NTXAMP lunch Meeting May 2018

1. “The State of the Industry” NTXAMP lunch MeetingMay 2018 Rob Chrisman rchrisman@robchrisman.com Chrisman LLC/NTXAMP

2. We have ~60 minutes, to discuss • The primary markets • and • The secondary markets Chrisman LLC/NTXAMP

3. Stay Relevant & keep your perspective Chrisman LLC/NTXAMP

4. I’m not going to sugarcoat this Chrisman LLC/NTXAMP

5. Loan officer pain points • Price Pressure • Inventory • Undefined uncertainty Chrisman LLC/NTXAMP

6. The fact of the matter is • We’re not in the non-profit business, you the LO, or any lender. • “We’re not going to lose money on the deal just so that you can make money.” • “We think our pricing is fair. You need to do what’s best for you.” • “Every lender out there is grappling with the same reality and the same environment.” Chrisman LLC/NTXAMP

7. What are companies doing about it? • Morale – two camps. • Reinvesting in people, policies, procedures. • In it for the long haul, and adding long-term value. • Proper on-boarding is critical: setting expectations. • Reminding employees to remember their value proposition, focus on the brand, clarity in their message. Chrisman LLC/NTXAMP

8. And… • Passing on knowledge: why create a shiny new object when the tools are already there? • LOs are yearning to hear what other LOs are doing – learn from your co-workers. Good leaders love to share. • Learning about other ways to do things. Chrisman LLC/NTXAMP

9. Where are your finding leads? Chrisman LLC/NTXAMP

10. Price aside, there are things that will help a LO & lender succeed MLOs that stay relevant and are a financial life coach for borrowers. Wisdom & credibility! Producers that are fully accountable, and manage their pipeline. Staff knowing the cost to produce a loan. Capital markets teams maximizing execution, and who are open to offering new products. Servicing properly. Enforcing culture. Chrisman LLC/NTXAMP

11. Discipline and consistency Chrisman LLC/NTXAMP

12. The Capital markets • Home price appreciation • 3% LTV product • The “end” of Quantitative Easing • Non-QM lending • Lawsuit settlements • PMIERs – mortgage insurance • Single security proposal • CFPB scope increase • Student debt • Mergers & Acquisitions Chrisman LLC/NTXAMP

13. Co-workers may ask you, “What is the point of capital markets? What do those people do all day besides make prices uncompetitive, beef up their margins, and deny extensions?” Product Pricing Hedging Execution Chrisman LLC/NTXAMP

14. A real estate bubble? Not looking that way Unless you’re in Manhattan. Nearly every metric shows that property values continue to increase. Underwriting criteria – historical standards. Skin in the game through down payments. Owner’s mindsets. Borrowers with low fixed-rate interest rates. And demographic & population trends. Chrisman LLC/NTXAMP

15. Majority of all loan products fall into products created and governed by the Agencies (FHA, VA, USDA) and the GSEs (FNMA or FHLMC). Let’s cover some basics! Chrisman LLC/NTXAMP

16. The yield curve Chrisman LLC/NTXAMP

17. When in Doubt Remember this! Chrisman LLC/NTXAMP

18. Who is the supply & demand of $6 billion a day? • You cover the supply: the loan officer! • Banks, mortgage banks, credit unions, owners of MBS, MBS from overseas… • The demand is out there. • Fannie & Freddie, banks, credit unions, insurance companies, pension funds, the Fed, money managers, hedge funds. Chrisman LLC/NTXAMP

19. So What makes mortgage prices go up and down? • Supply and demand! • Changing refinance and purchase volume, new programs, household formation, immigration, prepayments… • Risk tolerance, matching liabilities, cross selling opportunities, overseas events, rate expectations… Chrisman LLC/NTXAMP

20. What about rate sheets? • Every company is looking at the same bond market, maybe the same LLPAs! But • Not every company views the value of servicing the same (rate forecast, cross-selling, foreclosure laws…) • Not every company has the same overhead (bricks & mortar, labor, departments) or efficiency. • Not every company has the same profit margins. • And not every company or office has the same competitive environment (Greenwood versus Dallas). Chrisman LLC/NTXAMP

21. Management is thinking about the bottom line • Bank mortgage division basic p&l in basis points • Revenue 369 • Net interest spread 12 • Personnel (259) • Operating expenses (56) • Servicing amort. & impairment (8) • Income taxes (23) • Net income 35 Chrisman LLC/NTXAMP

22. Impacting volumes & the bottom line for everyone are… • Inventory constraints. • Lenders with little sense of profit margins. • Banks v. non-depository lenders v. credit unions. • Online lenders/call centers. • All cash buyers. • Reverse lenders. • 3 1/2 % 30-year fixed-rate borrowers. • Competitive landscape changing. • Vague regulatory compliance guidelines • Who is your competition? Credit unions without taxes? Banks without warehouse costs? Internet lenders without 1.50% comp plans? Mom & Pop shops who don’t have a compliance department, QC department… Chrisman LLC/NTXAMP

23. the demographics are great! Chrisman LLC/NTXAMP

24. Every generation & ethnicity • Elderly • Baby boomers (‘46-’64) • Gen X (‘65-’79) • Millennials/Gen Y (‘80-’95) Chrisman LLC/NTXAMP

25. To WRAP things up • Rates aren’t great, but they’re good. • There is a focus on culture. • Lenders who are well-trained and motivated. • Employees who know their emphasis: product, price, or service. Chrisman LLC/NTXAMP

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