Bryan Filkey joined Interfirst Mortgage in November 2020, where he is responsible for identifying opportunities within the non-government guaranteed space, establishing securitization and proprietary execution strategies to arbitrage agency-eligible collateral, and developing and executing on the company’s core long-term strategy.
Filkey has 15 years’ industry experience, with substantial expertise in mortgage banking, alternative product development, and asset management. Previously, he was EVP of Credit and Strategic Initiatives at PCMA Private Client Lending. Prior to that, Filkey served as Senior Managing Director at the Lender, as well as President TPO and Head of Capital Markets at Impac Mortgage Corp. Earlier in his career, he held roles at Sun West Mortgage Company, Credit Suisse, Capital One, and PIMCO.
MReport: Could you speak about how you’re working to leverage opportunities within the non-government guaranteed space?
Filkey: Interfirst is really focused on high-quality borrowers, so, to the extent that the marketplace is opening up with demand in that space, we’re looking for products to put in there. Obviously, the jumbo market has come back and recovered nicely from the COVID-19 experience, and we’ve also got some significant changes coming from Fannie and Freddie through the PSPA on limitations on non-owner-occupied properties, as well as cash window deliveries. We also have a big potential change to the QM Patch. It looks like we’ll be able to have some additional documentation type opportunities there. We’re looking at how to leverage the best possible pricing in the industry to help us provide the best rates to the best borrowers. To the extent that that continues to open up, we’ll be actively and aggressively trying to figure out how to utilize those tools to deliver those products for our borrowers.
MReport: What are the primary headwinds facing the mortgage industry right now?
Filkey: For the broad market, the challenges are trying to determine what’s happening with interest rates. If we really knew where that was going, we’d probably all be managing hedge funds. But there’s obviously a cyclical nature to the business in general, and there’s heavy purchase appetite.
You’re seeing a lot of migration from cities to suburbs and a lot of millennials trying to move into that homeownership space, and they’re going to face affordability challenges. For the marketplace in general, it’ll be trying to determine how much of the business they need to pivot towards purchase or how much refi business is still out there to be done.
We finished last year near $4 trillion in originations, which is a record, higher than 2003. You also have the Fed, doing everything it can to try to keep the economy afloat and rolling through this process. If we can come up the other side in a positive way, the challenge will be in determining how much of the business do you want to pivot towards more private product, more credit-related product? And if you pivot too early, you might miss the interest rate product. There are decisions that need to be made from a staffing perspective and from a strategy perspective. If you want to hedge it a little bit, you will not get the maximum, but you also won’t have as much of the downside.
MReport: What are some of the factors that go into managing those decisions and trying to navigate an unpredictable market?
Filkey: Interfirst has a different problem than the industry, because we’re scaling and growing, and we can take market share. We can still grow into the space, regardless of which direction it goes, based on our low-cost business model and recent re-entry into the space. But if you’re a typical big lender, and you’ve got more employees than you’ve ever had before, you have to start to determine, especially at the cost basis that you brought those people in, how do you keep them satiated? Are you going to let margins tighten up, as the industry margins tighten up? Are you going to invest in technology? Are you going to pivot and save your tokens for a rainy day? Are you going to double or triple down to try to take up market share for the next refi wave? There are just different perspectives, depending on where you are in this universe. Are you massive already, hitting record numbers? Or are you growing and trying to figure out how you’re going to fit in the 2.0 version of the refi wave?
MReport: What should lenders be prioritizing this year? Are there areas of untapped potential that you’re seeing?
Filkey: From my perspective, if you look at heavily regulated industries in general, you normally see very large market share by a handful of players. Take insurance or banking, for example. The mortgage industry has gone through a lot of changes for banking and nonbanks. So, the question is, will there be consolidation within this industry that looks more like other heavily regulated industries? If you believe that’s the case, are you investing for the long haul to make that happen?
The opportunities available within this universe … it’s one of the last manufacturing bastions where you don’t have a tremendous amount of technology applied in order to reduce the cost dramatically. And there’s a compliance aspect of this, which has raised the cost of producing loans, which is quite different than manufacturing nails or something to that extent. But there is a tremendous opportunity from a consumer perspective. The dynamic of our consumer is changing; they’re looking to engage with lenders in a technological fashion. The old business model of heavy sales commissions, agents controlling the purchasing process, and which lender gets that loan—those are changing now.
Borrowers want to know how much they can spend beforehand, or they want to pre-qualify before they go off to purchase a home and many of them want the tools to determine it themselves. So, there are a lot of ways for forward-thinking originators that want to try to grasp what the wave and the future will be.