1) How did you get your start?
I started my career as a loan originator, as a loan officer — a commission paid originator– so I understand what it’s like to be a commission paid originator: having to build a book of business and having to develop business relationships. I’ve trained many many, maybe dozens, maybe hundreds of loan originators on how to originate construction to perm loans.
2) Why is mentorship important to you?
It’s important to me to see a new generation of people in the mortgage and finance industry that develop these types of skill sets, and most of them are smart and educated, but they just need that leg up, they just need that little bit of mentoring to teach them why best practices, teach them about the different elements of risk and how to measure risk.
3) What advice would you give someone entering construction lending?
Learn what you don’t know about construction lending. Maybe you’ve made renovation loans before and you’re trying to migrate into construction to perm lending. And those are very very different avenues of loan origination.
Learn what you don’t know. There’s plenty of industry experts out there that can answer these questions for you. Your shareholders inside of your organization and the owners of your organization expect this from you. The warehouse bank and commercial banking industry that supports you expect you to exercise a high level of due diligence – and there’s a great deal.
4) What are the biggest changes you’ve seen in the industry in recent years?
I think the biggest change that I’ve seen has been the implementation of the the ATR rule, the ability to repay rule, under the Dodd Frank Act because that has had a profound change on the mortgage industry regarding qualified mortgages. It’s affected lenders virtually across the board. The implementation of TRID has impacted virtually every mortgage lender whether you’re a commercial bank, a credit union, a mortgage banker, a mortgage broker. It’s really impacted every aspect of the mortgage industry.
5) How have community banks been impacted by TRID?
TRID has negatively impacted the community banking industry, in particular.
We have a lot of problems in the housing industry with regards to housing inventory and affordability. Community banks have always played a very active role in consumer construction to Perm lending and now they’re basically in a back seat over this very issue.
I was glad to see the ABA get involved by submitting a letter to the CEO of the CSFB with regards to the TRID rule on disclosure of terms of construction loan. Hopefully something good comes out of that because holding a lot of community banks back from providing consumer construction to Perm loans.
6) What role do you believe technology plays in construction lending?
Technology allows you to scale your business and if you can’t scale your business it’s very difficult to grow your business in a very cost effective way. Years ago we managed construction and construction to perm loans using a simple Excel spreadsheet. Well those days are pretty much gone. The regulatory environment is not conducive to managing construction loans on an Excel spreadsheet.
7) Tell us about the USDA CTP Pilot Program
We have had a wonderful experience with the USDA and helping them bring their handbook into a modern era of understanding and transparency.
We’ve enjoyed a really good relationship with a director at the USDA, Joaquín Tremols. He has been very good to work with. We were able to participate in revising Section 7 of Chapter 12 of the USDA handbook in terms of providing more information about what the expectations are for management of construction to perm loans.
These updates allowed the USDA to take the next step forward and introduce the first securitizable construction to permanent loans. The program is currently in a pilot and we’re looking forward to it transitioning into a permanent program for the USDA.
8) What contribution to the industry are you most proud of?
Raising the awareness, I think, of government agencies, the GSE’s, about the need to really expand their offerings for construction to perm lending and to point out ways that it can be done without raising the risk level. It is a complicated industry. These are can be complicated loans but there are good solutions I think to all of the issues that have been raised by lenders — you know to the GSE’s — from interest rate risk management to getting a home complete and really defining what industry best practices are and what it should be and what it should look like. I think that’s what it would be.