How to keep a mortgage job

New York /
Nov.November 14, 2007 12:12 PM

With 70,000 mortgage brokering jobs having been wiped out recently in the U.S., it’s perhaps not the best time to be a mortgage broker.

While that might not be as big a story as homeowners losing their homes, it’s big enough to cause concern at the city’s largest mortgage brokerage companies. When The Real Deal asked the city’s top mortgage brokers to give advice to those relatively new to the business, some of the replies were astonishingly harsh.

“Pick a different job,” said Jeffrey Appel, a vice president at Preferred Empire Mortgage Co.

“It’s a tough time to get into the market. Volume is down, and there’s increased competition. Long-standing relationships have already been established. Unless you have a real passion for doing this and developing it as a long-term career, it’s just not a good option.”

Leaving in droves

The credit crunch mercilessly took jobs down with it; nearly 21,000 workers in the mortgage and lending industry had lost their jobs during the summer by August, according to Challenger, Gray & Christmas, a consulting firm that tracks job-cut announcements. By the first week in October, that number had risen to hit the 70,000 mark; mortgage brokers interviewed by The Real Deal say that number could now be more than 75,000 — and growing each week.

Real estate brokers are feeling the pain, too. (The National Association of Realtors expects the first big membership drop in a decade, from 1.4 million in 2006 to less than 1.3 million members this year. And that’s after double-digit growth in the past decade: There were just 716,000 members in 1997.)

Even Tom Barnhart, the 43-year-old president of Mortgage Commitments, Inc., said he wants to maybe get out of the business, or at least expand to something else like financial planning while waiting for the upturn.

“I’ve done loans for 1,000 people and overseen loans others have done for another 1,000 people. I’d like to parlay that knowledge into something else while I continue to do this,” said Barnhart, who has been in the business since 1989.

“I’m not seeing anyone get into the business now, but I’m seeing a lot of people get out,” he added.

Barnhart also said he is “shocked” by the kinds of first-rate people affected in the industry — like his mentor, Gordon Shanks, who closed his own company, Home Mortgage Acceptance Corp., and now works for Countrywide.

Barnhart said another man he worked for directly before launching his own company in the mid-1990s ended up moving into Barnhart’s office six months ago — and then left to do “personal growth” training as a life coach. Another employee who worked for Barnhart for seven years just left, saying he was “completely burned out” and that he never wants to go back to the industry.

“I’m sitting here watching everyone around me leave, and I’m going, ‘Wow,'” Barnhart said. “The last couple of months have been a disaster. I’ve never seen anything like this.”

One person at his company, which went from a high of 18 people years ago to three people today, recently had four of his six deals pulled on the day of the closings.

“It was shocking,” Barnhart said, adding that two were purchases and two were refinances — and all were victims of the secondary market pullout.

Riding it out

Barnhart said people doing subprime mortgages at his company have seen everything dry up while his business, which was not a lot of subprime, has slowed down significantly.

“I was always a firm believer that this would happen a year or two earlier, only not as fast; a slower exodus from the industry without so much damage caused,” Barnhart said. “Personally, long-term I’ll be fine. It’s just whether I can hang in for six months or two years while the market recovers. I hope it doesn’t take that long.”

Barnhart added that he was also in the business when a wave of co-op and condo conversions stopped, interest rates shot up to 12 percent and the industry slowed down earlier in his career in the early 1990s.

Advice to rookies

As for newer brokers who flooded the industry during the boom times, Barnhart said, “I wouldn’t tell people to do anything, but they’d need to look at this on an objective basis. It’s kind of hard to deny the fact that more than 70,000 mortgage and loan jobs have been lost in the past two months.”

Still, Barnhart said, if he had to give advice to newbies, it would be to keep a database and put everyone they meet into it so they can always be in touch — and never blow up any bridges.

“It’s a small industry with a long life, and you keep bumping into the same people,” Barnhart said.

More encouraging, James Whitall, managing director of Manhattan Mortgage Co. — who estimates he has generated $1 billion worth of mortgages in his 15 years in the business — said there is one word every mortgage broker should remember: trust.

“The companies will want you to generate volume, but you have to have the trust of your clients. That’s who you’re working for. This business is all about building long-term relationships and trust,” said Whitall. (For more of Whitall’s tips for young brokers, see sidebar on page 77.)

Think long-term

Appel, who has been in the business for 15 years, also said novices should take a long-term view.

Traditionally, Appel said, people enter the industry because “the bar to enter is low, and you can make a lot of money.”

But today, Appel said, making money isn’t so easy. His September activity was down 15 percent from the previous September, though October, Appel said, is looking better.

His advice?

“Realize it’s a business like any other, and it requires the development of relationships and centers of influence where people get comfortable with your skills and level of expertise over time,” Appel said.

“You will have to prove yourself — and the expectation of our customers to execute is stronger than in all the years I’ve been in the business,” he added.

Still, Appel said, the New York City market is better than elsewhere.

“We’re faring well [in comparison],” he said. That’s mainly because the New York customers are more sophisticated, or at least are more decisive.

“They have a stronger sense of what their financial plans are. They know if they’re buying a New York City home for a few years until their family expands and they move to the suburbs or whatever. These are people who know their exit strategies,” Appel said.

While foreclosures are on the rise even in New York City, Appel said his company has seen little evidence of them in Manhattan.

“I’m sure they’re coming,” Appel said. “They’re out there, and some folks are under stress. But it’s very light in New York City.”

Appel said he’s seeing more people refinance their debts, from, say, 90 percent financing to 40 or 50 percent.

“They’ll spend more on their housing, but they won’t go under,” Appel said. “That’s not the market we’re in. We still have folks who make a lot of money and have a lot of liquidity. Maybe they’ll have to shift their liquidity and may have difficulty with the adjusting rates, but the market will absorb them if they are willing to sell at reasonable prices.”

Go jumbo

Robert Hochberg, 56, co-owner of Hochberg & Holland Associates Inc., is also optimistic. His advice is to stick to high-end non-conforming loans — those over $417,000. Rates, he said, are also going down again, after “skyrocketing” in August. For example, he said that some loans that were 6.25 percent in April jumped to 8 percent in August and are now back to 7 .75 percent today.

“In two or three more months, this particular area of the market will bounce back again. It’s all about people having confidence in the real estate market in New York City,” he said.

Hochberg also said, however, that there is no easy answer when it comes to advice on how to weather the storm.

“The best answer,” he said, “is just to keep on looking at the rate sheets and try to find products that might work for your clients. Review old files and find products that may work for your former clients as far as refinancing.”

“The reality,” Hochberg said, “is that real estate is slow all over. No one is saying they’re really busy. Rates need to go down and confidence has to go up, and I think that will happen.”

Added Barnhart: “I’m looking forward to the time when the industry will return to

Know your niche: Tips for young brokers

1. Pick a niche in the marketplace where you have the greatest opportunity to provide your services.

2. Pick a company to work for that can provide you with the best product for that niche, as well as in general.

3. Learn the general knowledge necessary to be professional, but learn your chosen niche’s product and its development backward and forward in order to bring an intelligence to your presentation.

4. Don’t forget that what you say is no more important than what is heard (and people hear what they want to hear), so confirm your conversations in follow-up e-mails.

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