Predicting the Market
Whatever the Future Holds, Be Ready to Act Quickly
by Danny Byrnes
If there is one thing that everyone in our industry will agree on is the ebbs and flows are not always correctly predicted. Pre-pandemic, many felt the origination and refinance volumes had peaked and there would be a downturn. Those that planned around that likely found themselves short on resources and personnel to handle the incredible volumes that followed. Pre-meltdown, many felt that the capital markets business was growing at an unprecedented rate. When the meltdown occurred, many found themselves with resources that were going to go to waste, and talented and skilled employees were now out of work.
Navigating your way through the ups and downs of the real estate industry takes experience, skill, ability to move quickly and probably most of all… luck. What experience or knowledge does one need to make executive decisions that will keep your company relevant, viable and always ready to pivot? Understanding the entire loan life cycle is a must and enables you to make sound and conservative decisions on where you will invest your time and money as you prepare to deliver. Software development, platform enhancements, R&D, talent acquisition, M&A are all high dollar items. Spending money you did not need to can, in the end, wipe out profit margins. Don’t spend it and then need it will put you in a position of not being able to take advantage when there are increasing lines of business or put you in a position of over promising and underdelivering. “It’s better to have it and not need it than to need it and not have it” does not work out well here. Nor does “build it and they will come.”
Luck or Good Predictions
At Nationwide Title Clearing we are fortunate to be involved in many areas of the residential real estate market and have had a fair amount of success planning around the trends we see. At first glance I would say we have been very lucky. However, in reviewing events that brought us that success, there actually were some intelligence and good predictions involved.
So, what next? What do we prepare for and how much do we invest? For over a year there has been a lot of attention on default and the effect that will have on our industry.
If everyone acted on that when it was first a concern it would have been wasted effort and money. What will happen when forbearance truly comes to an end? How much should we invest in development, staffing up, office space, contracting outsource vendors, etc?
If and when interest rates increase, what do we do with all the resources we invested in to manage the volume we have experienced in the past 18 months?
I’ll leave the conservative, broad answers to the experts but I can tell you why I am comfortable with our approach. At NTC we have put a lot of time and effort into diversifying our services across several areas of the industry. When one line of business dips what tends to happen is another side increases relative to the decrease. Our approach to software development has taken the same direction. NTC’s PerfectDocs platform is known for processing hundreds of thousands of mortgage Lien Releases. However it is also used to do the same for Assignments of Mortgage, a key part of the default process or any capital markets loan sale transaction. As refinance volumes decrease, we typically have experienced an increase in capital markets activity loan sales and an increase in default.
And the final plan of attack is to ensure that we are cross training our employees so we can move them around to deliver different services as the market shifts as opposed to having teams of SME’s specific to a single service. There is a huge financial benefit to this, and it also minimizes the ramping up and down of employees through a hiring or firing process.
This approach likely made us look like we predicted shifts in the industry correctly when in reality, we were simply well prepared regardless of our prediction and nimble enough to move quickly.
