Dale Vermillion on Industry’s Feast or Famine

Over his career, Dale Vermillion estimates he has trained more than a million mortgage and financial services professionals from more than 600 organizations. And he recently told Mortgage Media that after nearly 40 years in the industry, he has never seen the type of market we have today. “We are in the biggest feast or famine mode that I’ve ever seen.”

He and his team have been recognized by the Association for Training and Development (ATD), the National Association of Mortgage Brokers (NAMB), and the Better Business Bureau (BBB). Vermillion is a regular guest on industry media, the author of Navigating the Mortgage Maze, and the creator of thinkothersfirst.com. He and his wife live in Florida, where they serve the homeless and hurting through Mortgage Professionals Providing Hope (MPPH).

He spoke with Mortgage Media over a Zoom call recently about his history in the industry, what he is advising his clients, and what he is seeing in today’s climate that he has never seen before.

Below is a lightly-edited transcript of a discussion between Vermillion and Mortgage Media’s Eric Souza.

 

Tell us about what you do with Mortgage Champions?

I started in the business in 1983 as a loan officer, and from 1983 to 1995, worked my way up to running a national mortgage company with about 2,300 employees. In that period of time, I spent a lot of time in senior management helping teams to develop. In 1995, I decided to start my own organization. We launched Vermillion Consulting, that later became Mortgage Champions.

Mortgage Champions is really committed to helping the mortgage industry improve in three key areas. That’s sales, operations, and leadership. I’ve had the great privilege to train over 600 lenders in my 25 year career doing this. I’ve had a chance to train over a million mortgage professionals. What we really teach is the best practices of the top producers in the nation, and help lenders just do a way better job on running their companies, to get more efficiencies and more production.

 

How have you changed your approach to keep up with the current challenges?

It’s really interesting with the change in the marketplace, none of us are flying anywhere. I’m typically 180 days a year on a flight going somewhere speaking. I haven’t done any of that for two months. Been pretty awesome to be home, but we’ve changed our business to be virtual. The good news is, I got three or four millennial guys who work for me who are absolute brilliant young men, who helped me build this company for the 22nd century about a year ago. We’ve been doing a lot of online training with lenders around the country and loan officers on how to respond to the pandemic. None of us expected that this would actually turn out to be – probably what I’ve seen, one of the greatest single opportunities in the mortgage business in my 37 years. Business is just killing it right now for all of my clients.

It’s because this is a time when people are in the most need for financial help. When you think about the economy, if you really think about it clearly, mortgage is really the only bright spot in the economy today that we see. It’s not Wall Street. It’s certainly not employment. The beauty is through a mortgage transaction we can really help Americans financially in a powerful way.

 

What’s driving this, along with the low rates?

What’s driving the increase in production clearly is the low rates, because we’ve seen purchase drop-off fairly dramatically, even though in the last couple of days, we’re starting to see a rebound a little bit with this partial opening that we’re seeing around some of these states.

That is driving a frenzy of activity because everybody’s concerned at an economic level about what their future is financially. Are they going to keep their job? Are they going to lose their job? Is their property value going to drop? Consumers have two major fears right now they’re facing. Those fears are emotional, about their health and wellbeing and their families, and economic. It’s their finances.

Well, in the mortgage industry, we help the second piece. So, the challenge has been in the industry, obviously the change in products and programs we’ve seen with the tightening of FICOs and Non-QM going away in a large part, and Jumbos coming back to being a lot less likely to get. There’s been a lot of challenges, but even within that, there’s such a massive core of people that need the benefit of saving money, and the benefit of mortgage financing, that the industry has just blossomed in this period of time. And we’ve become a very essential part of the needs of consumers.

 

It seems like there are two pockets, one pocket of heavy origination because of these low rates and because of the opportunities, and the other aspect of it is challenges, because lenders and servicers and all these different pieces of the mortgage puzzle have a completely different working structure now with working from home and having investor challenges and different questions from the stimulus itself, high forbearance rates. So, you have the origination side finding a lot of success. At the same time, the industry is having to deal with these other questions of how to make it work. And yet, it still seems to be booming.

It’s the most amazing thing that I am seeing in my almost 40 years of doing this. I’ve never really seen this before in the industry. We are in the biggest feast or famine mode that I’ve ever seen.

All of my clients right now are having record months. They are doing more volume in the month of March and April than they’ve ever done in their histories, yet I’m also seeing other lenders who are really suffering.

Now, the reason I’m seeing that … is two things. Number one is they didn’t transition well with this, getting people moved into their home, working from a home environment, dealing with the technological changes. The one thing about today’s marketplace, you got to understand is, you better be technologically sound because you’ve got to have the tech that will back up working remotely.

But the second thing is, the niche players are the ones who have really gotten hurt in this. Because if you were a broker, or you were a banker who focused on less than 550, or less than 600 FICOs, and that was your predominant source and you really weren’t selling anything else, you got smashed … when all the investors started to pull out of that.

