Mortgage Legend Willie Newman | Coffeez for Closers with Joe Shalaby Ep. 33

0:03What's up everybody? Welcome to another episode of Coffees for Closers.

0:20Today I'm sitting down the chairman of the loan store. He is also a board member on Aveo and SOAR. He is a legend in the mortgage industry. He was the founder of HomePoint, the founder of Interfirst Wholesale, someone who's absolutely changed the mortgage industry for the better. Please welcome Mr. Willie Newman. Thank you, Joe. I appreciate it. I don't know if the legend means I'm old. I think that's what it means, but I'll take it. It's fine. No, no, no. True legend. True legend. And I appreciate you for coming on the show. And I know I threw it at you real quick. And I love how attentive and willing you were to just say, all right, let's do it.

1:02I'm excited. So thank you. So, Willie, I know you're actually from Michigan, aren't you? I am. Yeah. I live in Ann Arbor. Nice. I don't know if I should say that here, though, but I do anyway. So we'll talk about I like to start the show with an icebreaker. Everybody I ask the same question. I know this has probably changed because after your exit from Home Point, you probably aren't as rigid with your schedule. Maybe you are. But what is your morning routine right now? I typically wake up, have two cups of coffee, and then I work out. And sometimes I read before that. It kind of depends on what time I wake up.

1:42But those are the three things that I do in the morning. Nice, nice. So what's it like now, you know, not having to grind as hard as you once did? It's hard to get used to, actually. And I think that, you know, you ask about routines. That's one of the things that I've tried to actually break a little bit is, like, I don't have to do things at a certain time. And I don't have to, like, have an order to things. I can change it up and, you know, try different things and maybe sleep in once in a while. So it is different. It's definitely different. And I missed it for a little while, but I don't now, at least at this point.

2:15You know, someone who's achieved such great heights of success like yourself, what was it like transitioning? That transition from being so incredibly busy, the grind, the compliance, all the different facets of this demanding industry, and then going into like, I'm going to be the chairman and just kind of get to bounce around. Yeah. I think in a lot of ways it's good and it's healthy. I think one of the things that takes a little while to get used to is you're not in control of things, right? So you may see something that you say, well, that's not right. It should be this way. Or I would do it differently.

2:51And you can suggest that, but you aren't able to implement that. So you have to kind of learn how to work through influence and work through ensuring that you're supporting whatever your thesis is, you're supporting it with information and facts, not, you know, hey, it's my idea. We should do it. Whereas, you know, if you're the CEO of a company, you can kind of say, I want to do this. So we're going to do this. So it's been interesting. And I think it's healthy to do that. Yeah. So what made you decide, like, after HomePoint, you're like, I'm over it. You know, I'm done. I'm not going to do it again.

3:24I think like you said, Joe, it was just the grind, right? I mean, I've been doing it, you know, pretty much for 30 years. I had a little time off during the financial crisis, which was nice. but my kids are grown and there's really a lot of other things that I can do and a lot of other places I can be so I decided I'd like to do that as opposed to kind of going back in and diving in and working 12 hours a day I kind of like this routine versus that This routine is much more in your pace right now It allows you to think too I used to have to schedule time I kind of learned this I would schedule time in my schedule to actually not do something, right?

4:06Because they would be packed, and I'd be like, I have to think. I'm not going to be as good of a leader if I don't think and I don't process and I don't research and find information that is not intuitive to me. So now I can do all of that. Yeah, that's awesome. And I hope and I can only dream to be in your position one day just to be the chairman on the board of a couple companies and not having to worry about the grind as much. You get to be out here at this event. You get to bounce around. I know people ask, what are you doing here? I was like, well, one, I'm very interested, especially interested in mortgage brokers in particular because that's really how I built my career.

4:46But also I'm interested, as we talked about, I'm interested in helping my friends. I talk to Matt Ishbia frequently. A lot of my friends are here. You're here. So it's really been fun to kind of re-engage with people that I don't see as often anymore. Yeah, it's a great environment, right? It's a great social environment. You get to have a good time. Totally. So let's talk about your history. So I want to dive. We're going to go back. Whoa, way back. We're going to go back. The way back machine. So let's go back into what year did you get started in the industry? So I guess technically it was 89.

