What the IPO wave may portend, according to a mortgage industry veteran
The wave of nonbanks going public raises the stakes for lenders across the board, as those newly public companies seek greater brand recognition and growth, one longtime mortgage executive said.
“We haven’t seen this in at least 10 years, but certain competitors of ours are trying to line themselves up again for world dominance, to be one of five players that together capture 60% of the market. So for Union Home and our executive team, we think time is of the essence now to play on a larger scale, because we do see history repeating itself,” said Bill Cosgrove, owner, president and CEO of Union Home Mortgage and the former chairman of the Mortgage Bankers Association.
But there are clearly some new dynamics and challenges this time around, Cosgrove noted. Among these is an increase in the importance of brand, consumer-direct lending and proprietary technology amid a digital revolution accelerated by the pandemic, he said. In order to stay competitive, every lender, no matter the size, must adapt.
“I think as an industry we’re at a crossroads where it literally is a double down or go home decision,” said Cosgrove. “The customer of the future seems to be as attracted to brand name as, ‘Hey I’ve got a friend who does a great job with mortgage lending.’”
Even smaller mortgage companies that don’t have any plans to go public, like Union Home, must place more focus on branding and distinct technology along the lines of those used by publicly traded nonbank behemoth and digital lending pioneer Rocket Cos. to compete, Cosgrove said.
That’s why, for example, Union Home recently became the title sponsor for what is now named the Union Home Mortgage Gasparilla Bowl, an annual college football postseason game played in Tampa, Fla. The company also invested in signage at and near the Cleveland Indian’s Progressive Field in its home state of Ohio.
“What we’ve tried to do is take on certain attributes of competing companies that work,” Cosgrove said. “We’ve seen others learn how to build a brand, we’ve seen others that really double down on technology. We’ve seen others double down on people, and it’s paid off.”
There are ways to stay competitive as a smaller firm, Cosgrove said. While Union Home may not have the resources to develop a completely proprietary technology platform like Rocket’s, the company has been able to tap a lot of the latest advances — like optical character recognition with the artificial intelligence component — by mixing its own IT innovations with off-the-shelf products, he said.
Cosgrove and the company’s staff determine the extent of their technology investments based on their strategic value in growing the company in an unpredictable market.
“We want to do things cheaper and leverage technology to create operating scale, but more importantly, we want to do it because consumers are demanding we do business that way,” said Jon Baymiller, who oversees business process and technology efforts for the company.
“You have to be responsive to that or you are going to be a dinosaur,” Baymiller said.
The extent to which the company continues remote operations has been part of that reassessment, he said, noting that some loan channels outside of consumer-direct may fare better outside the remote-only environment.
“It’s going to be hard to be remote forever,” said Jim Ferriter, senior vice president, retail sales. “For my sales team there’s a lot of interaction with real estate agents with referral sources. There are clients that like to meet face-to-face.”
The number and variety of loan channels lenders have could help to distinguish them against competing mortgage companies. Cosgrove thinks at this point the best mix is a diverse one.
“I think everybody’s in at least two channels and we think strategically all four help us to be successful,” he said.
When it comes to staying on top, Cosgrove agrees with analysts who consider cost controls, capital and strong retention rates among the key strategies in the highly regulated mortgage business.
He also stresses the importance of being able to roll with the punches and readjust strategies on the fly in a business where historically, it’s been a good idea to take all predictions with a grain of salt.
“I have no crystal ball,” Cosgrove said. “All I know is the last 20 years, when we’ve looked at what’s different and what the next year is going to be like, we’ve often been wrong.”