That’s why it’s so important. If there’s one tip I give to my lenders all the time when I consult is, be diverse. Don’t ever become just a niche player, because you set yourself up for failure in these kinds of marketplaces. If you can do conforming, and you can do Govi, and you also have some niche products and you diversify, you’re safe in all of that. That’s who’s doing well. Those who were safe, and those who also can do both purchase and refi.

If you’re only one or the other, again, you’re having trouble because purchase dropped way off the planet. If you don’t have loan officers who can handle the refi transaction you’re in trouble. Now, as far as the backside, the whole investor, the securitization, secondary marketing, all of the other backside and servicing yes, massive issues there. But I will say that I believe that the MBA, in particular, did a great job responding to that.

I believe that the government really did as good of a job as you can hope for. Yeah, there were some mistakes, no question about it. You can’t tell every American they can have a forbearance, without putting rules around that, and not understand it. That was a massive mess, but the good news is we’ve worked through most of that. Now, we’re on the other side, we’re feeling a little bit better about the future on the servicing side. On the origination side, if you’re diverse, if you do purchase and refi, and if you’ve got good technologies, you are going to be phenomenal right now.

 

As far as the volume levels that you’re seeing, are these mostly conforming that you’re seeing, or is there a good market for Jumbo still? Is there still a good market for non-agency? What are you seeing?

Well, there’s a good market for all of those. The problem is there’s not products for all of those. I’m seeing a lot of success in the areas where the products are available today. So banks, by and large, are doing better than mortgage bankers or brokers, because they’ve got more of the diversity. The mortgage bankers who are diverse are doing very, very well. The brokers who are able to get access to those investors with those more neutral products are doing really, really well. Again, it’s the niche ones that are really taking the hurt right now, because they just don’t have enough products to offer to their customer today.

Now, by the way, I actually also work with a reverse lender who tripled their production last month alone. Reverse lending has gone through the roof because again, when senior citizens are looking around and looking at the pandemic and asking the question, “What’s going to happen to my value? What’s going to happen to my 401k?” They’re going right to their equity.

That’s why I said mortgage is the bright spot of the industry because today, what’s the one thing that hasn’t been affected yet? Property values. Amazingly they haven’t been hit yet. I would’ve thought they would’ve started to shred already, but they haven’t.

If we have a second spike, we’re going to see property values drop. That’s why as a lender, you want to be talking to everybody today about using their equity today while they have it, to build cash reserves and things to protect a safe haven for their family in their home.

 

That’s interesting point. It’s also interesting to think about this is how different it is from the 2008 crisis, when housing was one of the causes of the crisis. Whereas today, we have a health emergency. That housing is just being impacted in different ways, but not a driver of the economic downturn. It’s actually likely to be a builder of it coming out of this cycle.

We went from the bad guys to the good guys pretty quick.

 

Sure did. Let me ask you what advice you’re giving to your clients about technology and how to handle this with a completely different working structure.

First and foremost, you have to really make sure that you have got your team set up so that if they’re working from home, which most of them are, and I’m assuming that all of them are, as a matter of fact, that you’ve got technology that allows you to connect your teams together so that you can still keep track and utilize those tools like CRM systems, point of sale systems. Your loan origination systems all have to have that connectivity, number one.

Number two, you want to have some good visual conferencing access and knowledge with your teams. The one thing I talk about a lot today in this pandemic environment is, I mentioned a moment ago that consumers have two fears, they’re emotional economic. The emotional is that human connection that they’re not getting right now and that concerned about wellbeing. The economic is the financial.

We’ve talked a little about the financial, but on the economic side, one of the things I’m recommending heavily to my lenders today, and for loan officers is, start having visual conversations with your customers, immediately. Why are you texting and emailing? You can’t convey compassion. I believe that the number one thing we must exude today as loan officers, as lenders is compassion on a human level. That’s what everybody needs. That’s what everybody wants.

Nobody wants a mortgage. They want a lender to contact them, to help them create life-change through helping them rebuild their mortgage into something that makes more sense, to refinance, or to buy properly and retain reserves in doing so. That’s a compassionate, compelling, relational approach, and that’s what I’ve always believed in.

 

Let’s talk about building family equity in a home. I know that I’ve been looking at different studies that have talked about home ownership rates among whites, and Latinos, and African Americans, and different groups, and how home equity and home value builds so much toward a family’s overall net worth. Tell us a little bit about the importance of making home ownership a financial safe haven for borrowers?

So think about the marketplace we’re moving into. We should have learned an awful lot from 2008 to 2010. Okay. One of the things that happened in 2008 to 10 was, because supply had increased dramatically for rentals, because of all the foreclosures and the people that lost their homes. What happened? Rents went right through the roof.