5:2089. Yeah. And what did you do in college? I graduated with finance. I went to the University of Michigan, got a bachelor's, a BBA in finance. And then straight into the mortgage industry? No, I worked for a savings and loan for a couple years. And I did learn elements of the mortgage business through that job, but it wasn't solely focused on mortgage. And then I met this gentleman that became my mentor, and he hired me. And he's like, I'm going to build a mortgage business and another savings and loan. And he said, I want you to be the head of secondary marketing. And I was like, I'm not sure exactly what that is, but that sounds like something I'd like to do.

5:53So he hired me and it kind of went from there. Nice. But you didn't get, like, a lot of people go into the mortgage industry through retail or through a broker. You went to the mortgage industry through savings and loans, which, candidly, is like the most stable way to get into the mortgage industry. Well, then there was this little thing called the savings and loan crisis. And what was happening. Prior to the savings and loan crisis. That's right. Well, I was in it after the savings and loan crisis. So what happened was the gentleman that became my mentor saw that these traditional savings and loans were actually starting to fail.

6:28Or actually, they were failing left and right by that time. And there were all these loan officers that were originating for these savings and loans that didn't have anywhere to go. And there was this little kind of legal construct called a mortgage brokerage. But it wasn't really used as it is today for mainstream lending and obviously kind of more mass market. It was really a very niche type of a segment in the industry. But my boss was like, why can't it be for everybody? Because there's all these law officers that still know how to originate. There's this construct. And what we did is we facilitated their access to the secondary market.

7:04And back then, Freddie Mac and Fannie Mae were still, they were kind of in their infancy still. So he saw all of this, and he put it all together. And, of course, you know, I was 24 years old, so what did I know? But I was like, this sounds pretty cool, so I'm going to try it. And, you know, it kind of went from there. And, I mean, he was a tremendous mentor to me. For the audience listening, can you explain the difference between a savings and loan and a normal bank? Yeah, so I think now they're kind of, it's a little bit merged. But back then, a savings and loan primarily focused on home lending.

7:34So, whereas banks focused on more commercial lending. And there were actually guidelines, limits to, or minimums that savings and loans had to lend from a mortgage perspective. So it really kind of, you know, banks did do a lot of mortgages, and the savings and loans did do a lot of commercial loans. And then that all kind of got a little bit messy, and that's kind of what spawned the savings and loan crisis. Yeah. And I think Wells Fargo was the first to add that, like Wells Fargo, is it called, like Wells Fargo? No, no, the home loans. Is it basically kind of like... Yeah, they formed, yeah, they formed.

8:05They were one of the few banks that formed a subsidiary that's, you know, and they, I mean, this is going way back, but they were the product of several different mergers. and one of the mergers was Fleet, who had a pretty big mortgage company. So they kind of combined it up and said, let's do mortgage too. Now, okay, so you went from savings and loans to working in the secondary market. Now, when did you start your own mortgage company? Oh, well, I started a mortgage business for a bank called Cole Taylor Bank in 2009 and then started Home Point. That was the first company that I started DeNovo as an independent company, and that was 2014.

8:46DeNovo was the first company you started? Okay. Yeah. So I built businesses for banks or financial institutions. And then InterFirst, you started in? That was the one I joined in 89. So we basically started building the mortgage business in that savings and loan in 1989. Wow. Okay. And then they sold to? We sold to another bank called Standard Federal Bank. It was actually here in Michigan. And then that got sold to AB and AMRO. And the good thing about that, Joe, is that every time we got bought, we were at about our limit from a lending standpoint because you need capital to lend. And, you know, we would kind of run up against our limits because we were fortunately successful at growing.

9:26And then we got bought. And then we got more capital. And then we grew again. And then we hit the ceiling. And then we got bought. And AB and AMRO was an international bank that we felt like had limitless capital. and we kind of tested their limits as well for it. Again, a fortunate problem to have. That's awesome. So every time these are like, and you were CEO the whole time? Well, I was one of the two top people each time. Nice. I kind of ran the mortgage side of it. And then after that final exit with AB and Amro, you were able to retire again. I could have, yeah. Yeah. And then you were crazy enough to start your own mortgage company after that.

