Eye Sight vs. Hindsight - Plan for a strong finish.

The mortgage industry is in the most challenging market of our lifetime. No matter what the industry does to you, or your company does, your worth remains intact. It’s up to you how you monetize it. Put yourself first and find a team that lets you participate in ownership. Be a shareholder!

If your CEO who represents the shareholders, or your LLC Owner who represents himself or herself, do not focus on the data balancing the equation, losses will mount crumbling the foundation of your path.

Prior to July 2022, I monitored accounting daily with no eyeglasses. Today, I need glasses to see the same screens due to the intensity and frequency needed to adapt and remain profitable for the last 11 months. Southeast Mortgage’s 62 Shareholders (1/2 Mortgage Originators 1/2 Operations Professionals), expect their fiduciary to steer carefully in storms. Huge value awaits those left to fill the voids of this cycle.

Do you know if your company is profitable? If it is not, put your career first and make your own choice to find a profitable company. When companies close, don’t let others make your choice.

One distress sale after another lately, employees post “happy to announce I have a new position with the company that bought what was left of their prior company.”

Put yourself in a position to prosper when the market turns north. Good deals are hard to find when a resume reflects poor choices.

Good profitable companies need competent good Mortgage Originators and Operations Professionals.
Since 1993, Same Name and Expanding Ownership.

www.southeastmortgage.com Phone: 770-279-0222

Time is your most valuable commodity. Use it efficiently.

2017 Gulfstream 280 - N536CH

www.southeastmortgage.com Phone: 770-279-0222

Theory of eye sight and hind sight:

The mortgage industry is in the most challenging market of our lifetime. No matter what the industry does to you, or your company does, your worth remains intact. It’s up to you how you monetize it. Put yourself first and find a team that lets you participate in ownership. Be a shareholder!

 

If your CEO who represents the shareholders, or your LLC Owner who represents himself or herself, do not focus on the data balancing the equation, losses will mount crumbling the foundation of your path.

 

Prior to July 2022, I monitored accounting daily with no eyeglasses. Today, I need glasses to see the same screens due to the intensity and frequency needed to adapt and remain profitable for the last 11 months. My 62 Shareholders (1/2 Mortgage Originators 1/2 Operations Professionals), expect their fiduciary to steer carefully in storms. Huge value awaits those left to fill the voids.

 

Do you know if your company is profitable? If it is not, put your career first and make your own choice to find a profitable company. When companies close, don’t let others make your choice. One distress sale after another, employees post “happy to announce I have a new position with the company that bought what was left of my prior company.”

Put yourself in a position to prosper when the market turns north. Good deals are hard to find when a resume reflects poor choices.

Good profitable companies need competent good Mortgage Originators and Operations Professionals.

www.southeastmortgage.com Phone: 770-279-0222

2008 - Sub-Prime was unsustainable, 2023 - Bond Duration bets are unsustainable. Similar Outcomes

The mortgage industry is currently undergoing a significant transformation due to the rapid increase in the Fed Funds Rate since mid-2022, coupled with the industry's lack of compliance with prudent profitability objectives. 

All mortgage companies must comply with GAAP accounting and meet financial covenants to remain listed on stock exchanges, retain funding from banks, and maintain approval with Fannie, Freddie, and HUD "The GSEs."

When mortgage companies incur losses due to below market pricing believing it creates volume or they react slowly to align expense with margins, the equity on the balance sheet pays for the loss and misjudgment. 

The result?  Banks cease funding agreements and GSEs revoke approval status to sell mortgages once the tangible equity and financial covenants are not met.

Eventually, the balance sheet equity (shareholder's equity or LLC owner's cash reserves) will reach zero and the business closes or must sell its assets to a competitor for pennies on the dollar.

Housing Wire and other mortgage news outlets have been reporting these realities recently.

This shift is similar to the transformation that occurred in 2008-2009, albeit for different reasons.

Remember, prior to today the last highest Fed Funds rate was in 2007. We all know what happened after that. Poor business decisions were exposed as volumes fell 34%. Today you have a higher Fed Funds rate and volume has fallen 50% industry wide. Both were fueled by assuming risk using unsustainable assumptions in an effort to keep their volumes up. 

The upheaval has begun and has already forced many companies to close their doors, and one large mortgage originator is projected to lose $2 billion dollars in 2023, with only $500 million of their common equity remaining. Accounting matters no matter what size company they all will be held accountable.

Every company in the mortgage industry is unique, with different costs, margins, and opportunities. A one-size-fits-all pricing strategy "Follow the Joneses Strategy" is unsustainable, especially when it is based on bad or incompetent assumptions. Companies should balance pricing with the costs associated with their individual business to avoid another calamity like the one in 2008-2009. Does a Can of Coke cost the same at the Baseball Game as it does at a Convenient Store or Costco? No! they all have different cost structures and levels of service. While it may be too late for some lenders, it is never too late to take a prudent path.

“What gives you opportunities is other people doing dumb things.” Warren Buffett

Easy Read Summary:

The mortgage industry is changing because interest rates have increased too fast and many companies are not making enough profit due to one size fits all pricing. All mortgage companies need to follow financial rules and keep their finances in order to stay in the mortgage business. If a company loses money because they priced their loans too low or didn't manage their expenses well, they have to pay for it by using the money shareholders and LLC Owners saved up. This can lead to problems remaining approved by banks and government agencies that help mortgage companies provide mortgages to consumers. The result, companies have to sell their assets or close down.

