One of the things that is so frustrating about the mortgage market is that it is completely inefficient. When I worked in the industry for 10 years it was a daily frustration. It wasn’t only frustrating for me, but it led to frustration from everyone involved. Let me explain.

At any given time, the market changes hourly, there is a price that banks are willing to pay for your mortgage. Unfortunately there isn’t anywhere that anyone can go to view that price. Yes, I said it… Wall Street Experts, Bank Owners, Mortgage Backed Security Traders, Loan Officers, Realtors and definitely not the Consumers know what the price is for a loan at any given minute.

And in my humble opinion, this is the cause for most of the pain involved in the industry. Take for example your bank, they are constantly offering a price for different loans depending on different characteristics of the individual borrower and property. Then you have the source of that loan. They may be offering it to you directly or they may be offering it to a correspondent lender or they may be offering it to a wholesale lender. And they may even be offering a loan that they have on the books for sale to someone else.

But why does this cause so much grief? Try this mental exercise and let me know what you think. Save up enough money to go on a shopping spree at your favorite store for your favorite things. Now imagine showing up at the store and nothing is priced. Well there are prices, but it all depends on who is talking to you and who you are and what you are looking at buying. And as you look around you realize that there are thousands of people working with thousands of sales people and the price is never the same! So you think you find the best sales person, and you think you have found the perfect item. Now the sales person starts asking you all kinds of questions to find out what price to offer you. What? Is this really happening? Now you decide that you want to make the purchase, but they tell you that they have to verify everything that you told them! What!? It’s going to take 30 days for you to finalize your purchase? So you found your item, selected your favorite sales person, have given them all of your personal information and now you have to wait. So when you leave the store you bump into another person walking out and you compare notes and nothing adds up. What!? You are paying more for the same thing, and you have to wait twice as long to get yours!!

This is truly how the mortgage industry operates. And not just for the consumers, it’s exactly the same for the people inside of the industry!

And to add insult to injury, there seems to be a general thought that mortgage originators make more money than they deserve. I have watched thousands of originators struggle in this industry and can tell you that the average mortgage professional makes less than $50,000 per year and their job is not easy. Sure there are those originators that make that much per month, but they are few and far between. And if the regulators, and banks get their way, those guys and their money will be nothing but a memory.

So, if mortgages are so painful, why do originators keep coming back for more? Obviously the consumers need the loans and the banks want to collect the interest, but why do originators keep doing it? Actually, compared to recent history, there aren’t many originators left. I believe that those who are left are, for the most part, true professionals that love helping walk others through the mortgage minefield. Or maybe originators are simply coming back to the only thing they know how to do? And once the big banks and regulators get their way, they will be reduced to doing it for pennies.

So if you are lucky enough to still know someone left in the mortgage business, keep their business card handy and remember that they are just as frustrated as you. But unlike you, they get to deal with the chaos on a daily basis. And if for some reason you can’t qualify for the loan, don’t get too upset, they don’t qualify either.

Have you ever wondered if what you are doing really even matters? I know this thought has raced through my mind on many occasions. Having lived a grand total of 37 years, I will tell you that everything matters. Yes, everything…even the stuff I can’t remember matters.

Daily I find myself moving throughout the day participating in what some call “self-talk”. You know, that little voice in your head that just talks and talks. To you, with you, and about you. Most of the time my voice is positive. I don’t know if it is a male or female voice, but I do know that it never stops talking.

For instance, take this picture of me.

Image of Troy Hamler

How did this picture become the best croppable photo on my computer?  Good or not, is not the point.  The point is that it is the best on my machine.  I don’t know why, but it is… and this is what I’m talking about.   The photo was taken because my nephew and I showed up at a wedding in the exact same clothes. He looked like a “mini-me”.  Everyone got a big laugh and he and I felt somewhat bonded the entire night.

And now this is the photo that I have pushed out to the world as a representation of Troy Hamler.

Is this what I really look like?  That day it was.  Attending a family wedding, trying to be presentable, being around family and enjoying myself.

