At the end of a discussion at AIME Fuse on how to step ahead of your competition with non-agency products, Danny Horanyi, SVP of retail innovation at Caliber Home Loans, offered mortgage brokers a way to reframe their thinking about portfolio lending and shared some strategies that are working in the field right now that brokers and retail lenders alike are using to grow their volume and to become a better partner to their referral sources.
The most urgent segment to approach regarding portfolio products, Horanyi said, is the homebuilder community because most of them have a fiscal year end that aligns with the calendar year. So they’re currently looking at their inventory and what they need to do to close as much as they can in the next several weeks. Because of this, they’re never more open to a new or backup relationship than they are in the 4th quarter—or if they have a different cycle, originators can plan for that.
“They have a relationship with their client for nine months, six months, and all of a sudden it’s falling apart? That’s a nightmare scenario for them,” Horanyi said. “It’s a great opportunity to catch them at what I call an emotional leverage point, when the clock’s ticking and the dollars are just slipping out the other side of the P&L to jump in. So you come in as a deal-saver.”
The thing about working with referral partners, builders and financial planners especially, but realtor partners as well, is they have a long-term relationship with their clients, and have already invested time, energy and money into that relationships. An originator who can step in and say upfront that they’re not trying to steal them way from their other partners; they simply want to get more yesses for clients with tools that don’t currently exist for them.
“Ultimately, there’s blind spots in their business, and most often, regardless of which referral partner segment we’re talking about here, the non-agency space is an area where they have a very distinct blind spot. Even if they do have one of these solutions, these solutions don’t have a broad enough platform of execution,” Horanyi said.
The goal isn’t for originators to convince partners to use them as opposed to their existing partners. Instead, approach them with the unique solutions available through portfolio lending that that could exist as a backup whenever a borrower is being told no or an escrow is falling apart. Before they pull a contract, the originator can take a look and provide an analysis.
Every transaction saved is money in everyone’s pocket, and a key for every borrower.
For originators whose primary fear is increasing automation, the non-agency space is actually a safe place for them, because it’s not about fitting in the box and therefore, it’s a much more specialized skill.
“If we look at something like a portfolio lending type of solution, it is much more difficult to automate that and it is much more difficult to put a call center person that used to be a barista five days ago on the phone with a client and actually have this delivered. Which means that we have an opportunity as on the street, local professionals, to really provide a service to our client base to our realtor partners, and to the other referral partners that we’ve built,” Horanyi said.
John Gibson, head of wholesale production for Caliber, said that the challenge is for brokers themselves to change how they think of portfolio lending.
“This isn’t a space for your tired, your weak, and your poor. It’s not the perception of what it was a couple of years ago where it was, they had the foreclosure or they had banged up credit. That’s not what this is,” said Gibson. “So when you hear non-agency or you think portfolio, change your mindset of what that loan and what that borrower actually looks like.”
Horanyi left brokers with a wild proposition: to partner up with originators at other lenders who need a way to say yes to a client but can’t due to their specific constraints. He said that of the $43 million in portfolio loan volume that his team closed over the years, $8 million of it was referred by Bank of America, EverBank, and Wells Fargo loan officers. Other lenders have buyers who are already vetted and ready to go. Being creative about partnership opportunities allows originators so seize the fallout from other lenders.
“It’s actually winter that we’re heading into but I would say that we’re heading into a metaphorical winter of our industry and being able to huddle up and know who your team members are going to be throughout that process is massively, massively valuable,” Horanyi said.