Who else is in the mortgage biz?

[Rick Lee]

I made a career switch in July to return to the mortgage biz and work for one of my best friends. Things started out pretty well and my first commission check was much more than I ever made in a month at my previous job. Now the subprime wholesale world has been rocked to its foundations and things are sucking very badly. A lot of our competitors have closed up shop and my company has just done away with our flagship products and raised our already high prices. They laid off a lot of inside folks and more is coming next week. I figure they won't touch sales folks like me, but things are getting so tough that many of us will have to quit. Well, at least those who weren't making huge money for the last few years and can't make it another 6 mos. without a paycheck.

Today I had lunch with my old boss, who is really trying to get me to come back. The old company was bought out by our only competition, so now they're pretty much a monopoly with a huge company to support them. Everyone there is making a lot more money now and he said I could even work from home. This is very tempting.

Anway, who else out there in the mortgage biz is having a tough couple of months? I know this time of year is bad even in a good market. But it seems extra super bad now. Correct?

[the]

Get out while you can. You will have been one of the lucky ones who was going to make a fortune in the subprime mortgage biz, but can now go back to their old job.

[azasadny]

All of the small sub-prime mortgage companies around me have closed up shop, but then again I'm in the Detroit area where everything has closed down. I would seriously consider going back to work for your former boss if I were you. You know him and I assume you get along well and he must respect you and need your skills and that's always a good place to be! Good luck!

[JeremyD]

and better for your resume too - "they wanted you back" says alot

[Joeaksa]

Rick,

You wanted to try this new job as it looked like a good chance to get ahead. At the time you did not know how it would work out.

Now you know, and have taken the chance you were worried about. If your old job was something that you liked and returning there would work out I would do it. Stability is important as we get older and if your old boss wants you back its time to look very hard at his offer.

[Rick Lee]

Spoke with my current boss about this today. Jan. was the first time in years he got a bad paycheck; didn't make enough to cover his two house payments. He went from $50k a month to about $7k. He said to give it this month, see how things look and then make a decision.

[Joeaksa]

Keep in touch with your old boss. I would lean towards the old job if things do not improve and really soon.

[jyl]

Tricky position, Rick, but sounds like you are reasonably well-placed in terms of options, at the moment anyway. Which is a credit to your work at your former job, your care not to burn bridges, and probably to your overall character which your old boss probably got to know reasonably well.

Okay, so the options are (1) stay at current company, (2) return to old company, (3) find a new company, (4) exit job market for a while (return to school, take a year off, whatever).

Obviously the other dimension is how quickly you make the decision. Might not have much choice about that one.

So, to consider option (1) you must make an informed bet that (A) the subprime market will come back, that (B) you're financially and emotionally able to hold on until it does, and that (C) by holding on through the downcycle you'll be much better positioned in the next upcycle than you are today. The last part (C) is important, otherwise you might as well do something else in the meantime.

I went through something similar in the stock market, entered in 1998/99, market and industry started imploding in 2000, our compensation was slashed, everyone was cutting heads. In my company, almost half of the analysts (my role then) were laid off, and some of them were still unemployed 1+ year later. I decided to stick it out, things have worked out (knock on wood).

I saw this happen with real estate lawyers in Southern Calif in the 1990s, around 1990 when RE market busted (and that included commercial) there was no work for my firm's RE lawyers, most of the younger associates (1-3 years out of law school) switched (or were switched against their will) to other practice areas. But a handful stuck it out. By 1996/7 the RE market (commercial) was back and there was a real shortage of senior associates in RE law. Those few left all started making lots more money and accelerated into partnership.

But the subprime market won't necessarily behave like the stock market or the SoCal RE market.

Are you able to do some serious research into the subprime market? Why is it tanking? What is the outlook for those factors? Has it been a cyclical market in the past? How long were those cycles? What is different/same now? Is there a secular (i.e. lasting, not cyclical) change occurring in the industry structure, legal framework, underlying demand/supply? In the next upcycle (assuming you decide it is cyclical) will the business be as profitable as this cycle? Will guys like your boss be making $600K/yr again? What are your chances of being in that role, and making that kind of money?

[jyl]

Then there's option (3). I don't recall why you changed jobs. Maybe there was something you didn't like about the old job. Do you want to go back to the same job if it wasn't satisfactory before? Would you prefer to go find something new? This is your chance.

