Optimist Barry Habib Worries About Industry “Under Attack”

SA Ibrahim has a wide-ranging and personal conversation with one of the industry’s most respected voices, Barry Habib, at the SocialSurvey Create WOW Summit in San Ramon, CA.

Their frank discussion covered the challenges facing the housing market, and how margin compression is changing the game with major internet companies “trying to turn this business into a commodity.”

“It’s a hand in the pot. It shrinks the pie,” Habib warns. “We were able to withstand it more, because refinances could potentially make it up, but we’ve never seen anything like this, and we’ve never seen what’s about to happen.”

Q&A With SA Ibrahim and Barry Habib

SA Ibrahim: Barry, it’s great to have you sitting here with me. Barry’s truly a renaissance person. He’s got a string of successes, not just in the mortgage business and the related businesses, but many other very different businesses, and now runs a business that provides MBS information. Without much ado, Barry, tell us about what you do and your business, and then how did you get here?

Barry Habib: First of all, thanks for having me, SA. I say it’s really great to be with you. You know, I’m a big fan of yours, first of all.

SA Ibrahim: Likewise.

Barry Habib: Thank you. Thank you. So, MBS Highway is a platform that really helps people in the mortgage industry better articulate what’s going on in the marketplace, and that’s both the mortgage market and the real estate market. I say we call it the mortgage business, but truly that’s a product that nobody wants, right? So, the product that people want is they want to buy a home. They want to have the best financing options available, and they want to create wealth. Mortgage originators who understand that, and companies who understand that, are those who can see into the future, and can see that you have to have advisors. And not just by name, you have to have it in deed. You have to truly be an advisor, and put the work in, and have the tools that allow you to be that advisor, so that when you have the level of competition that you currently have, and increased levels, as you know, the FinTech company is putting hands into the pie at a very significant level, means that the way to survive for most of us is you have to increase conversion. The way to do that is to show people that it’s not all about rate. It’s not a commodity. It is a very large and important financial transaction which requires financial expertise.

SA Ibrahim: So mortgage is our way to make home ownership possible, and they only serve that purpose of turning somebody into a homeowner, or enjoying the benefits of being at home.

Barry Habib: Yeah, you’re 100% right, but then how do you finance that home? What are your options and what are ways that you can use that to create wealth? There’s so many places and ways to put your money, and so many ways that you can be misguided. The media is constantly making mistakes. You look at story after story on CNBC telling people, literally, this was yesterday, SA, that Diana Olick on CNBC telling people, “Sell and rent. Sell and rent.” That’s a quote. “Sell and rent.” You get lots of people saying, “Don’t put your money in real estate. Take it and put it in the stock market. Rent. Put that money in the stock market.” So, there’s such a lack of understanding of wealth that can be created by compounding. Wealth that could be created by leverage. The fact that stocks don’t always go up 20% like they did in the past year. I don’t know if it’s just me, but maybe some of the people listening have actually invested in a stock and it went down. Okay? So, there is a level of client risk that has to be something that the professional takes into consideration. In addition to that, what that professional needs to do, is need to have the background understanding. Listen SA. A professional boxer trains a thousand minutes for every one minute in the ring. How many minutes of training does that loan officer have before getting in the ring? And getting in the ring is when they get on the phone, because you’re on stage, you’re in the arena, right then and there. When they’re in the arena, at that moment that customer will cut through the BS very, very quickly. The psychology of sales is that in the first five minutes somebody knows if they’re going to do business with you or not. If they decided that they’re going to do business with you, just like when we decide we’re going to buy a pair of shoes, whatever, we decide that we’re going to buy it right away, and then we justify to ourselves why we need it. Right?

SA Ibrahim: Yeah. Point made. By the way, Barry’s really into shoes.

Barry Habib: I am actually. Yeah I am. So anyway, but SA, when we make these decisions, the buying decisions that we make will be very forgiving if we’ve decided we want to do business with them, and we’ll be awfully critical, and look for an excuse not to do business if we’ve already subconsciously decided. It’s very powerful, and the way you get that is by building trust. You build trust two ways. One is through your knowledge. You have to put the time in. The other is by telling that individual everything bad. Don’t sell them. Present, yes, but treat that individual as if they are your child, your parent, your best friend, and you’ve been doing this forever. This might be their first, or second, or third time around. What advice would you give that person to look out for? If you could take that approach, you build trust with that customer, and it’s very hard for you not to get that transaction closed.