10:09Why did you do that? Well, so we sold ABN in 2007. And obviously that was really when the financial crisis was just starting to hit. And so I guess fortunately or unfortunately, for at least a year or so, there was really no opportunity to do anything in mortgage. And so I was like, maybe there's something else I could do with my life. right and so I was looking around you know maybe I'll be this or I'll be that and you know how it is sure enough it's like it just starts sucking you back in and you know the market started to open up just a little bit and I had a bunch of people that I worked with previously that were suffering and so I said you know what I go I think I'm going to give this another shot and you know in my experience the the best time to start something is when the market's disrupted not when the market and when the market's at its peak everyone's doing well right yeah yeah it's kind of like the analogy of hiring loan officers, as you know.

11:00It's hard to hire them when they have 20 loans in their pipeline, but when they have three or four, it's a great opportunity, right? Especially right now when they're suffering. I mean, we're having our best years of recruiting in the last couple of years. I mean, it totally makes sense. So you kind of extend that analogy to kind of business generally. It's like when the market's down, it's a great time to start. It's hard, but it's a great time to start. And you started Home Point in 09. No, Home Point was 14. 14. I started Cole Taylor Mortgage for Cole Taylor Bank in 09. 09, okay. And then you had an exit out of that one too.

11:31Yeah, I left it in 2014. Okay. Now, 2014, home point. And then I said, I'm going to do it again. One more time. Oh, my gosh, man. After multiple exits. I'm sticking to that now only one more time. Yeah. At least so far. I wonder if you're going to do it again. You've had so many exits. No newsflash. It depends on how bored you get. you know but I think this time you found like you you're pretty busy yeah I think so well so are you parent do you have kids four kids okay so I have three and my kids are adults now but I think part of like learning you know parent like I was saying with off camera was that you can't you can tell your kids what do you for so long and they grow up and then they decide what they're gonna do but you can try to influence them and I'm enjoying the influencing part of it now so what I'm doing and And I'm working in different industries.

12:25I'm working with different CEOs, different personality types. So I'm getting a different type of enjoyment out of what I'm doing now versus building or running something or building something from scratch. Yeah, yeah. And that's awesome because you get to work with true innovators. Exactly. And get a different perspective and influence people who have influence on a younger society. Yeah, and it's interesting you say that because most of the people that I'm working with are younger than I am. and a couple of them are materially younger than I am. And so they're helping me learn about kind of what motivates them because it's not the same as a person who's my age or my generation, I guess.

13:04Yeah. Did any of your kids go down the path of mortgage? Oh, God, no. You never condoned that, huh? Again, I tried not to influence them on what they did, and they just showed no interest. So I actually have, my oldest is actually a rocket scientist. She works for NASA. So I can't really complain about that. My middle daughter works in education, and my youngest daughter is in grad school. So they're all taking their own path, and they're doing great with it. And I'm going to dive into parenting, and especially parenting advice. Oh, boy. Me having four kids. How old are your kids? Ten. He's going to turn nine at the end of the month, so everything's going to change.

13:41Oh, you've got a lot of runway there. And then I have a four-year-old, and then a two-year-old. She'll be three in July, so end of July. So I'm in the thick of it. My wife's a hero. I experienced being a dad when my wife went away for a Mother's Day trip, and I had all the kids by myself. And it was like, the kids abused me. I was like, my wife is a champion. Well, I'm a divorced parent, and so when my kids were younger, it was like I look around and no one's here. They're except me, right? So when they were with me, it was me and them. Yeah, you learn. You learn pretty quick. Yeah, they're a handful at this age.

14:23Yeah, right. They know how to kind of play dad because I'm a sucker. Because when I'm there, I grind all day long, and then I see the kids. It's like I'm really like Disneyland dad. Well, plus you don't have to deal with the ramifications of that, right, typically? Yeah, exactly. Yeah, I'll spoil them, and then that's it. Yeah, then I'm out. I'm back to work. Right, exactly. Exactly. So you've managed to get through so many hardships throughout the mortgage crisis. Any particular hardships that you can remember that really you think reshaped how you do business? Like was it the financial crisis?

