‘The Opportunity Equals the Struggle’

Union Home CEO Bill Cosgrove looks at how independent mortgage bankers can weather — and thrive amid — changes of all sorts

New technologies. Demographic shifts. An anticipated downturn. New players in Washington. There’s a world of change for an independent mortgage banker to navigate.

But, notes Union Home Mortgage Corp. President and CEO (and former Mortgage Bankers Association chair) Bill Cosgrove, challenge and opportunity are two sides of the coin.

“Those companies that have great leadership, the companies that really execute in a world-class way, and they have the vision and the wherewithal to see it through to the other side — I think the opportunity equals the struggle for all of us.”

Cosgrove spoke with Mortgage Media’s SA Ibrahim during the recent Independent Mortgage Bankers Conference in San Francisco. Cosgrove was, in fact, instrumental in getting the conference started, as a voice in Washington for the independent mortgage bankers that make up the majority of the MBA’s members.

And that’s important. As Ibrahim noted, following the downturn, the media had written the independent mortgage bankers’ “premature obituary” and a number of start-up businesses sprouted, many in San Francisco, that supposedly were going to make the IMB dinosaurs extinct — but which had little experience or expertise in the actual mortgage business. Some of them these days are now working in partnership with the industry, Ibrahim noted.

Noting that from where he stands, every sector of the mortgage business has been wrongfully written off at some point, Cosgrove’s take on that scenario as twofold. One, there are fundamentals to the mortgage business that need to be understood and undertaken in order to be successful. But two, some of these newcomers did and do have ideas that the industry needs to take seriously and synthesize.

“So I think people call themselves ‘disruptors,’ and there’s a place for disruptors,” he said. “But once you disrupt it, it’s still the mortgage business and there’s fundamentals of the mortgage business. You could be a disruptor, but if you don’t know what the hell the mortgage business is, you’re not gonna be successful.

“But yet, if you’re in the mortgage business, as we are, and you don’t pay attention to the disruptors and partner with the right disruptors, I don’t think you have a future in the business. So I think the disruptors are getting better. I think the disruptors have determined that they don’t know the mortgage business but they certainly know technology and they know a lot about consumer behavior. So I think that the two are coming together in a healthy way that I think will be the future of mortgage banking, and I also think it’ll benefit consumers.”

And the bottom line is understanding and meeting the customer’s, the borrower’s needs, regardless of what’s happening with the economy, with the housing market, with the political arena: “You have a mission, and that mission is to be the best provider and the most responsible provider for home loans in America, and there’s no Plan B,” Cosgrove said. You’re not going to be advertising in the seventh inning of the World Series like a Bank of America — “in our minds, we have to be world class in consumer-centric because that’s where the game’s won and lost.”

It’s a challenging time for housing in America, Cosgrove noted. Many homeowners are locked into low-interest-rate loans and are reluctant to consider upgrading or purchasing a new home. The housing stock is old in a number of places like the Cleveland area (where Union Home is headquartered) or elsewhere in the Midwest — 70 or 80 years old, dating from the postwar boom — though he noted new construction is starting to take hold. He’s not been impressed with housing solutions coming out of D.C. — “Washington plays politics with housing, but they really don’t solve problems with housing.” Though, he noted, there’s more opportunity for substantive, realistic solutions on issues like affordable housing now that the relationship between government and the mortgage industry is more collegial and less adversarial, and the MBA has played a definite role there.

“Ten years ago, we didn’t have a seat at the table for all the changes, all the regulatory changes,” he said. “And I think some of the results, it showed a lot of the regulation punished but it didn’t make the process better. It didn’t really help consumers. Today, I think with MBA, and MBA’s leadership in other groups, we do have a seat at the table; what we say matters. That needs to continue.”

The efficiencies and opportunities for greater customer service financial by technology are crucial now and will be increasingly so, he noted: “As a mortgage lender, you really have to be in the game with technology — driving down your cost, driving up your efficiencies, taking world-class care of the customer. That’s the future of the mortgage business.”

With a continual diverse population — millennials coming into home ownership, Latino and African-American families making up larger proportions of the market — the industry and D.C. need to work together to figure how to best serve underserved communities. Good rehab loans are needed, so are different models to ascertain people’s income and creditworthiness in a changing society where people don’t necessarily work one job for one employer and their income may come from multiple sources. “There’s a lot of opportunity. It’s a changing America, for the better; it’s a changing demographic, and as real estate professionals in partnership with the government, we have got to come up with better answers.”

That said, he reminded, there’s a bedrock truth to remember: “When you strip it all down at the end of the day, we are lending money to people to repay, which is the risk business. And it’s a high-risk business and we’ve got to be responsible, doing it for our consumers and us as well. So it’s a rapidly changing world, but yet we as an industry need to change with it but remind ourselves that there’s basic fundamentals in mortgage finance that should never leave us.”

One of the ways Cosgrove and his company instills and reinforces those fundamentals to a new generation of professionals while at the same time growing and changing through the influx of new ideas is through an intern program, started five years ago. This summer, Union Home will have 65 to 70 interns from 19 different university, learning about the mortgage industry and what a successful business does, he said.

“These young people come in and just do a great, great job. They question everything we do. It makes us better. And at the end of the internship we hire them, a lot of them,” he said. “And they give us a window into what America will be and what the consumer of tomorrow will be, and it’s a really cool thing.”

Finally, looking to the expected downturn in the market — while acknowledging that its likely to be shallower than some seen in the past — Cosgrove noted the softening still will be painful because it’s coming after a decade of run-up, of growth. An unprecedented run, really, as opposed to, say, a four- or five-year cycle with one or two downturns that prompted professionals to reassess their business. He said everybody’s doing what they can to responsibly lower costs. He noted a bit of concern with loan-level quality softening to a degree, but says it’s nowhere near as irresponsible as it was in the 2006-09 era that exacerbated the financial crisis. He also notes there’s over-capacity in the industry — more lenders, more loan officer licenses, ultimately more competition than there are loans. But, as he put it, “the opportunity equals the struggle.”

“This is a trying time for a lot of mortgage lenders,” he said. “But with MBA — their help, and everybody else’s — I think we’re gonna be just fine.”