Barring further serious economic disruption from the COVID-19 crisis, the U.S. housing market is poised to rebound in the second half of this year. Pent-up demand, record-low mortgage rates and slowing home price appreciation have combined to potentially set up the housing and mortgage industries for a strong recovery. However, a full return to “normal” is likely going to take some time.
Flagstar Bank, which provides home loans through a wholesale network of brokers and correspondents in all 50 states, is supporting its third-party originator (TPO) partners during these challenging times with a broad suite of product offerings, advanced technology solutions, and tailored training to help them adapt to the new marketplace.
To learn more about how Flagstar is helping its TPO partners navigate these unprecedented times, MortgageOrb recently interviewed John Gibson, senior vice president of TPO lending.
Q: What are the biggest short-term and long-term challenges that your TPO partners face? How do you see these challenges possibly shifting and changing in the months to come?
Gibson: On the short-term side, there is the capacity issue—both on the lender level and on the TPO level. In this environment, with low interest rates and volume quickly getting back to historical highs, capacity plays a huge part in the short term.
Long-term—and I think this really started at the beginning of the COVID-19 crisis—is the ability to adapt to the ever-changing marketplace. Right now, the main focus is on product offerings, guidelines, overlays, and interpretation of guidelines, and I don’t see that changing. It’s all about the ability to adapt to what is presented in the marketplace—and I can see the market continuing to change through the rest of 2020.
Q: The purchase market has shown remarkable resilience during the past few months, considering the circumstances. What opportunities do you see emerging for TPOs for the remainder of 2020—and how can they best capitalize on these opportunities?
Gibson: We are starting to see a robust purchase market come back online. But we’re not going to see a spring market like we traditionally see. Instead, July, August and September are going to be the purchase season this year. And we’re already starting to see it rebound.
As certain states open back up, we’re seeing a corresponding increase in purchase applications. And it’s due to pent-up demand. For the past several months, we have had all these homebuyers sitting on the sidelines because of stay-at-home orders and social-distancing mandates.
Potentially, the purchase market in the second half is going to be one of the strongest we’ve ever seen. That’s why TPOs should be building relationships with their business partners for real estate transactions, i.e., real estate brokers, right now, so that they can capitalize on the market they will face over the next 12 to 18 months.
Q: Flagstar offers a broad suite of product options for its broker partners. In what ways might that be important, as we emerge from this crisis?
Gibson: Our business partners have choices. There are some wholesale lenders out there that are very product-specific, and there are others, such as Flagstar, that offer a wide range of products. As we come out of this environment, it’s key for TPOs to partner with a lender that has a depth of product that they can rely on for multiple levels of borrower support. We’ve learned that having a well-rounded package of products is beneficial. A lender that offers a comprehensive product line can more readily satisfy its business partners’ needs.
And for Flagstar, it’s not just about our commitment to having a robust product line; it’s also about our 30-year commitment to the mortgage space. It’s in our DNA. Flagstar has been supporting mortgage brokers and correspondents for upwards of 30 years now. And when you marry that with a diverse product line, it bodes well for our business partners.
Q: How and why are brokers now better positioned to help borrowers with their mortgage needs compared with banks and other lending institutions? Is tightening credit a factor in the growth we’re seeing in the broker segment?
Gibson: I don’t know that a broker is necessarily better positioned compared to a bank or online lending institution. What I do know is that a lot of talented people in the industry have made this their career, and in many cases, being a mortgage broker is the best fit for that individual.
Some brokers may not want to be tied to one lender based on the lender’s perspective on market conditions, how they mitigate risk, and their interpretation of guidelines. Even pre-COVID, there were certain processes—certain risk and credit factors—within certain lending institutions that did not line up with a particular originator’s book of business. That originator needs to make a choice: ‘Do I change the way I operate, or do I switch to something that better suits my book of business?’
Q: In terms of technology for brokers, what would you say are the most important advancements in the past several years?
Gibson: Technology and how it is applied to the loan manufacturing process has been a big focus for our business partners. It’s all about speed, ease of use and process efficiencies.
Technology gives our partners the ability to work more efficiently with borrowers—to ingest information and be able to communicate with them via the channel of their choice, versus the old-school days of having to meet face-to-face in order to complete a hand-printed application. It’s made the overall process more efficient from start to finish—both on the broker level, with the technology they have at their disposal, as well as on the lender level.
For example, we recently introduced a way for brokers to do loan estimates and application disclosures on their own, inside our loan origination system. This new DIY feature has generated a lot of positive feedback among our broker partners.
We also recently enhanced our mobile responsiveness, allowing brokers to gain new efficiencies when they are away from their desktops. And our platform will soon allow our correspondent partners to produce the loan estimate and closing disclosure from inside the system. This is huge on the non-delegated correspondent side.
Our goal is for our TPO partners to be able to take a loan from start to finish with the least amount of clicks. That’s the driving force internally at Flagstar from a technology perspective.
Q: Training is a critical aspect of any wholesale and/or correspondent program. Are there any new developments in terms of how Flagstar is supporting its TPOs with training and coaching?
Gibson: We have a hashtag: “We Are Where You Are.” Our account executives are not centralized. They’re not sitting in one location—they are in the marketplace with our business partners. And in the pre-COVID world, they would see each other at kids’ baseball games and PTA meetings.
The average tenure in the sales force at Flagstar, up and down the line, is roughly 17 years. Our experienced AEs understand the Flagstar offerings: the processes, the procedures, the manufacturing of our business partners. So training starts with our AEs—and they are some of the best in the business. And, hand in hand with our business partners, we’re making sure these AEs are fully trained on everything Flagstar-related.
Big-picture-wise, we support our business partners in a variety of ways. We continually work with the agencies to provide training and seminars. This year, we will be hosting a webinar on how to refine a business plan, and we’re working with Freddie Mac on an affordable housing seminar.
Q: The mortgage broker segment has been growing during the past several years. In fact, it is stealing people away from other parts of the industry. Do you expect to see continued growth in your wholesale network through the remainder of this year? And why?
Gibson: It’s true that during 2018, 2019 and into 2020, the broker space continued to grow. The market-share data bears that out. And we expect that trend to continue into 2021. A couple of things are driving that, including credit tightening—if you want to call it that.
And if you look at it simply, by definition, a broker is a mortgage professional who is able to provide options to meet borrowers’ financing needs. That optionality plays a role in the growth of broker market share.
So where is this growth going to come from? If history repeats itself, it will come from individuals within the industry who look at their current situation and decide that based on their book of business and how they function, they would be better served by having more options, as opposed to being locked into a single channel.
Bottom line: We envision broker market share continuing to grow, and we have planned for that here at Flagstar.