Atlantic Bay exec predicts mortgage industry cuts

Atlantic Bay exec predicts industry cuts, offers advice on rightsizing

April 21, 2024 2:07 PM

Scott Reise, senior vice president at Atlantic Bay Mortgage Group, has been in the lending industry for almost three decades, with stints at banks, independent mortgage companies and broker shops.

Though he's currently at an IMB, Reise thinks no channel is better than the other. The only thing that differentiates a company is leadership.

"It's the leadership, or the C-level people running the company that really dictates, not just in our industry, but in any industry, how success is going to happen," he said.

Scott Reise, Sr. VP Atlantic Bay Mortgage

With the mortgage industry currently weathering an extended spell of tumult, Reise says he's observed a trend of leaders not stepping up to the plate to be transparent.

"I do feel like there's an incredible amount of selfish people in this industry that are only looking out for themselves and don't give a damn about anybody else," he said. "I'm not saying that's the majority, I think that's in the minority."

The lack of leaders stepping up at companies is especially highlighted when companies make tough decisions to rightsize their shops, he said. Executives should be "present, on the front lines and communicating with their people, [thereby] building loyalty within the organization," Reise added.

National Mortgage News interviewed Reise about the state of the mortgage industry today, how leaders should handle rightsizing and why originators may be on the chopping block this year. This interview has been condensed and edited for clarity.

Why don't industry players want to have honest dialogue about what's going on within their respective companies?

Some of the people probably don't want to say a whole lot because they honestly don't know what's going on because the C-level folks aren't communicating with them. They don't know what to tell people because they're worried just as much as the people below them are worried.

There's an incredible amount of selfish people in this industry that are only looking out for themselves and don't give a damn about anybody else. I'm not saying that's the majority, I think that's in the minority. But there's certainly some out there where they're just going to cover their own backside and they're not going to worry about how employees get impacted.

Then there's some other people in leadership roles right now that know what's going on and feel trapped. They can't do anything about it. And if they do speak up, there's retribution.

What is the temperature right now of the mortgage industry?

It's going to vary from company to company based on their overhead and how smart they were from a money capitalization standpoint. From 2019 through 2021, when things were really good, did they put money into a rainy day fund and invest it in a smart way? Or did they go out and squander it on expensive second homes, boats and reckless behavior?

What I'm seeing now is a sense of optimism from the people that are working really hard. I definitely see the activity picking up. It's still a challenge. I think even the top originators are exhausted right now, they've been through a lot the last few years. There's been a significant exit from the industry by originators so now there's a lot less men and women originators out there looking for the loans, so you're not going to have as much competition. But it's still tough. I feel like the salespeople that stay positive and work hard are going to see an uptick in volume this year.

Industry wide, over 40% of the non-sales support staff are no longer employed. Some companies are still spending a lot of money to bring loan officers on board and then making them sign a clawback for two to three years. If the LOs don't produce, they'll be let go.

My personal prediction is you're going to see more sales turnover in 2024 than operations. People like myself that are in an executive sales position, if you're a sales manager, branch managers, regional manager and you're not bringing value to the team, you've got a target on your back. I think you already saw a lot of those layers of management removed at other companies over the past two years. And I think you're gonna see some of that as well as traditional loan officers.

How does turnover culturally impact companies?

There are few operations people remaining at most mortgage shops that handle the business and everyone is already close to their max and now they have more thrust upon their shoulders because of headcount reductions. These people are getting burnt out. They're stressed and overwhelmed.

Talented people who do one job in the mortgage world are now being asked to do another job too. And the person who is supposed to train them is so busy running around like a chicken with their head cut off that they can't, so now you're seeing this vicious cycle of a combination of burnout. But it's also an inefficiency because you have the top people at your company now having even more thrust upon them.

Have any stories inspired you to talk about this issue?

There's numerous stories out there that I've seen secondhand through friends and firsthand to a certain extent.

A woman up in the New York City area recently responded to one of my posts. She wrote that she's a single mom with a 14-year-old son and he's growing up fast and she can't find a job. She's interviewing, but she's living out of her car right now. Her son is living with a good friend of the family who is willing to take him in.

When you hear stories like this you shake your head and ask yourself how does it get this bad? I don't fault the companies for the layoffs. The layoffs are a necessity, but there's a right way and a wrong way to do it. The wrong way is to completely ghost people and not support them afterwards.

You should give them the decency and respect of preferably [letting them go] face-to-face and giving an explanation of why you're doing this. About 70 to 75 percent of the companies are not handling it the right way and instead they're telling people not to reach out to them.

I personally feel like I have an obligation to [help mortgage industry employees impacted by layoffs] because the industry has been so good to me. Many have reached out to me for career advice and I'm more than happy to help.

Looking ahead, how can companies do better in terms of mindfully growing? Might technology be a partial answer?

Having strong leadership that's willing to be transparent and put themselves on the front lines, they're the ones that are going to reap the greatest rewards across all the different industries. There's also others that won't respond to a text message or a phone call, they're completely absent.

Some companies are never going to learn because they just simply don't care, they are just cogs in the machine. And they're just gonna keep doing what they're doing.

But I do feel like the intelligent companies that truly value their employees that truly care, they typically have really good financial people. I call them bean counters. They have really good bean counters at their company and they learn from mistakes.

I think as an industry, we need to learn from this and sit back and say, maybe we ramped up too fast in 2020. Didn't pump the brakes quick enough. Now that we've gotten here, we have to evaluate what technology is available, such as artificial intelligence, and what the current staffing should look like.

What do we think the realistic production that processors or underwriters can handle looks like? What's the least amount the average operations person can be handling that still makes sense for us to keep that position? And then on the high end, once they reach this point, at what point should we start looking for another person to handle the business and determine those metrics, and then stick with those metrics?