SA Ibrahim: So Barry, you’ve got a record number of customers, and they’re growing, and you haven’t lost any. Who are your customers, and why do they stick with you?

Barry Habib: Well, we’re really blessed, and I am grateful every single day. I believe in coming from a position of gratitude, you know that. I am very, very proud. Our renewal rate is 96.5% right now. I monitor that very, very closely, because that’s really critical. That’s our report card. That’s how well are we doing? We are really proud of that because being in the subscription business for a very long time, that is a level I’m extremely proud to see. We think that we provide value, and that’s really the main reason, is we provide enormous value. Not just what you’re paying for is worthwhile, but much more important is the return that you get on it. It is the results that you get. We really believe, and we’ve been told oftentimes, that it’s not even a fair fight. If you have the information, and the tools, and the coaching that we give you. We’re not a coaching company, but we give you the right information. There are some wonderful coaching companies out there. We’re not in that realm, but everyday I do a video that kind of helps you understand what to say, and scripts you. If you have the data that we provide, not just on MBS, but real estate data for everywhere in the country, the presentation tools to allow that customer to see this and say, “Oh my gosh,” the tools that allow you to protect and grow your realtor base, it’s not even a fair fight, because if somebody doesn’t have it and you do, you’re going to win the majority of the time. Unfortunately, if you don’t have it and somebody else does, it is going to be difficult for you to overcome that, even if you have a lower rate.

SA Ibrahim: Barry, how did you leverage your success and experience in starting all of these other businesses in the past into this business?

Barry Habib: First of all, thank you for that. It’s really, really kind, but there’s been a lot of things that I’ve made mistakes on too, you know, so it’s been a-

SA Ibrahim: Huge learning experience.

Barry Habib: … yeah, it is a learning experience. A lot of trial and error, and a lot of course correction. We all have to do course correction, you know? Nobody gets it right all the time, nobody. I’m far from that. What you try to do is you try and be aware and honest, okay? It’s not you have to be married to your idea has to be best. You have to be married to the best idea, and that best idea can change. You have to be very conscious of if what you’re doing is working. A fine line between being impatient and not giving it enough time, and too married to it and and too vain to think that you could be wrong, because you’re going to be wrong. I’m going to be wrong many times. So, I think it’s my ability to course correct, which has helped streamline and save time. Now, when you say, “How do you combine these into areas of success?” I look for ways to reduce points of friction, and I think it’s in every business. Look, I have a very simple business philosophy. It’s similar to yours. We spoil our customers, we spoil our employees. So, just like we don’t have a lot of customer turnover, we have virtually no employee turnover, so we spoil them. That’s the first rule, right?

SA Ibrahim: Great philosophy.

