PERSON OF THE WEEK: The past few years in mortgage banking have been, for lack of a better word, tumultuous. But not everyone has been knee-whacked by a rough economy. Houston-based Envoy Mortgage, for example, has seen its mortgage production jump 400% in the past six years – no mean feat, to be certain. To understand how this accomplishment occurred, and to get insider perspective on where the industry is heading, MortgageOrb spoke with Bobby Welch, senior vice president at Envoy Mortgage.
Q: Earlier this year, your company announced that its mortgage production was up 400% since 2006, even as the industry has shrunk by 68%. At the risk of sounding corny, what is the secret of your corporate success?
Welch: That's not corny at all. As with most things, there aren't any magic bullets to success.Â
The entire team at Envoy Mortgage has worked very, very hard and we've been fortunate enough to have some luck on our side as well. Our leadership was very proactive in locating and hiring the management talent the company needed to grow early on. They weren't afraid to invest in people and infrastructure, even during 2008. The company has upgraded technology, opened up three underwriting centers across the country, refined processes to ensure consistent service and has launched world class sales management training to give our sales team the edge.Â
Every department is focused on incremental improvement in every area of our business. All of this creates a high level of service and empowers our originators and branch managers with the tools to compete and win. Equally, if not more important, it also allows us to produce high quality, compliant loans and serve our borrowers at a very high level.
Q: What is your view of the current state of the housing market? And where do you see the market heading in the next 12 months?
Welch: Oh, wow! This must be what Johnny Carson's Great Carnac felt like!Â
As far as the current state, I've been very pleased with what I'm hearing from our branches as I visit them or speak with them on the phone. Our purchase business looks really good right now and it looks really good across the country. Of course, everyone is excited by the recent reports of inventory levels dropping and the average time to sell going down.Â
We have good momentum in most of the country. Rents have been rising, and with interest rates at record lows, it is less expensive to buy versus rent in many areas. I think people are tired of putting off their American dream of homeownership too.Â
We still have some significant challenges ahead of us. Unemployment is stubbornly high, and many people end up taking lower paying jobs once they do find work again. The Echo Boomers are the next big home-buying demographic and they are saddled with record student loan debt, which affects their purchasing power.Â
We also have high profile issues like the fiscal cliff. In today's connected world, problems with the euro and the slowing of China. How our leaders navigate these, or don't, will have an effect.
To end on a high note, Warren Buffet was recently quoted as saying that one of the best things for the unemployment numbers would be to get residential builders busy again. These are high paying jobs that are good for the entire community. Home builders are reporting increased activity and hiring. Overall, I'm cautiously optimistic.Â
Q: From you vantage point, what do you see as the most popular products in today's residential mortgage market? And what makes these products so popular?
Welch: For purchase loans, the government programs run by the Federal Housing Administration and the U.S. Departments of Agriculture and Veterans Affairs are the most popular. Just under 70% of our purchase borrowers choose one of these programs because the credit qualifying and down payment options are more flexible than conventional loan programs. Most of our homebuyers are looking to afford the best home at the best monthly payment, and with record low rates, the 30-year fixed option is the most popular.
For refinance loans, we are seeing about 65% of our customers choose a conventional loan program because, as you know, if you have some equity, the mortgage insurance options for a conventional loan are less expensive than a government loan. Most of our refinance customers are choosing a 30-year fixed-rate loan to lower their payment as much as possible.
However, 26% of our borrowers choose a 15- or 20-year term and use the interest rate savings to build their equity faster. A product's popularity is driven by the loan purpose and specific goals of the borrower.
Q: Are there particular markets across the country enjoying substantially more robust housing sales? And, conversely, which parts of the country are experiencing weaker sales?
Welch: From what I'm hearing, most areas are enjoying solid sales activity. In fact, in the West, the biggest problem right now is that inventory is too low. Who would have predicted that last year at this time? Even in areas that have made headlines as continued value declines such as Atlanta, our branches are busy with increased purchase activity.
Q: What impact will federal REO-to-rental programs have on the overall health of the housing market?
Welch: While the program was proposed a year ago or so, I believe I read this week that the first transaction on the program actually just closed. I think the idea has promise since the sale of a distressed property through the standard listing process hurts the value of the entire neighborhood. On the surface, it certainly has the potential to help stabilize the value of hard-hit neighborhoods faster and also reduce the shadow inventory quicker.
However, I think we have to see the program in action before we can find the answers to some important questions: Will enough homes move through the program fast enough to make a difference? How concentrated will the inventory be in specific neighborhoods, and will it be enough to help stabilize home prices? How will the program affect areas where inventory is already low and buyers struggle to find acceptable homes for sale?Â
I hate to answer a question with more questions, but this program is so new and it is going live during such an interesting time of the recovery cycle.