Spring training is starting. Isn’t there supposed to be something exciting about that? We once read a book with a title something like Why Life Begins on Opening Day, and doesn’t that say it all?

PMI reported a tough quarter with paid claims of $518 million, but the good news is that delinquency growth slowed and new delinquent notices were down.  All M.I. companies have had some tough times lately, but PMI is definitely a survivor.

Think big or think small?  When we’re in a shop that is under leveraged, we like to run 3-4 scenarios showing what greater loan volume would to earnings.  When we see high volume shops, we like to run 3-4 scenarios showing loan volume shrinking by various percentages and margins doing the same. You can do these scenarios on your own with a basic spread sheet, and we think you should be running these every month.  When things change in this business, they change quicker and to a greater extent than anyone could have imagined, so knowing in advance what the impact might be can be good preparation for when the market turns.

The management at PHH noted in an earnings release that their mortgage production breakeven level is currently $28 billion annually or $2.3 billion a month.  If a big public mortgage company thinks it’s important to know their break-even number, every mortgage company should know theirs.

Is your Succession Plan current.  Think of your top 3-4 people.  If one of them got hit by a truck tomorrow or gave you two weeks notice, do you know exactly how you’d handle their absence? Do you already have 2-3 names of possible replacements? Well-run companies plan ahead. Top employees come and go, and maybe some will get hit by that proverbial bus, but you just don’t want to get caught flat-footed.

We made reference to CMG Mortgage Insurance Co. being out of business, and boy were we wrong!  They’re still in business and quite actively insuring new loans.  They’re among the highest-rated private mortgage insurers in the country and an eligible mortgage insurer for Fannie Mae and Freddie Mac. They’re meeting all existing loan obligations and have sufficient capital and reserves to pay all claims for new and existing business. The company continues to be an approved mortgage insurer with both Government-Sponsored Enterprises.

It’s well into February.  Do you have a 2010 budget which allows you to compare actual performance versus budget performance?  We’ll flat out tell you that top performing companies almost all have budgets, and poor performing companies rarely do.

We find it frustrating and maddening when companies don’t realize the healthy margins they build into their rate sheet.  This is typically due to a variety of operational problems, poor pipeline data management, and so on, but the one that’s most frustrating is when a company uses one of the nationally known hedging advisory services and still doesn’t get the margins they thought they’d get.   We know these services - MCM, Compass, CMC, SI, Flatirons etc. - and their models work.  If you follow their model, you’ll get that margin!   What is so frustrating for us is to see companies retain one of these advisors and not stick to the model.  It’s a prescription for failure.  If you don’t want to use a hedging advisor, that’s your choice.  But if you do use one of these advisors, don’t try to think you’re smarter than them, and don’t try to rebuild the model. It flat out won’t work.

We have an Orange County commercial bank client looking for someone to run their Warehouse Lending operations.  If you or someone you know is interested and has experience working for a warehouse lender, please send resumes to us at JGarrett@GarrettWatts.com.  For all you snow-bound people, Orange County has the best weather in the world. It was 71 degrees when we there a few weeks ago.