Earthquakes, Heartbreaks and Fannie Mae

Wednesday, 17 September 2008 00:00

Articles - The Last Word

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    California has not had an earthquake this size for over 15 years.  It registered 5.6 on the Richter Scale and was just big enough to bring everything to a halt.  We had just landed a sweet deal, the cherry on top kind, a promised land of sorts…. we had just moved into our new office.  My partners call it “legit”, but I like to call it like Bono sings it, “The Sweetest Thing”. It was our 6th and hopefully final move to a luxury suite, a Presidential Palace and it was our first day up and running.

    When I say running, I mean sprinting.  As soon as I felt the shaking, I saw many of our employees, mainly the non-native Californian’s, darting by into the lobby letting everybody know something was awry.  It was not a sharp jolt, rather a rolling motion that reminded me of floating in the ocean when a wave passes by.  Well, the good news is the office was new and was up to code with the rolling structural beams working as planned.  Nothing fell from the ceiling and very few heavy items moved out of place, but it a shaker nonetheless. 

    I headed directly to my office where a few things that had fallen to the ground, like the foul ball I caught off of Greg Zorn at an Angels game and the Bobblehead of Office Linebacker Terry Tate.  Interestingly enough, 5.6 the power of the earthquake is also the jersey number of this incredible guy who destroys people at work for bad mannerisms.  If you do not know who he is, Google him, you will thank me later.  I placed the bobble head linebacker on my desk; his head still swinging from the earthquake and watched his smile jump from side to side.  I sat for a second and chuckled to myself…. welcome to another week in the Reverse Mortgage world.

    It is not an easy task moving 50 plus people from one side of town to the other, if you have never done it; remember two things, computers and phones.  Our business relies on a lot of things but these two are essential.  We actually had a checklist of over 200 things that needed to be accomplished before we even stepped foot into the new digs.  Imagine going over that list every partner meeting and assigning responsibilities and making others accountable…not so good.  So there we were settling in, overcoming all the hiccups of today’s technology and we got hit with the largest earthquake since Northridge.  I felt pretty good though, the building was fine, nobody was too shaken and the phone lines were intact.  Little did I know then, the real earthquake which was brewing in Northern California and would hit in two days.

    Forty-eight hours later I find myself in our new conference room with the Executive VP of title.  I was proudly showing off the place when she whispered, “Have you heard anything?”.  I immediately thought of the HUD bill and replied to her, “Nope, I am just like everybody else, waiting for more info but I like the limit changes.”  “No”, she said quietly, “I don’t know if I have a job right now.”  I imagine for some, the sound of tires screeching comes to mind and for others it’s lightening striking in the background, but for me it was just a gulp and a one word question, “What?”  This was the first I heard of the levees breaking on the biggest and best title company in the industry.  Not only was All Reverse Transactions (ART) out of business, but word was leaking that their teams were being asked to exit their offices and all their monies had been frozen.  Not only had my company had solely been with them for almost four years, but they were also a working partner and a mainstay of our success.  Real leadership on all fronts was now about to be tested, fight or flight would be the only two options.

    In the next few days the careful steps taken by the management of ART and their loyal group of employees was amazing.  We had roughly 50 deals in the balance and were hanging on every word and every ounce of information.  Of course the timing was perfect, it was the end of the month and all funding was frozen. There was nothing in the kitty to pay the bills and monthly business costs, let alone provide paychecks for employees and nobody had an answer, but how else would we live in this industry? The confusion was eerie. I remember listening in on a conference call and it reminded me of the type of controlled chaos when catastrophe hits.  We were dealing with a lot at once and could not fathom how deep the cut went.

    Not only had every ART employee lost their job, but we were in the middle of paying off mortgages, saving seniors from foreclosure, making good on taxes and getting homeowners insurance coverage…the list goes on and on.  It was a trying week to say the least, but I must attest to the fantastic leadership of those at ART and my hat is off to the teams that stuck together.  This is an example of people working side by side for the common good and was truly a moment of selflessness.  We can look back on it and say that the right people at the right time made the right decisions and catastrophe was avoided.  Honestly, I will be surprised if NRMLA doesn’t recognize the committed people and hard fight that took place this August in many offices across the nation.  Although an official order was never given to fight, many held their ground and together we managed to get through this. We need to honor those who took care of this industry’s reputation when it was on the line.  I was proud to be associated with these types of people and I will never forget the effort put forth. 

    I was just catching my breath from the last week’s events when Fannie Mae was preparing to release their new pricing.  Whispers in the industry had them pegged for better pricing and that would be just what the doctor ordered.  Have you ever gone to pick up a prescription and the order was never placed?  Well the pricing came in all right and it was terrible, so terrible that we had 10 days to fund our entire pipeline before we lost our rebate. We took a bath on the loans that could not get funded in that very short time and we have yet to be handed a towel.  We live in a business world that is full of aftershocks and unknowns and if it truly does not kill us, it will make us stronger. 

    With counseling issues looming, origination fees being reduced and the incredible mass of new entrants into our Reverse Mortgage niche, we need to be prepared for the next shaker.  To a degree, our continued success comes down to our ability to react even when things are completely out of our control.  Wait, here is another statistic, there is a 99 percent chance of California experiencing a quake of magnitude 6.7 or larger within the next 30 years.  How is Phoenix in the summer?  It’s just a dry heat, right?

David Bancroft is the President of Omni Reverse Mr. Bancroft is a leading industry expert in the origination of Reverse Mortgages, FHA & VA Government Loans and uses his extensive experience to help promote the Reverse Mortgage industry. Omni Reverse was founded by Mr. Bancroft and his partners in 2002 to specialize in Government lending and is one of the largest originators of HECM Reverse Mortgages in the Country.