One morning I was driving my 10 year old niece to school, and as I was making small-talk about her big day ahead.  I told her that I hoped she had a good day.  She pondered and said, “I probably won’t even remember today.  Just think about it.  How many days do you really remember?  Unless something really great or really bad happens today, I won’t even remember it.”  She was profoundly right.

There are way more days that I don’t remember than ones that I do remember.  But every day, every interaction, and every decision is what shapes us into the people we are today.

Lucky people never cease to amaze me.  There are some people that just seem to “luck-out”.  My uncle, Ray Sikes, is one of these guys.  I actually believe that he has been incorrectly labeled as “lucky”.  Let me give you some examples:

• He bought a failing dry-farm / cattle operation and sold out for 10x to developers
• He used the money from that to buy a very good ranch.  On that ranch he found a rock quarry that is worth more than the rest of the ranch
• The rock quarry business is tied to development and has slowed, but a construction company just won a large contract for road repair, and they chose to mine gravel from his ranch.

If you listen to people that hear about this stuff you will here things like, “He’s so lucky”.  ”I wish I could be that lucky.”  and on, and on…

If you were in the “know” you would know that he was able to buy the failing ranch because he took a job as a farmer when everyone else wanted to ranch.   The farming wasn’t paying the bills, so he hauled hay to supplement his income. In addition his wife worked full-time in the health care industry to pay the household bills.  These decisions allowed him to carry the land as it appreciated.

Developing the rock quarry would have never been possible, except in high school he had taken an underclassman under his wing.  Years passed and the guy he befriended became a miner and eventually the two of them worked on a completely unrelated project.  30 years later, when the topic of rocks came up, he was able to call his friend and get the inside scoop.

And that stroke of luck relating to the construction company needing gravel?  One of his first jobs was operating equipment for a small local construction company.  He made friends with the owner and throughout the  years kept in touch with the family.  When they needed gravel, in the southeast corner of Colorado they called him.

So, the next time you think that what you are doing is pointless, or that it doesn’t matter, remember that it does.  It’s not about having huge days, or even remembering the days, because you won’t.  It is about making the most out of them, because in some way, at some time, it will matter.

I believe that there is something different about a business owner. Business owners have a dream. When they close their eyes and think about their business, they see the silver-lining, what is possible, what can be. They see what others can’t see, sometimes they see what is not there, and sometimes they can’t see what is there.

As a business owner it is easy to focus on the dream. Sometimes the silver-lining is all you have to hold onto. As businesses are started, the first thing that happens is revenue. After all, without revenue you don’t have a business.

It is a natural thing for a business owner to focus on revenue. Revenue becomes your newborn baby. It is perfect, it is a part of you. It requires effort, nurturing, and it gets all the love. And just like a baby, it is easy to overlook all the work and pain, as long as the revenue is growing. But, if for some reason your revenue stops growing panic will set in. It is true that “growth hides warts”. And in the event that your business stops growing naturally, you will need to do something to spur growth.

The search for continual business growth can be as elusive as the fountain of youth. My one piece of caution is to not grow your long term expenses parallel to your revenue. Always grow your revenue with variable expenses when possible. In almost every business it is easy to find a sales and marketing force that is 100% variable. You may have to pay a premium, but it will allow you to avoid the long-term liability. Trust me on this one. I have lived it!

Unless your business is a non-profit, there is really only one reason for the business to exist, and that is to make a positive net income. The recipe for net income is simple, (revenue – expenses = net income). And you better have more revenue than expenses if you want your business to be successful. So why is it so prevalent for business owners to get fixated on revenue and so complacent about expenses?

If you ask business owners what they do, they will unilaterally side with the activities that generate the revenue of the business. But why? They obviously know the formula for a successful business? Why don’t they associate with the expenses? It doesn’t take a rocket scientist to figure out that the revenue side of the business is fun and exciting and the expense side, well it just sucks… Literally!

Nothing in a business can suck the life out as fast as expenses. It is important to recognize that this side of the business is just as important as the revenue side and it must be known and managed. When I owned my mortgage bank, I hated dealing with the expenses. Not only were they not sexy, they were everywhere! We had expenses everywhere you looked. And it seemed there was a good reason for every one of the expenses. Expenses are a lot like cockroaches. They will be there when everything else is gone. If you close your business tomorrow; the people, revenue and fun will be gone instantly, but the expenses… you can bet they will be there!