And of course there's option (2). Would you have to go back to exactly the same job? Is there a way you can change the job, to address whatever wasn't ideal before? In principle, it would be a bummer to take a backwards or sideways step, nice to find some way to turn it into a forwards step.

Finally, there's option (4). I assume there's no trust fund or big bundle in the bank, so a year in Monaco might be tough. But, wait, are you interested in getting an advanced degree? I don't know anything about your educational background or how useful more school would be. But if you are, can you combine options (2) and (4)? If you can work from home, clearly there's the flexibility to do a night program, bust your butt, get another degree in a few years.

Remember, your goal is, in some reasonable number of years, to be your boss and be the one pulling down $50K/month. Think forward! You've got to have a heck of a lot going for you, considering how much people want you to work for them.

[Rick Lee]

Thanks John. The reason I left my old job was because my income was pretty much capped out and I was the top or #2 producer in any given month. Every year they'd raise my quota 40-60% but not my commission cut or base salary. So, since my commission was based only on revenue I brought in above my quota, I had to do 40-60% more each year just to make the same money I made the previous year. Though I always managed to make more each year than the last, this formula irritated me. In addition, the commute was absolute hell for a slightly agoraphobic person like me, getting squished on the Metro every day. And I just wanted to work for my buddy, do it from home and have serious income potential.

Now it seems the things I didn't like about the old job are all gone. Since they were bought out by their only real competitor, the sales people are handed a huge book of existing business and paid a decent base plus commission on growing that current book's revenue by 7% or more per year. That's not too hard when the company hikes rates 5% each year. My old boss said I could work from home and make a lot more money than I did before. So

I'm at the point now where I simply cannot ride it out much longer. I have about 5 mos. living expenses left before I need a 401k loan. I haven't lived paycheck to paycheck in many years and it's not something I ever want to do again. So this month is soul and job searching month.

[jyl]

Sounds like you are thinking it through and have at least one good/better-than-good option. Not a bad spot to be in.

If things go south, I get first dibs on the cars and guns. (I am kidding of course, ain't gonna happen.)

[RANDY P]

Well, it's been a rough start. Had a huge amout of taxes to pay this year, and so far it's noticably slow. I'd say I'm down probably 30% from last year. What I'm mostly worried about is the decline in available products that afford us to look for clients.

Subprime is history as we know it, and the investors on Wall St. are really just beginning to see how much damage fraud has done. I think it's going to really tighten up for the next 2 years. However once things settle down, it'll get easier and easier as some of the guidelines start to ease up. Binge and purge.

That is, assuming the FED doesn't come in and turn subprime and Alt A out completely..

As of myself-

The combination of my corporate filings, and taxable income from last year and the nut that's due hurt pretty bad. I'm right side up, but I'm worried about my 14 LO's who aren't connected. If they drop out, then I'm screwed..

I'm dumping huge cash into grassroots marketing and spending on leads like you wouldn't believe. I'm trying to keep it running for everyone..

Rick, you don't work for AHK or WMC do you?

rjp

[Rick Lee]

Yes, I work for WMC.

[RANDY P]

all these are subprime co's that have died in the last 6 mos..)


ResMAE listed for sale

Wachovia Corp.'s consolidation of its wholesale operations will result in layoffs

Fieldstone announced that it's closing 5 west coast branches including its Arizona operations.

Mortgage Lender Network (MLN) "stopped funding residential loans" on 12/29 (they didn't actually say they were closing).

HMIC closed its doors on Dec 20.

As part of a $100 million cost reduction strategy, Sovereign Bancorp exited the wholesale mortgage market.

Own it Mortgage - closed its doors (big player, and this hurt)

Sebring Mortgage closed its doors

Axis Mortgage closed its doors

Oak Street Mortgage closed its doors

Right Away Mortgage closed its doors

Secured Funding closed its doors

Loans 123 - Not taking any more business

Aegis Funding (sub-prime) closed its doors (Aegis Wholesale (Conforming and Alt-A) and Home Equity are still open)

Option One - Up for Sale

Meritage Sold to Lime Financial

Mandalay - Closed it Doors yesterday

Southstar - AE's leaving (a good source stating company cannot meet payroll obligations)

Accredited - OC Regional office production at its lowest levels, rumors they may close by 1st qtr.(big player)

Countrywide - Multiple layoffs

Washington Mutual - Continued layoffs

Saxon - Layoffs

RFC - Layoffs

Decision One closed 6 regional centers.

