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On Wednesday, March 10, the Mortgage Leadership Outlook featured Julian Hebron, founder of The Basis Point. Hebron and series' host Andrew Berman, head of engagement and outreach for National Mortgage Professional Magazine, explored the UWM ultimatum, capital markets, what independent originators can learn from big brands, an economic outlook for 2021, opportunities for originators in 2021 and beyond and more.
Hebron is a former C-Suite marketing executive in the mortgage industry with a handful of years working as a top producing originator and branch manager while building The Basis Point, a blog; sales and marketing strategy consultancy for banks, lenders, and fintech, and a "down to earth" financial media brand. He also served in executive sales and marketing roles with UBS, Wells Fargo, loanDepot, and LendUS/RPM Mortgage over the last two decades.
Highlights From The Interview:
- “As an originator, I wrote a Friday newsletter called ‘Market Week.’ When August ’07 hit, I started expanding it to a two-paragraph newsletter that was really for clients and Realtors on Fridays and the Realtors would get it, they knew how to talk rates at open house on the weekends. I basically got all of my Realtor business from it,” said Hebron when discussing how The Basis Point was created. It would later evolve into a marketing machine for his network.
- “Cycles are so important. I was taught early that it’s full market cycles or nothing. Our industry obviously survives and thrives through full market cycles, but the production mindset is definitely more like a monthly-quarterly behavior. So, it’s like this, I’ve been asking for years senior execs, ‘Who’s the customer? Is it the end consumer or is it the loan officer?’ Everyone knows that most execs say the loan officer because the loan officer is their viability … their market share. That’s how it works because most of the market share is still predominantly retail rather than direct. We can include brokers in retail because its consumer-facing loan officers generating the business. So, all execs are going to say the loan officers are the customer. I have had a line in the sand on that since long before AIME or BRAWL or anything else, which is the customer is the customer. I formed that sensibility as an originator, boots on the ground, belly-to-belly with people signing papers the old fashion way. The loan officers have all of the leverage.”
- Hebron touched on the UWM ultimatum to brokers who work with Rocket Mortgage and Fairway Independent Mortgage Corp. “I’ve been really surprised to see certain loan officers sort of saying, ‘Yeah!’ I feel like some of the sentiment around, let’s say BRAWL, as an argument versus just full market cycle long game as an originator who wants the most amount of options. All options all the time, that’s the professional originator/loan officer’s mentality. ‘I’m going to go where I’m going to get those options.’ So, for me, a decision like this is really complicated because I can see where today I’m siding with this line that has been drawn in the sand by a top wholesaler because I need that product. But if you game that out over the long haul, you and I both know that the deck on the leading wholesaler is completely shuffled from what it was in the last cycle and it will be shuffled again in the next cycle. To all of you originators, please, think carefully for what this means for you,” said Hebron.
- “If I’m a broker today I’m not signing that addendum today because I believe that even though I’m being told I lose that option, I would still make the decision that keeps everything else open. It’s an incredibly difficult decision there’s no question about it.”
- “Brokers are better and we’re better because we have access to all of the options.”
- “The rest of the world is going to get a lot more visibility than it ever got in terms of understanding gain on sale and what that means, how important is servicing in a full market cycle. I think it’s going to be incredibly important because Wall Street, just like in the last cycle, doesn’t fully understand that this is a little bit more resilient than people think. We know that mortgage is this wonderful cash flow business, but it’s never been this valuation business.”
- “Rocket is the best example of the biggest institution with the most originations and the most servicing and frankly their valuation is quite flat. I believe that when the Street watches us move as we move through ’21 Q1, the quarterly figures originations gross, purchase and refi originations is the same we’re going to do $700B plus in a quarter just like we have in the last few quarters, but then it’s going to start to drop off and then who captures the most purchase business is obviously going to be a factor and then how well does servicing support valuations. That’s what the public world is now going to be looking at because we have a lens on us like we haven’t had in 14, 15 years because there just wasn’t any public mortgage only companies.”
- “A couple things, the first AI in mortgage was in 1994. We’re 26 years into it. Yes, we will move more towards direct, but there is this convergence of the great mortgage companies that are retail only, that are fintech powered under the hood, but it’s all retail LOs. I think that humans stay but you still have to be smart and pick which horse you want to ride.”
- As for capital markets, Hebron said we have had our half-point rate spike. “That brought us to a level that coincides with what the 30-year rates were supposed to be like 2Q, 3Q and potentially even 4Q. We might as we have done in previous cycles, have just gotten there quickly. The bond market is very smart, knows what to do and is always going to trade ahead of any inflation fears,” said Hebron. He told Berman that the inflation fear is not real. He says while the economy will have some short-term volatility, it should balance out and end up somewhere between 3.5% and 4% as 2021 closes on the 30-year.
- “Everyone can stare at rates all day. Just know this, this year the industry will do 4 million refis and 5 million purchases, units. Next year, 5 million purchases and 1.6 million refis. That’s all anyone should care about. I got 5 million purchases this year and next year and that’s my business model. The rest is chatter.”
Check out the full interview between Hebron and Berman below.
See all the interviews from the Mortgage Leadership Outlook series on its YouTube channel.