WE'RE HEARING from some football fans about my column last week who were shocked that I dared to compare the mortgage industry to the National Football League. Many readers were offended that I would dare to speak negatively about the occupation that we all depend upon so dearly for the sanity it brings to our lives and families, which of course is football season.
I guess its OK to sort of poke fun at ourselves in the mortgage business, but not at all OK to make fun of Jets QB Mark Sanchez and his famous butt fumble play, which not only was one of the worst plays in the history of the league but occurred on Thanksgiving, guaranteeing maximum viewership (Go ahead and read last week for the joke about Mark Sanchez. And if you don’t know about the butt fumble play be sure to check it out online @ http://www.youtube.com/watch?v=gOJlHHyN-hE.)
As summer ends and we prepare to kick off the fall conference season (and the new football season), it’s only fitting that we revisit the many ways in which the NFL is like the mortgage industry.
My first observation comes from twitter follower @schnaps who tweeted that “U.S. mortgage lending is like the NFL in that it is being ruined by too much officiating and rule changes.” I had already thought of a number of comparisons, but have to say that I appreciate how succinctly Schnaps crammed his sentiment into a short 140 character tweet, nailing down what many are feeling. I take at least 500 words per week, but I need that much space for jokes. But @schnaps is correct in that the NFL surely has changed and those rule changes are having a profound effect on how the game is played. That surely is how many in the mortgage industry feel, too.
One big change we’ve seen in the NFL involves the league’s attempts to clean up the game and make it safer for the players. As a result, we’ve lost long appreciated parts of the game—the head hunting tackle. Viewers love the big hit of the player coming across the middle, the big impact, and the big score.
We’ve seen the same thing in the mortgage industry when the unscrupulous LO takes on an unsuspecting borrower, getting the extra fee or the higher rate as the borrower tries to sprint to the closing line (I expect even more feedback on that comment than the Sanchez one.)
Not all loan officers participated in that sort of behavior, of course, just as not all football players lead with their helmet, deliberately trying to hurt or maim. But just as the NFL is trying to curb the most egregious actions of some players, so too is the CFPB trying to change the actions of some mortgage players by proposing new rules that will really change how we play the game. And just like NFL players, figuring out how to change our behavior—our aggressive sales processes, our natural instincts honed over years—is not easy.
This is having a big effect on some companies, especially when it comes to structuring fully compliant compensation plans for originators. Ask any career football player about contract negotiations and their importance will be impressed upon you.
At its core, structuring these plans is a legal exercise, and we have been involved with several clients who are trying to figure out how to pay originators who are used to getting paid based on how much they were able to collect from customers. They need to attract that top talent, but they also must pay in the new compliant manner.
At Stratmor, we have done extensive modeling that helps lenders determine how changes on their compensation plans and changes in market conditions will impact their bottom lines. Because even if you can’t pay the originator ON the bottom line, you certainly need to know how the bottom line is impacted by how much you do pay. The modeling takes into account all the potential ways you could pay the originator and then shows how those decisions would impact LO pay. The modeling also lets you make predictions about changing market conditions, such as an expectation of higher purchase and lower refinance volume. It’s sort of like a sophisticated way to do a fantasy football draft, which makes it fun. You know how the player performed in the past and make some assumptions about the future, then the model tells you how they are likely to perform this year. If only fantasy football was that easy.
I have way too many football-mortgage parallels for one column, so I’ll save the rest and look forward to any you send me this week. Maybe they’ll show up in a future column. Or, we can talk about them later this fall on the conference circuit. I’ll give the keynote address at the SourceMedia Mortgage Technology Conference in Fort Lauderdale this November, just a week prior to Thanksgiving. I will try to get through the entire speech without running into anyone’s butt and fumbling my point. Hope to see you there.
Garth Graham is a partner with Stratmor Group, and has over 25 years of mortgage experience, from Fortune 500 companies to startups, including management of two of the most successful mortgage e-commerce platforms. He was formerly with Chase Manhattan Mortgage and ABN Amro, where he was a senior executive during the sale of its mortgage group to Citigroup.