Barry Habib: Yes. Then what we really do is we try and, first of all, find the points of friction, and they exist in every business, and then act upon it. You know, taking action is so important. In different businesses that I’ve been in, right? From was a kid in a stereo business, and understanding what the best systems we’d be putting that time in, as I said, monitoring yourself. So, record your phone conversations. Record your salespeople’s if you’re a leader there. Record their phone conversations. If you’re watching a sporting event, look at the coaches on the corner. On the sidelines, pardon me. Going over it. What do they do? Today it’s on an iPad. They’re going over the previous plays. They’re course correcting, because the film doesn’t lie. When you’re in the heat of battle, just like if you’re on the football field, basketball court, if you’re on the baseball, you cannot make the course correction in the middle of the heat of battle. That’s not the time to do it. The time to do it is when you’re on the sidelines, and you reflect, and you say, “Here’s what I did right. Here’s what I did wrong.” It will build your confidence and accelerate you through the process, yet hardly anyone does it. If you’re a manager, are you listening to your salespeople’s phone conversations? It’s painstaking. Now look, I had the pleasure of, in a couple of meetings like this with Bill Belichick, which you know what? What an amazing man. The way the media portrayed him, and being a New York Giant and Jet fan, I was like, “Man, this guy’s not that great.” You know? But what an incredible man. I just wanted to sit at his feet and learn. What he taught me was that even great players can overcome bad coaching. That inspired me to really be the very best coach I could be, and putting in that work, and if you’re listening and if you want to be a great coach, put that work in. Find out what those points of friction are. Make those course corrections. So other businesses that, when I started Mortgage Market Guide, what I discovered was the way I was doing business was helping me as an advisor, and a lot of people didn’t understand the markets. I just said, “Let me bring this to the industry.” It became pretty ubiquitous. Then, when I got into theater, and I got into Rock of Ages, and boy did I make a lot of mistakes. And, did I get taken advantage of because I was the new kid on the block as well, okay? So, I have to say thank God I was probably very, very dumb when I went into it, and thank goodness I was, because if I were smarter at it, I would have said, “Who the heck wants to do this? There’s like no chance of making money at this thing, right?” I let my optimism and my energy kind of carry the day. Thank God I did because Rock of Ages was a real blessing, and became an unbelievable success. One of the things I did, which is kind of fun, is that I would watch, and I would see a point of friction. I would just notice things, and we all notice things all the time. Before the show would start, people would order to a drink. 15 bucks at the bar. They take the drink, and maybe it’s a couple, and the lights flicker. Ding, ding, ding ding. Got to get to your seat. You can’t take your drink into the seats on Broadway. I would watch these people take their drink, (glug glug gargle). I’d watch them spill it on their cheeks. I was like, “Wait, they’re all dressed up. Why do you have to make these people do that?” And I said, “Can’t we just allow them to drink in the seats? “No, we’ve never done it.” Well SA, you know me. That’s not a good answer for me, okay? We’ve never done that before. It’s not something that I’m okay with, you know? So, let’s fix that. It took a while, but I became the first show on Broadway that allowed drinking in the seats, and now they all do it. Okay. Actually, I got into the medical industry as well. I’m kind of … SA, I love to build businesses. Businesses are about people, and it’s about service. It’s service to your employees, it’s service to your customers. If you have surrounded yourself with the right people, and look, I believe in this. When I hire somebody, this is the reason I hire them. Attitude, aptitude, initiative, and a sense of urgency. You got those four things, I’ll teach you the rest. So we have a teaching culture always. Every business I’ve had, it’s a teaching culture. I need to learn, and we need to teach. You never say, “Hey, you got to do this.” It’s, “You do this because of this.” It’s end result. With our tech people, we sit down with them. They’re very great technologically, but they need to connect it to the customer. “Here’s what we’re trying to do,” and in this case, our customer being the mortgage professional, “and this is how it helps them gain more business.” When they make that connection, you build a better product that works. So, getting back to this. In the medical imaging business, after understanding what we need to do there, it was very interesting SA, because look, God forbid, I hope no one has to have scans or things like that because you’re ill, but if you do, you know what happens, is that the tech there, they know what’s going on but they don’t tell you. The anxiety builds up in your head. So I said, “Why do we have to have that? Why?” So, in our centers, we put a radiologist right there. By the time someone got dressed, they were in a nice room, got their scans, and if it was good news, great. If it wasn’t good news, you had a plan, and that’s what people want, and that’s better than the anxiety. We quickly built that and then sold it.

SA Ibrahim: The uncertainty. Living with the uncertainty is worse at that point.

Barry Habib: Absolutely. So once again, it’s service, and searching points of friction, and finding ways to alleviate those points of friction.

SA Ibrahim: Terrific message. Now let’s turn from your businesses to your views on the industry. What do you think are the nearest, or the biggest near term and long-term challenges facing the mortgage and housing finance industry?

Barry Habib: I’ve never been more worried than I am right now for this industry. Over 30 years, and listen, I don’t sound alarm bells. I’m an optimistic individual. Accurately called the housing crisis that we’re going to have. Sold my company right ahead of the housing crisis. I was a little bit lucky on the timing. Cut it awfully close. Sold it in a bidding war to six weeks before it happened. I wasn’t that smart. I was lucky. I thought it was coming. I didn’t know when it was going to come.

SA Ibrahim: I’ll take lucky any day.

Barry Habib: Okay. Right. You know the old saying. It always takes much longer for it to happen, but when it does, it happens faster than you ever would imagined, right? That’s the old saying. I have never been more worried about this industry, because it is literally under attack. Margin compression is real and that’s an issue. You have hands coming into the pot that are flush with capital, that are trying to turn this business into a commodity, and the sales staff is ill-equipped. So, when you have … You know Zillow’s getting in, right? You’ve had $190 million hits a month. You think, “They’re already in this game.”

Barry Habib: Amazon already has laid out their plan for how they’re doing this banking thing. They’ve already laid it out. They’ve showed it to us. They’re coming.

