Margin compression, higher mortgage rates, and a purchase-focused market are dictating more sales process control among loan officers and fewer layers of bureaucracy in retail lenders.
This change will create a disruption from the cookie-cutter, non-personalized model, said Brian Covey, former vice president of regional production at loanDepot, who recently took on an executive vice president position at boutique lender Revolution Mortgage. And, according to Covey, the changes are necessary in traditional retail lenders to navigate the industry headwinds.
“LOs and a lot of us today want control back in the process, whether it’s the sale process or how to structure teams, how you get business,” Covey said in an interview with HousingWire. “I think all of that control has been removed in the bigger box retail.”
“Be different — we’re going to revolutionize the industry standards and give you a different kind of experience you’ll love” is a slogan on Revolution’s website.
Covey, whose career of more than 20 years in the industry included stints at Wells Fargo and Movement Mortgage, emphasized that the hybrid model of a wholesale and retail lender at Revolution is what drew him to a smaller lender, which gives LOs more control over the loan closing process and the flexibility of offering diverse products from the the wholesale channel through its broker outlets.
“It’s a retail correspondent lender. We underwrite to agency guidelines with very few overlays,” Covey said. The lender has broker products, including non-QMs and jumbo loans, he added.
Revolution, founded by Tony Grothouse in 2017, is a direct retail lender licensed in 45 states, with 316 active loan officers and 79 branches across the country, according to mortgage tech platform Modex. The lender originated a volume of $1.8 billion from the start of the year, consisting of 70% purchase mortgages.
Hiring local, top talent
The executive sees potential for the boutique lender to expand — especially as Revolution focuses on targeting the local and purchase markets. Training and hiring top talent who can penetrate local markets with their own database and network are roles that Covey will take on.
“It’s the local relationships. We hire locals, so they can work with the local real estate agents, CPAs, financial planners, and attorneys,” he said.
Looking to scale both sales and operations teams, the lender plans to expand to 150 branches from 79 with no strict timeline.
Custom and personalized signing bonuses will be offered to lure in top talent, Covey said, without mentioning specific numbers. However, it’s about the company fit that LOs are looking for, the executive emphasized.
“There are so many people that reached out to me this week that are handcuffed. They got a six- figure, seven-figure signing bonus and they’re stuck,” Covey said. “So I think that in many ways it was short term growth-minded both for the company and for the LOs. While some worked out, equally or more have not worked out.”
While the mortgage industry is expected to shrink next year, “there’s enough business out there,” Covey said. Real estate agents and LOs are exiting the business, but for those professionals who have the database and following up, they will be the one picking up market share.
“If 100 LOs get out of the market in one state, where does the one or two loans that they did a month go?” he asked. “It will be acquiring talent that joins us to grab market share that comes from other companies.”
Despite the bleak projection for mortgage origination next year, Covey says there is a silver lining. For people ages 35 and below, they want to have a piece of home ownership.
People will be moving out of their current homes, whether it’s due to families expanding or downsizing, he explained. With rates forecast to drop next year, Covey expects potential buyers who have been saving and getting their credit ready will come back on the market when springtime comes.
“I think that the American dream shouldn’t look past psychology. The silver lining is there are still a lot of dreams for a lot of people to move.”