PERSON OF THE WEEK: Matt Clarke is chief financial officer for Churchill Mortgage, a regional mortgage lender based in Brentwood, Tenn. MortgageOrb recently interviewed Clarke to get his views on where the mortgage industry is currently headed and how lenders are handling the shift back to a purchase market.
Q: In your opinion, what are the main factors shaping the current mortgage landscape?
Clarke: After two decades of feverish refinancing activity, the industry has taken a dramatic shift to a purchase market. To adjust, most lenders have had to retrain their sales teams and get them reacquainted with a purchase-heavy market – or replace them altogether. Not to say refinances have gone away completely, as they still comprise roughly 20% to 25% of our book of business – but that is a significant decline compared to 60% to 65% a year ago.
Although rates will continue to rise and fall over the coming years, it is important that we do not get fooled by temporary rate decreases and short term increases in refinance opportunities. We expect to be in a value-driven purchase market for years to come.
Q: How do lenders adjust to the new scenario?
Clarke: In order to succeed in today's market, sales and operations initiatives should work together closely to bring value to realtor partners and home shoppers.
Operationally, adjustments need to be made to accommodate the increased volume of purchase transactions. The communication dynamics, speed of decision-making, clarity of expectations and expansion of the number of stakeholders on every transaction means that operational excellence is a top priority. We remind our team often that there are no second chances in a purchase market and failing to maximize operational efficiency comes with a significant amount of reputation risk.
On the sales side, delivering value means helping our realtor partners win and close more transactions. This requires a multitude of factors that combine to create a differentiator in the market. Lenders should leverage strong sales teams with industry-leading expertise in prospecting, educating, conversion, communication, technology, comprehensive product knowledge and a deep understanding of how to structure deals. There are a lot of truly innovative products and features out there today, if a lender knows where to look. Finding that product – and training sales teams to effectively manage the end-to-end process while consulting and teaching their clients – will drive a consistent flow of new business.
Q: What are the top upcoming regulatory changes on lenders' radars?
Clarke: In Nov. 2013, the Consumer Financial Protection Bureau issued a final rule on the new ‘Know Before You Owe’ mortgage disclosures, which replaced the Truth in Lending Act, Good Faith Estimate and the HUD-1 settlement. The disclosures go into effect on Aug. 1, 2015 and will help consumers understand their options, choose the deal that's best for them and avoid costly surprises at closing. This has been Churchill's approach to lending all along, but it is critical to the industry's integrity that it becomes mandated.
Part of ‘Know Before You Owe’ requires that the closing disclosure be provided to the borrower within three business days of closing. That's something that lenders must be focused on properly executing today to ensure that it can be done once the rule goes into effect. Successful purchase transactions are impossible to achieve if last minute surprises are an issue. Delivering the proper disclosures to all parties involved several days before closing is a huge part of that. This coincides with our operational focus. In addition, we have established incentive plans to ensure that the three-day rule is satisfied on a consistent basis.
Q: Does Churchill have any big plans for the remainder of 2014?
Clarke: It's hard to believe that we're already more than halfway through the year. To date, our growth and development has been outstanding – we have hired a full-time compliance trainer to ensure our entire staff receives expert guidance on the latest regulations, strengthened our Mt. Juliet management team to better serve the middle-Tennessee region, and promoted two individuals to assistant vice president of closing and processing. We also opened three new branches in Missouri, Arizona and Maryland and launched the Churchill Mortgage Corp. CMC Academy, which will develop the next generation of mortgage professionals.
This momentum is critical to our success for the rest of 2014. We are continuing to drive a disciplined approach to an activity-based sales management and prospecting system, which was created and deployed earlier this year. Operationally, we are focused on making the three-day HUD requirement a standard by the end of the year. In addition, we will keep establishing strategic partnerships with other organizations to streamline the home buying and refinancing processes for borrowers and have some upcoming initiatives that we are very excited about.