The most important way to know your expenses is to talk about them. Everyone in the business should be aware of your expenses. Too often only the business owner and the accountant talk about expenses. Why, because it’s not fun to talk about expenses. I recommend sharing your expenses with your people. After all, if you don’t share the information, how can they help? You will be amazed at the changes in behavior when expenses become visible. Your people know how to cut expenses, you just have to make them aware of the need. Accounting needs to be tight and reports need to be available often. Your people must know that there are “No Sacred Cows”. Every expense needs to come into question. Your biggest expenses need the most scrutiny, but every penny is equally important. An expense evaluated culture is not easily obtained, but once it is, your people will be amazing at sniffing out unnecessary expenses. Vendors, New Hires, Perks, Employee Programs, will all have to pass your people’s sniff test if the culture is built correctly.

Sometimes it takes an outsider poking around in your business to shine a light on all of your expenses. After all… Why do you think they have lights shining on the dumpsters outside of fast food restaurants? I’ll give you a hint, it’s not to keep people from stealing the trash. It is to keep the cockroaches away.

GROW your revenue and KNOW your expenses. And if you don’t know where to start? Call someone that has been there. You will be amazed at the difference it will make.

I recently sold my 50% ownwership interest in Assurity Financial Services, LLC.  Assurity is a company that my cousin and I started back in 2002.  We started as a couple of loan officers that wanted to “build-a-better-mouse-trap”.  We eventually morphed into a mid-sized mortgage bank with around 600 employees.  The early days were the most fun, with many very close friends helping to make it possible.  But as the years passed, the faces and the landscape changed.  The biggest change had to be the amount of risk involved in owning a mortgage bank, then, as opposed to now.

In May of 2005 we converted from a mortgage brokerage to a mortgage bank.  I’m not kidding when I say it nearly killed me and the company.  It had to be the most trying event of my life, but at the time the rewards outweighed the risks.  As we figured out one aspect of the mortgage banking landscape, we would find new rules and regulations that made it almost impossible to operate.

The biggest change was when the Warehouse Lenders changed their requirements for “guarantees”.  Initially we pledged the assets of the company to guarantee the warehouse line.  Talk about leverage! They were willing to lend us nearly 20 times what our company was worth, so we could fund our loans.  At the time I believe the company was worth something like 2 million dollars.  It seems crazy for someone to let you borrow that much money to fund loans, until you realize that the loans are what are being held for collateral, not the company.  Come on… If we hose them on the entire line, they can only recoup 2 million of their 20. Having the entire company promised to the warehouse lender, was their attempt at getting our full attention.  And believe me it worked!  I don’t know anyone that worked as hard to get everything right as my partner and I.  After all, we had the entire company riding on it.  2 share holders, 600 direct employees and their spouses and children.  That’s a lot to consider, every minute of every day

As things started changing and the economic landscape started looking more like a mud-slide than a landscape.  The warehouse lenders raised the ante.  They began requiring owners of mortgage banks to pledge their personal possessions along with the company’s in order to extend credit.  The day we signed the first personal guarantees was the day that I knew it wasn’t worth it.

Estate Planning, Asset Planning, Family Limited Partnerships, Trust Accounts it all seemed to be one big distraction from what we had set out to accomplish in the beginning.  Needless to say, I never went down any of those roads.  I instead started thinking about how to get away from my company that was now a huge liability to me and my family.  Two years later, I’m “out”.  I wish there would have been a huge cash event that correlated to me getting “out”.  Instead, I hope to get part of the money that I invested into Assurity back out.  And all of this is predicated upon Assurity succeeding.

I’m currently looking at different business ventures where I don’t have to risk everything just to go to work.  And I can’t help but question the sanity of those that do.

It seems the wave of public and political opinion wants the leaders of companies to risk everything as a normal consequence of their jobs.  I have to believe that the best and the brightest are not willing to risk it all.

Maybe one of these days, the risk/reward profile of mortgage banking will change, but until it does you won’t find me leading the charge at any of these companies.