14:59I mean, you've been through multiple downturns in the market. Any notable ones that you think? Well, I think probably one of the most influential periods of time was when we grew very rapidly at AB and AMRO. And frankly, we grew too fast. And as a result, we ended up taking some losses that we had not anticipated. Now, we had done really well financially the two years prior, but there were some unanticipated losses that happened subsequent. And the lesson that it taught me was that it's like, no matter how strong you think your strategy is, because again, it was my mentor and me who were running the company.

15:39You have to have the depth of knowledge around you in order to build to that next level. And so, yeah, it taught me, one, that, and then two, the importance of culture. and I thought we had a strong culture but it wasn't it was a fun culture but it wasn't a strong culture if that makes sense because there were signs that these things were happening that were identified after you know after we kind of we took the hit so to speak that we should have known sooner if people would have raised their hand and said hey by the way this is happening and that was Again, the culture was fun, but it wasn't strong enough for people to feel comfortable raising their hand and going, I'm not sure what we're doing here is exactly what we should be doing.

16:26Both those things really influenced me as I was fortunate enough to build two other businesses. They really influenced me in how I did those. How did you pivot to creating a strong culture after that? Well, one, I think you try to make people feel comfortable that there aren't going to be negative ramifications associated with raising your hand. So as a matter of fact, there are more negative ramifications associated with not raising your hands. So it's like you really should feel comfortable participating. You really should feel comfortable telling us what you see and what you believe. And then two is, you know, kind of related to that was like treat those people well and other people will see how they're treated and they'll kind of act accordingly.

17:10And I noticed that Home Point had a great culture and everyone who worked at Home Point loved Home Point. And they were like diehard Home Point fans, basically. And the thing I noticed about Home Point, they're there to the very end. And after we have Home Point 2.0 at the loan store, and I talked about this with Phil, it's like he's developed an excellent company culture completely virtually kind of on on the same principles he actually mentioned right you know that there's a a huge component of collaboration and and he used the term raising their hand as well right you know people you know always speak up just you know a suggestion box type of culture right yeah well not feeling like that their role is the only thing they can do for the company.

18:03So, you know, if you need to pitch in, you pitch in. If you see something that, you know, there's paper on the floor, you pick it up, right? So, and I, you know, I see that with Phil and how he's leading now, and I'd like to believe that's how we also had it at HomePoint. I think the other thing that we really did well was, you know, during the pandemic, we did, we really listened to the stressors that our associates had outside of work. and we try to respond to those as well as we could. As an example, the leadership of the company actually, we pooled our own money because we don't want to deal with the tax ramifications and all that.

18:39We actually pooled some of our own funds and we had this, it was basically an emergency fund. And we said, we'll give you up to$500 and we don't, we want you to tell us why only because we want to track the reason, but we're not judging whether it's like an appropriate thing to give money to or not. So literally, if you or anybody else who worked at HomePoint could say, man, I need$400 because I got this bill and I didn't expect it. And we'd be like, here's$400. So I think that engendered the culture that you're referring to. So you had just a slush fund for people who needed it? A slush fund is not exactly how it would characterize it.

19:16Yeah, yeah, just. We had an emergency fund. That's awesome. Yeah, yeah. I've never even heard of something like that. So just how much was the most you gave at one point? It was$500 was the max. and I think we ended up giving 30 to 35 thousand dollars and it was all leadership like I said we you know we didn't want to go here's here's 500 but you're gonna get it you know we're gonna take 100 out or you don't have to pay 100 we just like we'll fund this ourselves so we just funded it ourselves I actually distributed the money what was the name of that initiative you know what I don't remember now yeah like how did you frame that like that sounds like cool it's like yeah I think it was just like, you need money, we'll give it to you, you know?

19:57But what we wanted, I mean, if you think about back then, and even now, but I mean, especially back then, there are all these new stressors on people's lives. And we just wanted to kind of, and as you know, it was one of the busiest times ever in the business. So we just wanted people to not, it's like, we want to take as much of the worry that you have off as possible. And we can't prevent you from getting COVID, but we can help you be a little more comfortable in the day-to-day life that you have now that's been disrupted by the pandemic. So, yeah, so that's a great idea. And that's actually a good idea just to keep as an initiative for the company.

