It just so happened that I was visiting Cleveland last week when LeBron James announced his decision to join the Miami Heat. I don’t follow basketball but it wasn't difficult to understand the magnitude of this event for Clevelanders. After he declared his decision, most of the crowd at the restaraunt groaned loudly, gave a bronx cheer, and left the building muttering under their voice.
All individuals, companies and organizations experience change. Some change is drastic and some is slight. How we confront and adapt to change defines the future for us. How might LeBron’s decision and the resulting changes have anything to do with mortgage lending?
Over the past 36 months, our firm has reviewed over 100 mortgage companies. During this time, our industry has gone through the most dramatic changes I’ve witnessed in my 40-year mortgage career. The secondary mortgage market has been turned upside down, broad regulatory reforms have caused great confusion and slowed the loan process, and credit guidelines are as tough as most of us have ever experienced in our professional lifetime.
Of the 100 companies we reviewed, 1/3 of them don’t exist today. While some failed because of financial issues (lack of capital or repurchase loan losses), most died a slow death because they failed to adapt to the radical changes that played out in the industry. They held onto old business models and processes that weren't getting the job done anymore.
The operations that survived seem to be the scrappy regional mortgage banks that are independently owned and have successfully adapted to the new environment. In fact, these owner/operators have exploited the changes and turned them into opportunities. The common theme between these mortgage shops is they all adapted and evolved.
Radical change can be good if it rids the market of weaker players and provides new opportunity. Those who read and react quickly will give themselves the best chance for long-term success.