Each month, National Mortgage Professional Magazine will focus on one of the industry's top players in our "Mortgage Professional of the Month" feature. Our readers are encouraged to contact us by e-mail at [email protected] for consideration in being featured in a future "Mortgage Professional of the Month" column. This month, we had a chance to chat with Paul Donohue, founder of Abacus Mortgage Training and Education. Over the years, Paul has been very active with industry trade associations, including national involvement with the National Association of Mortgage Brokers, and locally in his home state of North Carolina with the North Carolina Association of Mortgage Professionals (NCAMP). He has served NAMB in a number of volunteer roles, including time spent as a member of the NAMB Ethics Task Force, North Carolina’s representative to the NAMB Delegate Council, and was a certified instructor with the NAMB Educational Foundation. In 1997, Paul was honored with the NAMB Teamwork in Education Award and in 1998, was named NAMB Regional Broker of the Year. Serving his home state of North Carolina’s NAMB state affiliate, NCAMP, Paul served NCAMP as statewide association president in 1997 and was named the winner of the 1996 NCAMP Broker of the Year Award. He began his career as a custom home builder, crafting unique architecture in Blacksburg, Va. He entered the mortgage industry in 1987 and founded MoneyNet Mortgage Planning Services in North Carolina in 1989. Paul has personally originated more than 4,000 loan applications. Teaching from a lifetime of accomplishment and personal experience, Paul believes his purpose is to give the real estate finance industry the tools, skills and vision it needs to thrive in an ever-changing marketplace. Paul’s personal code of integrity and personal philosophy of reciprocity are woven throughout his teachings and storytelling. Paul grew up in Buffalo, N.Y. and as a young adventurer, spent three years traveling the United States before settling in Southwest Virginia. Married since 1978, he and his wife Deonna have raised two sons, Austin and Francis. They are currently building and living on the horse farm of their dreams in Summerfield, just north of Greensboro, N.C. Paul is a member of the Nationwide Mortgage Licensing System (NMLS) Education Provider Working Groups, is the author of more than a half-dozen courses approved for state mandatory education and a regularly featured columnist in industry magazines and publications. How did you first get involved in the mortgage industry? I started my career in 1976, as a home builder in Blacksburg, Va. Virginia Tech has a terrific architecture school and we were building fine energy-efficient passive solar homes. It was very cutting-edge architecture for the times. I loved custom home building, especially the interaction with the families I served. It was extremely rewarding; however, after 10 years of pickup trucks and nail aprons, I was ready to make a change. My wife and I had two small children, and I wanted something where I could create a better family life … and, I wanted to buy a tie! To me, with my blue-collar background, a white collar job represented a life change. I answered an ad in the Roanoke Times that a mortgage broker was looking for an originator for the Roanoke, Va. area. When I discovered I could make a great living, control my own time and serve homeowners, I was in. I knew nothing about mortgages or finances, but I loved home sales and was willing to work hard to learn the business. That was early in 1987, back at the beginnings of the mortgage broker industry. My company’s registration number was seven. Within six months, the owner made me the general manager and I stayed with him through the end of 1988. In 1989 I started MoneyNet, Mortgage Planning Services, a mortgage brokerage shop that I ran until the beginning of 2007. What was the secret to your personal production success back then? Two key concepts propelled my production over a 20-year origination career that allowed me to produce in excess of 4,000 loan applications. First was a singular focus on my customers. I discovered early on that my customers borrowed money for their own reasons not mine. I learned that every single person I met had a financial need and that need was always changing. When I fully embraced this truth, it caused me to focus entirely on my borrower’s needs. I was simply selling into my customer’s changing financial needs and timing was crucial. If they were not “mortgage ready” when I first met them, and if I treated them well and stayed in front of them with consistent follow-ups, I could provide them with a loan when they were ready. This was the foundation of my practice, and we went on to build a tremendous repeat and referral business as a result. Secondly, I quickly grew frustrated with prospecting where I spent 90 percent of my time getting in front of a borrower and only 10 percent of my time actually selling. To correct this, I developed a team selling concept where entry level employees were trained to prospect, pre-screen applicants and coordinate in-home appointments for me and my senior loan originators. This created a training ground for new loan originators and allowed the more experienced originators to spend their time in front of families originating. The result was a “high volume, high margin” loan production team and we effectively served a lot of families. Would you say that you utilize a particular management style to inspire and motivate your employees? I was a working manager and produced loans personally until 2007, when I transitioned my career. It’s a principle of leadership that dictates, “You cannot teach what you don’t know and you cannot lead where you won’t go.” One of my great mentors, Bill Brooks, taught me this. The leader sets the pace, communicates clearly the expectations and then demonstrates the values of the organization through his or her actions. The sales manager is the most important job in a sales organization, yet I find it’s the least understood position and gets the least amount of training and attention. Sales management consists of coaching, teaching and reinforcing expectations. Ultimately, you get the results that you measure and hold people accountable for. This cannot be done from behind a desk. Effective sales management happens in real-time, on the production floor and in the field. You must be committed to your originator’s success, which means direct involvement. It demonstrates that you are serious, that you care about individuals and I find people respond well to this. When did you see a need for educational requirements in the mortgage industry? The independent mortgage broker and mortgage banker channel exploded on to the market throughout the mid- to late-1980s. By the early 1990s, there was a