As CEO of Dorado I travel constantly. These last few weeks have been very unique. What began as a single business meeting turned into a quest to understand from industry leaders what it takes to be the best.
My odyssey began on the 47th floor in a building in the center of the financial district in New York. I was ushered into the corner office to meet one of the most senior and most written about executives that I have ever met in my life. He called me, as the CEO of one of his strategic technology partners, into his office to challenge me. His fist hit the table and he looked at me. He said he wanted to be the best. He asked me how I was going to help him. I told him I would take personal responsibility for getting him there. I meant it.
A few days later, I took the train to Washington D.C. to meet with an executive responsible for a production operation with tens of thousands of people reporting to him. I asked him over dinner what was important to his success. We talked briefly of the demise of third party originations, now only producing 17% of all originations and declining, and how the correspondent channel is only a single government regulation away from losing viability. He said that people in the industry don’t get it, including his own loan officers. He woke up one day and decided to look into his top 100 producers and was amazed to find out that with all of the volume they do, only a handful of them were profitable for the company. Most think that profitability, especially with the secondary market gone, is in the volume, he observed, but I got my team together and explained to them that we lost millions on the quality of loans due to repurchase.” So to be their best, improving quality was key.
My quest continued onto St. Louis to meet with the CEO of one of the largest mortgagecompanies in the world. He knows the industry because over the last thirty years, he helped build it. I asked him the same question I asked in D.C. He said what is confusing to most banking executives in Manhattan is the difference between this business and retail banking. For most bankers, transactions happen in seconds or less. In the mortgage business, a single transaction can take 45 days. They don’t get it. Being the best, he said, is a continual process, not an overnight change. Return or ROI in this market, he said, is much more iterative with analysis and execution. While large-scale agility is very hard — it takes time and discipline with the right people and systems in place – it is also the benchmark for success.
My odyssey then took me to Kansas City. I was in the car of the executive responsible for all alternative delivery for the largest lender in the country. He is an expert on risk. We were looking for Gates BBQ – a hole in the wall kind of a place and a landmark for smoke pit aficionados around the world. I sat in my suit across a platter of slabs of pork ribs and smoked beef, sitting on plastic seats, and sipped my beer. I asked him how important transparency was to rebuilding a secondary market that has collapsed. How important I asked is transparency to being the best? He said it could help build it or ruin it forever. It has to be done right. He said that some officials and advisors want to make all information accessible throughout the life of a loan. For example, if a person’s credit score changes a few years after getting a mortgage, then an investor has the right to know as that could influence the health of that loan. There are a lot of people in D.C. and New York that would like to see that happen, he says. But if it does, they will kill the very thing they are trying to fix. Who will trade on assets that you can’t predict the value of? If credit worthiness data continues to be made available after funding, it’s like putting a webcam in the bedroom of every borrower. The after-market will be crippled with too much information.
Fast-forward and I’m at the Epic Roasthouse, right on the water under the Bay Bridge, back home in San Francisco. I’m having dinner with the CTO of a lender from Texas that now finds itself in the top 20. He is young, smart, and laser-focused. He is having the New York strip and I’m thinking I should have gotten that over the lamb. I make up for it with a Russian River Pinot. This lender is growing fast. They are making money and taking advantage of the market conditions to expand. They are making tons of money. They have a vision — to be the best. Now more than ever, it’s in sight. To them, being the best means producing the cleanest loans in the fastest amount of time, without losing their entrepreneurial spirit – the quality that makes them great. It’s part of their culture. They are here to win. And that’s why we are talking.