SA Ibrahim: Goldman Sachs.

Barry Habib: Goldman Sachs. Real estate agencies like Keller Williams announcing. No. I don’t know if it works, if it doesn’t work, but it’s a hand in the pot. It shrinks the pie. We were able to withstand it more, because refinances could potentially make it up, but we’ve never seen anything like this, and we’ve never seen what’s about to happen. Mortgage professionals who don’t see this, you have to remember time is compressed. What used to take 10 years is taking one. So, when we look at where we’re going to be in two or three years from now, this is going to be a whole different ballgame. You’re going to be in the realm of what I call the travel agent. There used to be travel agents on every single corner. If you’re a millennial watching, you’re probably looking at me saying, “What the frig is a travel agent?” Right? You know, the guys behind the camera are saying, “What travel agent? What’s that?” Right? So, travel agent became extinct. Why? Because they didn’t do unscalable work. They didn’t do things that put them in an advisory role. They aggregated information and presented it, and you could automate that with your phone. So, it’s game over for them. Take a look at stockbrokers. Stockbrokers had really fierce competition in price, because they were charging 200 bucks a trade, and then all of a sudden $9 a trade online. That $9 a trade online put a lot of them out of business who were salespeople, but today there’s still a lot of stock brokers, and they’re making a boatload of money. Why? They’re advisors. Now, you can’t just take your name tag and say, “Oops. I’m an advisor now.” Okay? No. You have to put the work in. You have to have the tools, and you have to be able to want to provide information and wisdom that makes your customer feel that difference. Look, when we look at the role of an advisor in today’s marketplace, people will pay for that. People will pay for great advice.

SA Ibrahim: If you’re transparent, people will say it’s worth it.

Barry Habib: And SA, the great thing about what we do is it’s fair, okay? It’s fair, and here’s what I mean by that. I played athletics. I loved sports. There’s a fire that still burns in me that was even maybe greater when I was a kid. I was always someone with a lot of heart, and a lot of desire, and I didn’t mind working hard. Let me tell you SA. I was pretty decent as a high school ball player, but when I got to the higher levels of athletics, man, people seem to get stronger, faster, jump higher than I did, okay? It was hard for me. I worked harder than they did, but I still wasn’t as good. It’s not fair, because if God gave you those things, if God made you taller, if God made you stronger, God made you faster … Now, we can improve for with what we have, but there’s certain things that are hard to overcome, okay? You can’t win as easily. Sales is great, because all you need is right here. That’s it. If you have heart, and you have desire, and you have drive, and you will not quit, you’re going to win a lot of times because you’ll outwork somebody who won’t. You’ll be smarter than them. You’ll get the information that your customer needs. If you do that, SA, you’re going to win and you’re going to be successful.

SA Ibrahim: So Barry, with that message, and that way of delivering it, have you thought of going into politics?

Barry Habib: SA, I am not that. I am not wired that way. You know what? That is too much of a negative ballgame for me. That is too much, you know, just too much negativity there. I’m an optimist. I’m very up. My blood type, honest to God, my blood type is B Positive. How about that? Okay? That kind of shows you where I am. So no, that’s not my game. I’m about helping, and nurturing, and making things better.

SA Ibrahim: Aside from sports and other activities, how much time do you have between work to spend with your family?

Barry Habib: Well you know, there’s some valuable lessons I’ve learned there, SA, because I grew up really, really poor, and my parents made sacrifices. My Dad passed away when I was a young boy, so I had to kind of grow up. My mom worked in a sweatshop, so I know what it’s like to be poor. That’s one of the reasons why I work so hard to help other people, because I know what it is like. I learned a lot of lessons because I was very ambitious, and worked very hard, because I kind of thought that was the right thing to do, but I missed out on a lot. If I could rewind the clock, I would probably choose, I definitely would choose, to be a little more in balance. Sometimes you have to be out of balance. I’ve made some mistakes along the way too, and I didn’t course correct fast enough there, but you make those mistakes and you try your best to learn from them. Right? I’m still a work in progress on that.

SA Ibrahim: Terrific. I’ll wish you a lot of luck on that. And again, thank you for your time. This has been a wonderful interview, and a great message for our listeners. Look forward to catching up with you again in the future, and hearing more about how the world has changed.

Barry Habib: Thanks SA, it’s a pleasure to be with you.

SA Ibrahim: Thank you.

Barry Habib: Thanks for all you do.