PERSON OF THE WEEK: A lot has happened in the mortgage industry during the past 15 years – but perhaps nothing has been harder to predict than the impact of the pandemic on this current housing cycle. The COVID-19 crisis has – almost antithetically – created a strong purchase market for those financially positioned to capitalize on current market conditions – while at the same time creating a potential wave of defaults coming from borrowers who were negatively impacted by it.
To get more perspective on how this current housing cycle is unique and, more specifically, how servicers can prepare to scale, MortgageOrb recently interviewed Rob Pajon, senior vice president of marketing and product development for USRES and its wholly owned subsidiary, RES.NET.
Q: This is your 15th year at RES.NET. What have you learned about creating product solutions for the real estate industry during that time?
Pajon: Change is the only constant, and having the patience to endure the ups and downs in the market cycles. Even when a project is concluded, there are always changes and how you plan for them and react to them makes the difference. During my tenure at RES.NET, I have learned that maintaining a steady cadence lends to avoiding an overreaction. As an example, overreacting to market trends can lend itself to building a solution to a temporary market trend that will not withstand long term requirements.
Confining product development to cater toward trends and particular market segments, over time, create rigidity and your products become dated and therefore unusable. Strategically implementing what aspects of the product might be client specific versus those that can fit global needs is another key factor to consider when building out your roadmap. If something does not have to be rigid, then make it configurable so each client can use all enhancements and products that you release.
My years in the industry have taught me to focus on the how and not the why. It is easy to focus on why, but our clients, particularly today, need us to focus on HOW do we get there, and in enterprise software, this is the equivalent of focusing on the journey versus the destination. So we ask, what is the most innovative solution that we can create, and how can I contribute? What is the game changer that will leave a mark?
Q: During your tenure at RES.NET you have seen a few real estate cycles – this cycle has a myriad of conditions occurring all at once – what are notable differences you see?
Pajon: Current conditions in many areas of the country have created a perfect storm in real estate – historically low interest rates combined with a lack of inventory will always signal an uptick in prices and a sellers’ market. One year into the pandemic, restaurants, hotels and recreation businesses have been the hardest hit in all but two states (as reported by usafacts.org, March 26, 2021), and retail giants filed bankruptcies by the dozens, causing layoffs nationwide.
The most notable difference during this cycle that has not happened during any other is that the predictions are all fluid in that they have carried about a 90-day prediction lifecycle, up to the period the next moratorium date expires. In this current cycle, it carries us through June, when it is expected to expire, that is, unless it is again extended.
Q: Predictions are mixed but in one, an imminent fluctuation in default inventory is foreseen. What is your advice for providing scalability?
Pajon: Have a plan in place that allows long term scalability but also have a plan to solve for short-term solutions – mortgage servicers have to solve for both when predictions for the future are so fluid.
After the ’08-09 mortgage crisis, there were lessons learned. Being agile, maintaining a solid workflow and reliable reporting with accountability for each of the business partners who are involved throughout each stage is critical. Mortgage delinquencies are expected to rise, and efficiencies in servicing must be at the top of the list especially today and particularly for non-banks. Seeking out those who experienced the crisis then and helped pave the way is where you will find the best resources.
Q: What makes the biggest difference between managing a portfolio in-house versus outsourcing?
Pajon: The primary difference is how you plan to manage the portfolio at large. What is the overall plan to manage the results and data and scalability of your portfolio? Do you have a plan to maintain oversight of the portfolio and any third party? Establish the answers in advance, and assure the measures are in place. Adding a third-party asset management provider can improve your results, particularly when hiring is difficult in many areas of the country.
The requirement to establish oversight programs for third party vendor and service providers as a part of overall compliance management is an integral part of any successful operation. Generally speaking, vendors that support your business to uniquely function do require oversight. If an oversight team has not already been established, now is the time to do that and assure that comprehensive reporting capabilities exist.
The team should pay particular attention to the quality and sustainability of the service provider’s controls and its ability to meet service level agreements and produce performance metrics. Before engaging a third-party provider, and really, in order to truly understand the risks by any service provider, you may want to have them explain their policies, procedures, internal controls and training practices with their internal and external resources as well.
Q: Is there anything you would do differently today than you would have done 15 years ago or advice you would offer your younger self?
Pajon: We have all heard, “use your critical thinking skills” and “don’t be afraid to be creative”, but never, “be creative when using your critical thinking skills.” Creative thinking and critical thinking are more often taken to be opposites. In fact, I had believed (and some of you reading this might to) that I could do one well, but it would require me to abandon the other. I would not do anything differently because growth is where the evolution comes from, but I would provide this encouragement to anyone 15 years my junior who is in the same space.
The challenge with creating, particularly in mortgage banking, is there are finite rules, therein lies the black and white. However, in developing the product(s) to support clients and vendors, after being able to combine both those skills, is what yields the greatest results. It is very similar to how one might write a piece of music; there’s inspiration, precision and the result appears effortless.