Challenges Facing the Mortgage Industry

This feature originally appeared in the February issue of MReport.

For more than 15 years, Mike Fontaine has played a key role in the evolution and success of Plaza Home Mortgage. He is COO & CFO, responsible for the day-to-day operations of the company’s businesses and financial management, including strategic planning, overseeing Capital Markets, IT, Marketing and Servicing operations, and the development of BREEZE, Plaza’s loan origination system. 

He spoke with MReport on the challenges 2020 brings, technological changes, and how the industry can appeal to a younger demographic. 

 

What are the main challenges facing the mortgage industry? What are the problems you’re looking to solve and victories you want to achieve in 2020? 

One of the biggest challenges right now is matching staffing levels to demand , given the volatile rate environment. We’re all about service at Plaza and we need to make sure that we have the right staffing to handle the volume. The refinance boom in the second half of the year just came in out of nowhere. It was a good problem to have, but at the same time it was one of the biggest challenges for our industry this year.

 

How do you prepare for that fluctuation in staff? 

We have wholesale and correspondent channels and this gives us additional flexibility. Our correspondent channel makes up the majority of our volume and it is less labor-intensive for us, because it relies on third parties to handle many of the review functions. In addition to competitive pricing, our correspondent sellers also receive additional protections from manufacturing defects and for fraud through our Certified Loan Program. Our third party review firms are set up to handle fluctuations in volume. They’re able to push more people our way as necessary or where they can back off a little bit if they need to. That helps us quite to manage volume up and down. 

On the wholesale side of the business, we are managing volume through automation and technology. We’ve been making a lot of technology investments over the last several years and that is starting to pay off. It also improves the client experience that we offer. 

We’ve spent a fair amount of time mapping the workflow from the loan origination process and zeroing in on the activities where you’re spending a lot of time or money. Usually it’s the same activities . By focusing on those areas and then finding the right vendor partners to help with improving automation or outsourcing pieces of it to a more certain cost or a lower cost provider, you increase efficiency. We have a strategic planning group that’s tasked with continually looking for improvements.

 

It’s necessary to revitalize the business and we’re an important part of the homeowner experience, and with that we have to be able to provide the personnel to do it as an industry.

 

What do you do to attract new employees? 

We spend a lot of time on this. Much of our focus has been on getting the new generation of associates interested in the mortgage space. In some cases we’re recruiting directly at colleges. We also helped start an industry group to attract the next generation of mortgage professionals. 

We continue to sponsor a lot of outreach programs that to get younger people to consider mortgages as a career. We also have a diversity initiative to grow the overall talent pool and make our workforce more representative of an increasingly diverse society. 

Now’s the time to do this, because our industry is aging. The good news, I just noticed today looking around the conference here, that I am seeing more younger faces at this conference than I had seen a couple of years ago. 

It’s necessary to revitalize the business and we’re an important part of the homeowner experience, and with that we have to be able to provide the personnel to do it as an industry.

 

How have you learned to appeal to a younger demographic? 

There are misperceptions about the opportunities in our industry. We need to be reaching out to the people who are coming out of college with teaching degrees but they don’t necessarily want to be a school teacher. Or for that matter, just about any degree. Because we need lots of smart, interested people who want to learn and who want to help other people. 

Back to those new grads with teaching degrees. They don’t realize that companies like ours have training departments and a training professional in a mortgage company is somebody who has a teaching background typically. That’s an example of something where people don’t necessarily think about. 

Maybe it’s somebody who’s got an accounting degree and they really like doing audit work. Maybe they would be great to be trained as an underwriter because a lot of that is an auditing function. It’s trying to expose people to the concept of the industry. I look around at our staff and very few of them as a percentage of our workforce have finance degrees. We have people that are history majors, environmental studies majors, and general education type degrees who probably never said to themselves: I’m going to be a mortgage professional. 

Those of us who have been in the mortgage industry for a while now, need be more emboldened about our industry. We provide the financing so people can experience the American Dream. 

 

What are some of the possible impacts of GSE reform?

Whatever they do, they need to make sure that they keep in mind the amount of business that the GSEs and our industry do, and the important role that we both play in helping first time home buyers, and the underserved. They need to make sure that they’re maintaining that volume. If they do something drastic that severely disrupts the marketplace, I don’t think that other entities would jump in overnight and fill that void at a similar price point. And potential homeowners would be severely affected. 

So far, the changes that they’re making and some of the things that have been proposed appear to be mindful of that. I can’t predict what Congress is going to say or do in the future, but, based on what’s happened so far, I’m more encouraged than concerned.