, much less a key to
In this situation, companies will naturally turn
their attention to costs and expenses, which is something our industry hadn’t been forced to do in years.
Amazingly, many of today’s mortgage executives
can barely remember — or were not working in the
industry — during the last higher-interest purchase
cycle. This is testimony to the unnatural length of the
Source: National Center for Biotechnology Information
“Silo may be defined as groups of employees that tend
to work as autonomous units within an organization.
On a farm, a silo prevents different grains from mixing.
In an organization, the silo effect limits the interactions
between members of different branches of a company,
thus leading to reduced productivity.”
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