This is similar what happened in 2008-2009 except mortgage volume is down 50% in 2023 versus 34% in 2008, when companies made risky assumptions and caused problems for themselves and the economy. It's important for mortgage companies to price their loans based on their own costs and profits to avoid making the same mistakes. Some companies have already gone out of business and others are too far down the road to be saved. Those that are left have to decide if they will choose to make better decisions.

Cal Haupt

Chairman and Chief Executive Officer

www.southeastmortgage.com Phone: 770-279-0222

The Most important thing you will do!

Career Challenge: How to know if your company is a fiduciary for both your career and your family?

Here's a simple way to find out: call the person at the very top of your organization - whether it's the CEO, LLC Managing Partner, Bank Holding Company Chairman, or someone else in that high-ranking position. Not a sales manager or someone lower in the hierarchy, but the person whose name is in the news as the head of your company.

Call their mobile phone and ask for a $2,000 personal loan that you'll pay back in 12 months.

Outcome 1: If they answer your call and give you the loan, congratulations! You can rest assured that you're in good hands with a company that values its employees.

Outcome 2: If you can't find their cell number, they don't pick up, or they brush you off with excuses, it's time to find a company that truly values you and your career.

Just like our clients and partners, we all need a fiduciary - someone who will look out for our best interests and have our back, even during tough economic times.

If you need more than an employer, call me.

www.southeastmortgage.com
Cal Haupt, Chairman and Chief Executive Officer
Mobile: 404-886-7016

Can You?

www.southeastmortgage.com Phone: 770-279-0222

Outcomes are derived from choice, Choose You.

Have you ever heard the phrase, "change your zip code"?  This means if your current actions create the same outcome time and time again, you have to change your zip code to get a different outcome.

I learned many lessons from my mentors during my Banking Career.  One of the most valuable lessons was the Bank always does what is in the best interest of its Shareholders.  It is the fundamental responsibility of a Corporation.  Early in my Bank career my mentor granted me stock based on performance and I quickly understood the generous recognition to be a Shareholder.  The wealth created by the sale of that stock was life changing and an experience and dynamic I wanted at the core of Southeast Mortgage of Georgia, Inc.

One person cannot build a company, it takes a Village.  The Village should benefit.  This belief is part of your culture or not.  If its not, what is your longer term outcome?

Banks can sell many products if mortgage origination is determined not to be in the Shareholders best interest.  Read the News, its the trend.  Southeast Mortgage sells one product and evolves with media and technology.  We originate mortgages only and are all in and have been for 25 years.  Your career deserves a company that is all in on what your income is dependent on.

Over the past 25 years, I have seen a lot of Mortgage Operations go out of business and a few sell.  Poor judgment, poorly conceived plans, and unsustainable strategies were the cause and cost good employees their jobs and the valuable time they spent away from their family growing the company.  When it comes to taking care of your family or planning for retirement, you need proven leadership that can help you accomplish your goals long term and provide equality.  Change your zip code for a path to retirement.

When your Bank or Non-Bank sells and asks you to stay with the company they sold, who's best interest is it?  Yours or the New Shareholders?  You basically accept a new job (sometimes with pay cuts) without an interview and without comparing other opportunities.  The company being bought and the reasons you worked there ended with the purchase.  The new Bank or Non-Bank will do what is in their Shareholder's best interest in the manner they believe maximizes their Shareholder's value.  Its important to understand your new leadership works for their Shareholders not as your fiduciary.  Change your zip code and take a chance on a path to be a Shareholder.

When a Bank or Non-Bank sells you only hear about a few people that got a big check.  Search Google, Search Google2, Search Google3, SEC filings are public knowledge and show how many shares and how much each made on the sale and where the expense cuts come from to create efficiencies.  Mergers rely on expense cuts to leverage combined revenue into a higher net income for Shareholders.  IMO the Hundreds of Millions of Dollars from the sale should also benefit the employees that created the value.  The reality? The employees who created the Hundreds of Millions of Dollars in value do not share equitably in the sale.  After the close of the sale, employees at the company being bought have to find a new job or hope the new company they were sold to continues in a manner that allows them to make the same income.  No Bank operates the same nor has the same strategy.  There is a reason one Bank buys another and it is usually about Deposits and cutting non-interest expense to create a higher net income.  Expense is always cut from the company being bought.  Bank sales are SEC regulated and public knowledge.  Read the agreement. Merger

Loyalty is a two-way street.  If you are loyal, you should be rewarded when good things happen.  If your leader just moves you from company to company 2 - 3 times

with the same outcome, turn the page (Change your zip code) and try a better path.  You only have a few opportunities in life to make a better path.  Change your zip code to a path that makes you the owner.

What do your Shareholder's look like?  Do they represent you?  Do you have a path to become an owner?  Have you ever met your Shareholders or Board Members?

We work side by side daily.  At Southeast Mortgage of Georgia, Inc., our shareholders are our Processors, Underwriters, Closers, Originators, and Administration.  Four of our Shareholders have retired comfortably.

This is what our SEM shareholders looks like.  Every year we add those that help us grow.  From 2 shareholders to 41 is equitable distribution of our success.

They all changed their zip code at some point in their career to make a better path for themselves and their family.

With change comes an opportunity for a better outcome.

#truth #respect #history

www.southeastmortgage.com Phone: 770-279-0222