Argent consolidated and let 1,000 people go.Currently for Sale (big player)

Ameriquest laid off 3,800 and shut 229 retail branches after announcing a $325 million settlement with state's attorneys general for overcharging borrowers. (owns Argent)

Bank of America Mortgage laid off 225 locally.

Fieldstone Mortgage closed their Las Vegas branch.

Acoustic Home Loans closed its doors due to a sudden increase in repurchases.

WAMU exited their correspondent business. (meaning they stopped buying loans from people who used their own money to fund - in short they only trust their own.)

This means a lot of buyers are gone. Only FHA and VA are available these days for FTHB..

OH WELL>>>

[RANDY P]

Bummer. My biz partner was a big AE hitter for WMC prior to us opening our net branch.

WMC is still afloat, and they have a decent name in the marketplace. I think you'll be back soon.

Also, didn't you guys get fedreally chartered recently?

Originally posted by Rick Lee
Yes, I work for WMC.

[Rick Lee]

Yes, we became an FSB on Jan. 1 this year. We are owned by GE, so there's not much of a liquidity problem there and the big shots swear to us that GE is in for the long haul and will keep WMC afloat for as long as it takes. But that doesn't do much for my personal situation. All of our niche products went away last week and our already high pricing just got higher. We may have less competition, but we have a lot fewer loans to fund too. One guy on my team had $8 million of his pipeline get killed for appraisal issues last month. I'm not much hurting for submissions, but every one I get gets killed for some reason or another and then the broker send the loan somewhere else and they always close it. It looks to me like WMC plans to have us rebrand the company in the marketplace. That's fine if you're getting paid for it. But making 100% commission and spending the next 6 mos. trying to rebrand and remarket the company is not gonna be a well paying job.

[RANDY P]

Originally posted by Rick Lee
Yes, we became an FSB on Jan. 1 this year. We are owned by GE, so there's not much of a liquidity problem there and the big shots swear to us that GE is in for the long haul and will keep WMC afloat for as long as it takes. But that doesn't do much for my personal situation. All of our niche products went away last week and our already high pricing just got higher. We may have less competition, but we have a lot fewer loans to fund too. One guy on my team had $8 million of his pipeline get killed for appraisal issues last month. I'm not much hurting for submissions, but every one I get gets killed for some reason or another and then the broker send the loan somewhere else and they always close it. It looks to me like WMC plans to have us rebrand the company in the marketplace. That's fine if you're getting paid for it. But making 100% commission and spending the next 6 mos. trying to rebrand and remarket the company is not gonna be a well paying job.

I hear ya.

My GF is an AE for a subprime player (edited since she started screaming "DON'T MENTION MY BANK GDDAMMIT"! YOU'LL FRY MY BIZ!), and she gets her deals cut repeatedly. They're all using appraisals as the final way to control quality and I think it's a way to increase margin (A'la Accredited Home Lenders) -

she still has decent submission volume, but they are paying close attention to tax assessed vs. appraised value. Way of the market.

We still have the spring and summer purchase market coming up, fortunately appraisal cuts are rare on those deals -

It could be worse, you could be with New Century, for instance...

Any speculation on if Argent or NC is gonna drop dead this week? My money is on Argent...

rjp

[Rick Lee]

I can't take too much schadenfreude in others dropping out of the game. That only makes our bosses tell us how lucky we are to still have jobs, albeit near non-paying ones. That reminds me, one of our real big shots is a Porsche guy and has his cars serviced at TRE. I hope he doesn't read this.

[Rick Lee]

Well, I never doubted that the market would evolve or that there would be slow period like the usual winter slow down. But to see how far and how fast the bottom has dropped out of this has really surprised me. At the time I made the switch, the guys I now work with were making sick money, so making half or even a quarter as much was still a decent paycheck. And my first commission check was more than I had ever made in a month at my previous job.

[berettafan]

not contributing here, but curious; what exactly is it you guys do?

i understand mortgage brokers but it appears you do something different?