trend of abuses and deceptive trade practices that had spread widely across the retail marketplace. Much of these practices were by short-term thinkers who entered the industry with the intention to take as much as possible out of each transaction. Back then, consumers were much less financially sophisticated and they were ripe for the unethical practices of the few. I also recognized that many originators did not fully understand their methods were destructive and that education and training could be a solution. There are givers and takers in this world, and I find most people want to do the right thing if they know why and how to do it. In the mid 1990s, I got involved with the National Association of Mortgage Brokers Education Foundation and began teaching the fundamentals of origination with a focus on borrower-centric principles. Knowledge is not retractable. Once a person learns something, it cannot be unlearned. Education represents growth and progress. Through the late 1990s, I was teaching and speaking across the industry. As the laws changed, individual licensing and education created an opportunity I gravitated towards. In 2000, I started my education company that has evolved into Abacus Mortgage Training and Education. With the SAFE Act and the development of the Nationwide Mortgage Licensing System (NMLS), I was privileged to serve on two working groups developing the education protocols for mortgage loan originator licensure. As an NMLS education provider, we are teaching nationwide and providing test preparation tools for the industry. It has been extraordinarily satisfying to play a part in educating our industry. As a former mortgage broker and past president of the North Carolina Association of Mortgage Professionals, how do you feel about the current role of the mortgage broker in the marketplace? This is a very complex issue in which mortgage brokers have been marked as the scapegoat and have been out-manipulated politically by influential power brokers with very deep pockets. With that said, I still think the mortgage broker can reemerge as a significant player in the primary market. With proper systemic safeguards, mortgage brokers still represent the least cost and most effective way to produce loan contracts. Several factors, including regulations, perceived capital risk and investor appetite for mortgage-backed securities, also happens to Fannie and Freddie and how we respond as an industry to our new realities, are just a few issues that will dictate the future role of mortgage brokers. Depending on the direction we go politically as a nation, it is very likely the mortgage broker can recapture much of the market share it has lost. I do not subscribe to the thinking that it is over for the mortgage broker. The relationship between the mortgage broker and its sponsoring lenders will no doubt be the critical link. To secure a seat at the table, mortgage brokers will need to demonstrate an ability to produce investment-grade product and have systemic quality control processes in place. The safety and soundness principles that were once the domain of depository institutions are being pushed down into the non-depository channel. And, the accountabilities go all the way down to the originator that sits across the table from the borrower. Although the mortgage broker industry has suffered deeply, it can ultimately rise again as a better incarnation of its former self. Do you feel that exemption from full SAFE Act requirements by depository banks will soon end? Before Dodd-Frank I would have said no. With its passage down the road, I do see it as possible. One of the objectives of the Dodd-Frank Act is the “leveling of the playing field” between banks and non-bank entities. With that, I think we have a chance of seeing the hypocrisy of unlicensed activity by mortgage loan originators (MLOs) working for banks coming to an end. The banks will fight hard to keep this exemption. If it does come to licensure for registered MLOs, it will be several years down the road. How can mortgage loan originators create distinction in this marketplace? The professional MLO brings two things of value to every loan transaction. First, the value they deliver with their product solution and the impact it has on the families they serve. Secondly, the value of who they have become as a person and a professional. We must never forget, people do business with people. And, more than anything else, people want to do business with people they like and trust, and with someone who takes the time to understand what they want. It’s a tight credit market and consumers have shifted their approach to taking on debt. My advice to originators is to become experts in their field. Become intensely knowledgeable in areas of debt, credit, equity management and the financial markets. Expertise provides comfort to consumers and that is value people will pay a premium for. To differentiate, drive up your expertise. In business today, your income will be proportional to your expertise. It’s also a highly skeptical time where people do not know who or what to believe. The integrity and good name of an originator has actual value today. This is a very positive trend. With the advent of things such as viral community chat, an endorsement by happy customers is the lifeblood of an originator’s business. The MLO should focus on every aspect of the customer experience, from application through funding and follow through. Give your customers an exceptional experience and the word about your value distinction will spread like wildfire. A highly-trusted mortgage expert exerts influence and is intrinsically distinct. Can you tell us about some required reading that has been helpful in your career path? The list is too numerous to itemize. I think you are either learning or you are dying. It’s that simple. The key is to have a reading or listening habit. The great thing is, the better you become, the better your rewards. I like audio books and use my windshield time for learning. With that said, here are a few classics that are must-reads: Philosophy: Atlas Shrugged by Ayn Rand; sales and business development: You Are Working Too Hard to Make the Sale by Bill Brooks and What Clients Love: A Field Guide to Growing Your Business by Harry Beckwith; personal development: How to Win Friends and Influence People by Dale Carnegie and Think and Grow Rich by Napoleon Hill. The mortgage business is one of those wonderful opportunities in which you can make a great living while providing a service that is meaningful. This is the new era of the professional mortgage originator. I believe five and 10 years from now, we will look back and see that we have built a better industry. It will take each of us committed to that end. It’s a pursuit worthy of our best work. Our nation’s future depends on it.