Finding a Niche, and Doing it Right

A conversation with Plaza Home Mortgage co-founder, president and CEO Kevin Parra

Under the leadership of Kevin Parra since its 2000 inception, Plaza Home Mortgage has focused exclusively on wholesale and correspondent lending, with an emphasis on customer service. Starting out as a loan officer/originator out of college, he went on to enter the wholesale world as an account executive, then went into correspondent lending and eventually started Plaza “with four people and a little office.” It’s grown organically, and now Plaza has coverage in all 50 states. “It was the best thing that ever happened,” Parra said.

Parra, Plaza’s co-founder, chairman, president and chief executive officer, spoke with Mortgage Media’s Dave Matthews at the MBA’s recent National Secondary Market Conference & Expo. They touched on many issues, from recruitment to demographics, from technology to the status of the GSEs, though Parra’s main focus is to continue to strengthen Plaza’s place in the marketplace as a trusted third-party originator.

“I think we’re just going to continue to do what we do well,” Parra said, “which is third-party originations.”

A summary of the main points of their conversation follows:

 

‘A very challenging time’

So, Matthews asked, is this a great time to be in the wholesale business? “Great” isn’t exactly the word Parra would use, but it’s certainly an exciting time if you like a challenge.

“I wouldn’t call it a great time, I’d call it a very challenging time actually,” he said. “Last year, refinances were nearly nonexistent, so overall volumes were and are down. We did see things start to improve January and February, this continued into the Spring and now we’re expecting June and July to look good. But the market is very competitive. There are some large players out there that have been foregoing profit to get market share. This is especially the case on the broker side, but also on the correspondent side.”

He figures some in the business are pricing overly low to make it up “on volume,” so to speak, with hopes to recoup in the longer term. Parra and Matthews expressed doubts about that approach’s viability, as evidenced with some players leaving the space entirely.

Ultimately, Parra believes Plaza’s strategy of offering a wide variety of competitively priced products and the experience of dealing with a knowledgeable, customer-driven company will be what’s truly successful.

 

Priorities for Plaza

To offer that competitive product, Parra said Plaza needs to continue to be as efficient and streamlined as possible; efforts that have been in motion for some time.

“Well, clearly with the market where it is, we have to become a lower-cost service provider, and to do that we need: A. good technology; and B. efficient operations. We’ve revisited the idea of having 12 regional centers — and are now down to four. It’s just more efficient, driving more volume going through fewer regional centers.”

Plaza has hubs in the major U.S. regions: the West Coast, Midwest, and two on the East Coast (Boston and Jacksonville) with offices in assorted metro areas and even a small one in Hawaii. All time zones are covered — and for that matter, the more psychological aspect of language and culture, Parra noted, as people tend to prefer to do business with and take advice from someone with a similar background: Simply put, Texans want to talk to Texans, or at least would rather do so than talk with a New Englander, and the reverse is true. People also just like working with people who know their local market.

Consolidation efforts haven’t changed Plaza relationship-based approach to customers, Parra said — after all, the company is regionalized rather than centralized, allowing for that more personal approach. It’s relationship-based rather than transactional-based, he noted.

Technology-wise, Plaza moved last year to a new loan origination system (LOS), a move Parra said was long overdue. The new LOS, BREEZE, is web-based and flexible, with an excellent customer-facing component, he said.

Recruitment

Younger people aren’t coming into the profession right out of college the way they did back in the 1980s, Parra confirmed — in fact, he had just heard that the average age of a loan officer in the industry is now around 49.5. He said Plaza has had some success recruiting at colleges, specifically in Jacksonville — but said this needs to be an industry-wide push.

“I think we really need to start recruiting heavily out of college, and I just don’t think companies are doing that,” he said. “I think it’s the same people (who are) doing the same thing, but it’s starting to get to a point where they’re getting older and retiring.” And that’s as true on the origination side as it is for underwriters, he noted.

 

GSE status

Parra isn’t worried about the GSEs exiting from conservatorship. In fact, he doesn’t think it’s impending at all. It’s been talked about for a long time, he said, but he doesn’t expect any major changes right away given the current political climate. The conventional wisdom in the industry seems to be that there certainly wouldn’t be any major changes or moves before the elections. So, at this point, Parra said he’s not guessing what the changes will be or when they’ll occur.

 

Demographics

Studies show changing demographics in the housing market as millennials finally enter the marketplace. Will that have much impact on the way Parra’s customers originate and then downstream onto Plaza’s operations? Not that much, Parra thinks, at least not anytime soon: They’re still not going to do everything online.

“From the standpoint of a millennial, you associate them with wanting to use technology, but the reality is that people use technology to shop around — but when it comes to securing the loan and buying the house, first-time homebuyers want to talk to someone who is knowledgeable and who can explain the process to them. I don’t see technology changing that much anytime soon,” Parra said.

Some online lenders are having some success, but their customers tend to be at a different place he said, “Online lenders have success with customers looking for a refinance and repeat homebuyers who already know the ins and outs of the process. Our broker customers tend to be focused on purchase money mortgages.”