Uncertainty about the qualified mortgage rule has created an opportunity for expansion-minded retail lenders to recruit salespeople and branch office teams, executives at those lenders say.
The new regulation has made loan officers and branch managers take a long, hard look at their business models. While all lenders are dealing with the same rules, mortgage workers want to feel comfortable they are affiliated with a company that is compliant and has a clear vision for operating under QM and the Consumer Financial Protection Bureau. This has some recruiters emphasizing compliance, rather than compensation, in their pitches.
“The regs are getting very complicated. Folks want to talk a lot about our position on compliance and regulatory [matters] and how we’re implementing our regulatory changes,” says Howard Michalski, a managing director at W.J. Bradley, a growing mortgage banker based in Denver. “They are interested in reputation, stability and financial strength.”
iServe Residential Lending, based in Stamford, Conn., is another lender looking to pick up individuals and teams who are concerned about the new environment. Ken Michael, the company's vice president of sales, notes that it has inside and outside counsel to provide compliance interpretations, unlike many smaller companies that rely on trade groups or retain lawyers on an ad hoc basis.
iServe will add existing branches which are looking for a new home as well as hire an individual to build a branch in a particular market, says Michael. The de novo branches get recruiting and marketing support as well as operational backing from the company.
iServe might not find the right group that fits into its system when it starts recruiting in a market, but it might find an individual it can successfully build around.
"We're really a community-based lender. Our branches are heavily involved in their communities. So trying to find those communities we fit well into is sometimes difficult," Michael says.
So recruiting managers or branches can be difficult when you are trying to put a specific business model into a particular market.
iServe lends in 21 states across the nation, from California, Oregon and Washington on the West Coast, to New Jersey and Connecticut in the northeast. It will add both de novo and existing offices in all of them.
However, it does not plan to move into any new markets at this time, with the exception of New York and Pennsylvania, where it has applied for licenses. iServe might add offices in states adjacent to where it does business, Michael says.
iServe is a Ginnie Mae mortgage-backed securities issuer and it feels that its existing footprint is a good one for government mortgage product lending.
The company does conventional and jumbo lending, but "we're playing to our strengths" in where it establishes its offices, he says.
It wants to add 20 branches to its model. Right now, it has 32 branches. Unlike some companies in this business which have been known for adding branch offices for the sake of expansion, iServe wants people who head its locations to be technology and marketing savvy.
A significant part of the business strategy for W.J. Bradley Co. has been focusing on personnel growth, says Michalski. The company and its affiliate had nearly 10% of the originators on the Origination News 2012 top 200 list.
"If you provide a compelling value proposition for top producers, everything else falls into place," he says.
When it came to people looking for jobs in 2012 and 2013, the pain that caused them to seek a new position was related to capacity constraints. These people worked at companies whose infrastructure was not up to the volume of applications winding through the system.
This started to change in the latter part of 2013. Now the tone of conversation with candidates looking to join W.J. Bradley is totally different. Like iServe's Michael, Michalski is seeing people looking for a quality lender, not necessarily the lender with the best compensation.
The candidates want lenders to have a clear vision for operating under QM and the Consumer Financial Protection Bureau. They are interested in the lender's reputation and stability, he says.
A company which might be the most recent example of one that lacked those qualities was Residential Finance Corp. The Columbus, Ohio, firm reportedly was to be acquired by another lender because of its financial difficulties. There were unconfirmed reports of branch managers being owed funds. RFC's website currently has a placeholder on it.
People move companies to remove whatever pain they are experiencing with that prior employer, Michalski continues. Companies are strained by the new rules and the new economics of the mortgage market, with fewer loans and lower margins. Employees are worried about how their company is helping them deal with these new realities.
W.J. Bradley is focusing on helping its current branch managers and loan officers retool to meet that changed mortgage environment, he says.
By enhancing the value proposition for its current branches, the word is spread and that helps to bring in interested candidates for W.J. Bradley to consider. This is because others in the industry see this level of support and want to become a part of the company.
The company is speaking with a lot of branch candidates, especially among independent small to midsized lenders. Levels right now are three times larger than they have been in the past few years.
What sets W.J. Bradley apart is that whether a branch comes on or not, the discussion starts with what the company thinks a healthy business should look like.
Thus, much of the discussion is about business consulting rather than recruiting. Standard practice is to provide recruits a deep look into their business model with W.J. Bradley's thoughts on it, Michalski says. It does not have the typical "this is our comp plan" conversation with recruits.
The company considers itself to be entrepreneurial in its operations, but that does not mean it operates in a laissez faire manner.
"A successful entrepreneur needs to be a successful operator first. What that means is you have to be in tune with the market you are operating. If the market reduces revenue on your loans by 40%, you have better respond to that or you will perish."