Editor’s Note: This is the eleventh installment in the “Industry Warriors” series, a collection of profiles on veteran real estate professionals and lenders who produced high volumes pre-9/11 and pre-2008, weathered those economic downturns and rebounded even stronger.
Much of Tracie Southerland’s approach — with her clients, her team and herself — to weathering today’s economic uncertainty is rooted in personal finance.
Knowing your own financial situation is critical to feeling settled amid an unsettling time, said the 30-plus year veteran in mortgage banking and wealth management who primarily covers California’s Silicon Valley. In fact, she’s built it into her interactions with potential borrowers, modeling out how an income change affects the affordability of a house.
HousingWire spoke to Southerland — a senior loan advisor, personal finance advisor and wealth advisor with Opes Advisors, a division of Flagstar Bank — about the importance of financial planning in navigating today’s lending market.
This interview has been edited for length and clarity.
HousingWire: What are you doing within your lending business to adapt to the current market situation?
Tracie Southerland: I work directly with clients and Realtors, so I don’t manage a team of other mortgage advisors. I manage my team, which is a fulfillment team for the business that we bring in. It’s interesting that it’s been four weeks, and life has changed enormously in four weeks. Your head can kind of spin a little bit, dealing with all that and product changes, guideline changes, product suspensions and banks going out of business or at least temporarily shutting their doors.
All of what we knew four weeks ago is no longer there, not part of our world. How we adapt is you can only provide alternatives, products and options for people with what you have now. You can’t think about what was four weeks ago. It definitely has changed our life very dramatically. Now we just have to deal with what we have. What we do is look within our suite of products with our clients and Realtor partners and help them create ways to get their clients in homes. That’s the key.
HW: What are you seeing in the lending business in California? Are you still seeing purchases come through? Has the mix gone more to refinancing?
TS: Refinancing and especially in the conforming market has been pretty significant. Purchases are out there. We just got one contract last night, and we just closed a purchase couple days ago. There are purchases happening out there. When I talked to my Realtor friends in this area, the feedback I’m getting is business in March was 30% of what it had been, so down 70% from what it had been, but they’re also just getting their sea legs because their world has changed so dramatically as well.
You can sell a house and buy a house when it’s vacant; it’s much harder when it’s occupied. Those things are the new paradigm they’re all dealing with, so then how do we help them navigate back? We’ve thought of creative ways to help them with that, things like we have a bridge loan product. If somebody wants to access their bridge loan to help them get out of their house, so that they can buy another one, so they can make their house vacant, so they can sell it more easily — those are creative ways that we’re looking to help people navigate this time.
HW: How are you encouraging your team to stay positive during this time?
TS: The first thing I keep telling them is ‘this too shall pass.’ It doesn’t feel like it when you’re four weeks in and then they’re talking about 18 months or whenever, you can go all over the place with what the predictions are and how this is going to play out. I used to always say to people all the time, ‘Nothing changes but the changes.’ What we focus on is a couple of things. One is stay on top of our guidelines, stay on top of our product offerings, stay on top of the changes so that we can make really good offers to take care of our clients and our Realtor partners. That’s where we have to focus, not focusing on the history of what we don’t have but focusing on what we do have.
Also, understand they’re (the lending team are) people with families and concerns, and they have their own set of concerns with their family and their financials, separate from our clients and our Realtor partners. I have encouraged, from the beginning, stay connected to your financial situation, know what your expenses are, and project it out.
What I do for myself and I recommend it to them is look and see: What do you think the worst case is? What is that worst case potentially? Will you have to dip into savings? How much will you have to dip into savings or not at all? Are your expenses low enough that you can survive a downturn in income for a period of time? Those are all the things I have them look at because when you’re settled, when I’m settled, when my team is settled about our own situation, we can be much better help to our clients.
If we’re freaking out, it comes flying through that video conference, that phone call. Staying calm, staying relaxed, staying grounded is very helpful today. That’s our job.
HW: How are you staying positive?
TS: Well, I think the same way, knowing that I have saved for a rainy day. This is more of a storm, not a rainy day, a tsunami, but just keep making offers, keep looking for ways to be valuable to people. How are you valuable to people now with what you have to offer? There’s a fine line of watching the news and keeping on top of what’s happening so that you can anticipate things, but not getting so bogged down in it that you freak yourself out. Just trying to stay grounded, it’s tough. One day we will look back on this, and how we act in the interim is the key.
HW: What did you do in past economic downturns to successfully navigate that time?
TS: The most obvious is the 2008 financial crisis, more so than the others. In 2008, it’s very different, what happened then to what is happening now. The underlying fundamentals were weaker (in 2008) than they are now. The other thing is that we have a blueprint today for what happened; 2008 was a blueprint that’s helping us navigate now.
