Luke Hayden is executive vice president of PHH Corporation
and president of PHH Mortgage
. His 30-year career in mortgage banking includes 13 years at Chase Mortgage
, where he was responsible for all secondary marketing and risk. Recently Hayden was involved in the restructuring of ResCap
Hayden sits down for this edition of In This Corner
to discuss the current lending atmosphere and is staying competitive.
Given your experiences over the past 30 years with mega-lenders and for the past two years, with some major workouts, like ResCap, what’s your view of the state of the market today?
It is unfortunate that as an industry, we don’t learn from our mistakes. The recent meltdown is a revival of circumstances we faced in the early '90s – only this time we’ve blown up in a much bigger way. What does this mean for us today? The mortgage industry is at an inflection point and a fundamental change is in order, but it’s a course change that takes us back to basics. The days of poorly conceived products and lax underwriting practices must be behind us. Success – indeed survival – today will be driven by strict underwriting, risk monitoring, quality control and improved transparency from both lenders and borrowers.
PHH has had some well-publicized challenges, what attracted you to this company now?
I have long been an admirer of PHH’s outsourcing business model and the value proposition it offers to the end customers of financial institutions: banks, credit unions and real estate brokerages. It’s really the only company that has ever succeeded as a private-label originator and servicer. That model is even more attractive today, given the unpredictability of demand within market, the uncertainty that is being caused by new regulatory requirements and financial reforms and the margin compression on servicing side of the business. A growing number of banks and securities firms still feel compelled to offer mortgage products, but don’t want to face the challenges of managing them. That’s where PHH can and will own its niche.
In addition, I’ve been a client and a consultant to PHH and have known CEO Jerry Selitto and several other members of the executive management team for many years. The opportunity to team up with them and help rethink the mortgage business was so compelling I couldn’t pass it up.
How will PHH, as a non-bank be able to compete with giant banks like Chase, Bank of America, Wells and Citi?
In order to compete against institutions such as BofA
[stock BAC][/stock] and Chase
[stock JPM][/stock], PHH will have to be more efficient… be better and faster at everything we do. There are opportunities for lenders who are willing to rethink traditional approaches to originating, servicing and investing mortgage products. And those opportunities are particularly favorable for nimble, but disciplined companies like PHH. To maximize on those opportunities we have to be better. It’s as simple as that. We are currently embarked on a year-long initiative to drive efficiency and take more than $100 million out of our cost structure on a run-rate basis, and at the mid-point in the year, we are well on our way toward meeting that goal.
In PHH’s earnings call, the company said it was expanding its correspondent channel. Is it safe to go back into the TPO market?
As long as you have the appropriate safeguards, absolutely. Last year, approximately 20% of our volume came through our correspondent channel. This year we expect it to grow to 25%. Some of this new volume is coming through new relationships that we have recently established with Lenders One
and Ellie Mae
. In the case of Ellie Mae, our pricing will appear dynamically on the screens of a select group of mortgage originators, as they enter borrower information into their loan systems. But our primary focus is always quality, not volume. Without the quality control, I’d look for growth elsewhere.
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