20:33Yeah, yeah. And then was there a limit monthly that you would disperse? No, it was just, we dispersed it until the money was gone, basically. I think we actually did two contributions. I think we had one pool and then we figured out more people needed money. And I think we did another one. So I think it was like 25 and 10 or something like that. And it was an anonymous thing? No, we actually tracked it. Like I said, we tracked it only because we wanted to know what the stressors were. So if there were things we could do more systematically with the stressors. So one of the things that we did from that was, you know, I mean, you're constantly working.

21:09We were hiring pretty rapidly. We're constantly working with technology providers. So we ended up having all these laptops, some of which we'd replace out and, you know, kind of get the new version and all that. So we started giving laptops to the kids of our associates because, again, they were schooled remotely. They may or may not have access to technology, so we'd give them laptops. So we did several hundred laptops to children of our associates. That's awesome. Listen, all of that contributes to developing excellent company culture and kind of hearing how some of the little nuggets that you established early on to encourage that company culture.

21:48I mean, it's not like it paid 10x. It's paying dividends forever. You know, like you were able to create like a spin-off off of HomePoint because everyone was diehard HomePoint. Right. So what's the vision now with the other company you're chairman of? Like, do you have lofty goals like you had? Well, you know, now they're Phil's goals, so I'll let him. And he already told us his goals. Oh, did he? What did he say? I better check. I think for me, the reason that I'm involved is other than there are a lot of people there that I care about, is that if you look at kind of the broker segment, you know, as we've talked about here at UWM Live, it's growing.

22:31It's healthy. But there's one really large advocate slash lender. There's another one who's not quite as big, but there's divergent perspectives on who they are. And then there's a bunch of really small lenders. And by small, like the loan store doing$600 million last month, that's not small. I know, we're getting there. The loan store is getting there. But I think, in my opinion, I'm saying this now, I'm directly involved with the loan store, but I believe that there needs to be two or three other companies, not of the size of UWM, but that are of a size that people can look at them and say, okay, they're significant players in the industry.

23:12So we hope that the loan store will be one of those. And I think there are several other companies out there that have the opportunity to do that. And frankly, I talked to a couple of them and I try to help them, just like I try to help UWM because I think the broker segment is only going to be as strong as UWM is at the end of the day. I mean, they have 45, 50 % market share. Yeah, right now, Matt just, he recently announced that the broker segment is up to 24.2 % market share. Now, in your days, you've seen the broker market share up to, what was the highest you've seen it at? Yeah, I mean, reports differ, but, you know, 50%, 60%.

23:52Broker market share. Yeah, somewhere in that range. Yeah, and this is the highest we've seen broker market share in 15 years. Definitely post-crisis, yeah, post-crisis. So, you know, broker market share is starting to increase. What is it about the broker that attracts you so much to this environment, to the broker? Yeah, so, I mean, so like, you know, we talked about, so I've done this three different times. I built three different mortgage businesses. And every time I looked at, okay, where was the best opportunity to build and grow? And what was the best opportunity for the consumer? And every time it was the broker segment.

24:29and frankly it's because I think the broker's superpower is choice which kind of leads to having more strong lenders in the segment I think is a good thing so again that's kind of part of the motivation behind helping the loan store out but if the broker's superpower is choice they have the opportunity to really help the consumer get the best deal possible and so that's a series of factors not just price right convenience, speed the ability to execute on a timely basis so every time I've looked at it it's been that and if you look at retail as an example there are a number of really strong retail companies so I'm not here to say you know everyone should use a broker all the time but if you look at a lot of retail companies you know they basically their loan officers have one choice so it's hard to be competitive all the time when you really only have one option as a loan officer yeah and it It was great, you know, always because we were number like you guys.

25:31Home Point was our number two. Now, I think the loan stores like our number six or seven. They're climbing up the ranks as well. Good. And that's big for a company with 900 loan officers for us to have. But our number one, you know, takes up 90 percent of our market share. Sure. And then, you know, the other seven get 10 percent, which is still significant considering the amount of volume that we do. But it is great to have a good, reliable partner. Right. It was disheartening to lose HomePoint, obviously. What do you think some of the biggest issues that caused the fall of such a massive partner?