If you go back to 2008 and look at what happened, the Fed, Congress, everybody was slow to react, to step in and help. They did eventually, but it took months. The Fed’s actions and Congress’s actions now have been quick, have been decisive. They’ve moved very quickly to step in and help. That, I think, is the result of 2008. That was their blueprint for: How do we help here? That’s part of what’s different right now.
And it’s a different animal. Back in 2008, things just shut down. We couldn’t even originate a loan for a while; we couldn’t close a loan for a while. It was a pretty scary time. Then the pendulum swung dramatically, where if you wanted a jumbo loan, you had to put 35% down. It was, overnight, different in terms of what was available.
[Before 2008] you could do a “no-doc” — no income, no assets — loan and get 100% financing on a million-dollar house. That was the norm then, and those things have not been around for a long time. Now, you have to put more down than some of the jumbo financing. Credit score requirements are higher. Reserve requirements are higher, can’t get a lot of investment property financing right now. I think those are temporary pauses and because the underlying fundamentals are better, over time, you will ease back in an easier way than I think we did in 2008.
HW: What were some of the strategies you used in 2008, 2009 to navigate that time in your lending business?
TS: Stay on top of your guidelines. Things change so fast and what you don’t want to do is get your client in a bad situation because you’re not on top of the changes. Educating yourself constantly, and then being creative, figuring out, within what you have, how you can structure things to help people. It might not be the obvious ones. It might be better ways to do things. Combining the first and the second (mortgages), it may be a better way to do it than what you had done historically.
HW: You mentioned you couldn’t originate loans for a time. What did you do during that time?
TS: I remember figuring out where the niches were of the things (products) that we have, and then making sure you communicate that to your Realtor partners and to your clients, making sure you continually are letting them know what’s possible. Then staying on top of it as it began to unfold and change back so you could open up the product offerings. Somebody told me a long time ago, ‘Sell what you have.’ If you don’t have blue shoes, but you have red shoes, sell the red shoes. I don’t mean give them something they don’t want. I mean: What do you have to help them do what they want to do?
HW: Given your history in those past economic downturns, what do you think LOs need to know now that they might not be thinking about?
TS: I think clients are scared to act. They don’t know what the future holds. They don’t know how how things that they’re doing today will impact them. I was doing this before COVID was a thing: I spend a lot of time with my clients to help them figure out what they can afford, not just what is the potential lending environment for them, but really what makes sense for them financially. We have proprietary software for us to help them do that. That’s now necessary more than ever, to help clients get settled and help them look at scenarios. What does it look like if you buy x house versus y house, and how does that impact your financial concerns?
For instance, in our area, a lot of the people who buy here, their income is three-part; it’s base, bonus, restricted stock. Many are concerned that the bonuses won’t be there, that the restricted stock might be taken because they’re based on stock price. All those things that generate their income, what if that goes away, or what if it’s a lot less than it was?
For me, it’s helping them with, ‘If you want to buy this house, how does this play out and what are the scenarios under which you want to look at this?’ Many of them, we look at it with: What if you don’t have base and bonus for two years? What if that goes away? What are those things that would could potentially impact you and then are you still okay?
When people are sold and they know worst-case, best-case and all the in-betweens, they will act, but when they are unsettled and it’s all kind of floating around up there, they are not going to act in an environment like that. So I feel my job is to listen to their concerns and help them see what possibilities are there for them. Then they’ll act, and their action might be to not buy it. Their action might be to buy, but whatever it is, it’s perfect for them. That’s what I think our job is.
HW: What piece of advice from your history in downturns would you give to others in your field trying to navigate COVID-19?
TS: Just look forward. Don’t look back. Look at what you can do now for them, not what you could have done, and then help them make a decision about what’s going to be best for them going forward. The key as a mortgage advisor: just keep on reading the world, knowing what’s out there and you have to know what people are anticipating may happen.
A situation I had not too long ago, a client got into contract right when this was all starting, to buy an investment property. They were thinking about, ‘Maybe I won’t lock it, maybe we’ll see how things go.’ I’m like, ‘No, you need to lock now. The loan needs to be submitted.’ Once you’re locked and submitted, you get grandfathered in for the old guidelines. But if you don’t, you’re not, and you’re subject to guideline changes in the middle of a transaction. Don’t put people in that risk.
I might get you in contract today on something under a certain guideline, and if I don’t have you protected by locking you and submitting your loan for approval, that guideline could change tomorrow and suddenly you don’t have what you thought you had. We get notices all the time like, ‘This product guideline will change as of Monday. If you have anything you need to take care of, take care of it now.’
The key is anticipating what you see might be coming, so that you can protect your clients from things that that would be negative for them. It’s just about staying on top of it, knowing your guidelines, anticipating future changes and helping your clients navigate that stuff. They count on us to know that.