One of the joys of living in South Florida is spending New Year's Day at the beach. This year when walking along the shore I came across a sand crab making its way toward the water. My grandchildren were fascinated by the fact that the crab didn't walk forward, but sideways. Every time my grandchildren got close, the crab stuck its head into its shell, thereby making no progress at all.
As we sat there watching the lack of progress made by this crab, it struck me that 2011 should be considered the “Year of the Crab” for mortgage lenders. For all the opportunities we had during the year, we actually took advantage of very few. We just walked sideways, not sticking our heads out or taking any risks.
Unfortunately, we entrenched ourselves in standard positions and ducked those who would try to force us to repurchase loans based on origination guideline violations, never questioning whether or not the issues they found were really risk violations or just plain variances. If we had, would we have found new lending opportunities? Would we have avoided repurchases? Just like the crab, we managed risk during the year by avoiding it, even when it could have brought us numerous rewards.
In 2012, we once again face many of the same issues that kept us side-tracked last year. There are certainly plenty of potential problems coming at us. We need to begin the year by sticking out our heads, identifying the risks that we may not have recognized before, and finding ways to manage them. In my opinion going sideways is no way to go at all.