Today if I’m talking to a consumer, what I’m saying to them is, “Look, the last thing you want to be today is a renter. You want to be a homeowner. In a rental position, the landlord controls your future. They control your monthly housing expense. In a mortgage. You control your monthly housing expense. You can move into that home…”

It’s interesting, I wrote a book for consumers 10 years ago, titled Navigating the Mortgage Maze. I’ve done hundreds upon hundreds of national radio programs, I do them every month, around the country. The one thing that I talk about all the time when it comes to home ownership is, there’s two rules you got to follow in home ownership.

Number one is, you never buy a home without doing a budget first. That’s a very important point. Because the debt to income ratio is a terrible budget indicator. It doesn’t tell you if you can afford the home, it tells you if you qualify for the home. So doing a budget to make sure you get an affordable payment is key.

Second is, maintain reserves. Don’t ever shred all your cash to put down on a home, because if something like this goes wrong, you’ve got nothing to back you up. So we talk about building home ownership as a safe Haven. The safe Haven is that home ownership creates stability in payment, where renting doesn’t. It creates tax benefits, where renting doesn’t. It creates equity building potentially where renting doesn’t.

And for the consumer today who would say, “Yeah, but what if I buy and values go down?” Okay. That might happen. But what has happened the last three times that happened in ’87 to ’88 in the S&L bailout, ’98 in the mortgage problem, and 2008 to ’10 in the meltdown. Well, what happened was it came back and it doubled, that’s what happened.

It is a much safer bet to be in a home. It is a much more stable bet. It’s a much more secure bet. Here’s the key: build reserves. If you have a home today and you don’t have any reserves, use some of that equity. Don’t use a bunch of it, just use enough equity to put away six months of mortgage payments. That would be a very well thought out plan. It’s going to impact your payment very minimally, but it will create security and protection for your family to really help them out in a tough time.

 

Tell us about Mortgage Professionals Providing Hope

In 2006, my life was dramatically changed. I took a trip to India. I did a mission trip. My wife, Laurel and I had been sponsoring a little girl in central India. We saw a thing in church on Sunday morning, one morning. It was a organization called IREF that took care of orphans in India. And for a dollar a day, you could feed, house, clothe, and educate these children, so we decided to do that.

For four years, I looked at this sweet little girl’s picture on my fridge. Couldn’t it take any more. I woke up one morning, went to my office, said, “I can’t take it one more day.” She said, “What?” I said, “Looking at her picture.” She said, “You want to go meet her?” I said, “I do.” She said, “When do you want to go?” I said, “Tomorrow.” And literally having a really nice wife, she said, “Okay.”

I got on a plane, flew 55 hours. It literally changed my life. I spent 12 days in the poorest villages, literally in the world. I saw people dying in the streets. I saw starvation. I saw disease. I saw things that I never, I knew existed in my mind, but until you sense them, see them, smell them, touch them. Pray for people, love on people who are in those positions. You can’t appreciate it.

I came home, and the first thing we did was sell our house, sell our car, and changed our whole lifestyle. We decided that we wanted to commit our lives to giving back. So as a result of that, we started Mortgage Professionals Providing Hope, which was a not-for-profit, where 100% of the funds that we take in, we give back directly to charities, or organizations I should say, that are either taking care of children, or families.

Last year, we were able to house almost 200 homeless families in the US. Almost all of those were single moms who were living in their cars with their children. They’re all housed now. We’ve built an orphanage in India for 500 girls. We built a school in Guatemala for kids living in a garbage dump, where they have the best education in the entire country of Guatemala.

We’ve been able to do all kinds of amazing things through that, because I believe, you probably see my T-shirt, “others first,” that’s our logo and our philosophy at Mortgage Champions. It’s all based on others first, which is based off my life first out of the book of Philippians. It says, “do nothing out of selfish ambition or vain conceit, but in all things with humility, value others above yourself, looking out for their interests and not your own.”

That’s my firm belief about life, and about business. That’s what Mortgage Professionals Providing Hope was designed for. And we’ve been very thankful for the people who’ve come alongside of some partners with us so that we can make a difference in the lives of children and families around the world.

 

We appreciate the efforts that you’re doing with the not-for-profit, and for your time sharing your observations about the industry, and about the challenges and benefits that are coming with this unprecedented time. Is there anything else that you think we would be remiss not to share with our listeners?

I want to tell you how much I appreciate the great questions that you asked. I will close with this. This is a time when we can have our finest hour. I look over my 37 year career, and I say, “What are the moments that we’ve had in the mortgage industry, where we really could make a massive difference?” This is our finest hour right now. We literally can help Americans in an amazing way. I just want to encourage all of your listeners to remember that what you do, you don’t provide mortgages, you don’t do loans. You’re a life changer. You’re a difference maker. You’re a wealth builder. You’re creating stability, and savings, and security for people. You are making a massive difference. So don’t make it about transactions, make it about people. Be relational, not transactional, and you’re going to win big in this marketplace, and you’re going to change lives and feel great about what you do.