Partners,

It’s hard to believe how fast this year has gone by thus far – the old adage says – “Time flies when you’re having fun!” I’m not sure it’s all been fun, but it has certainly been a wild ride!  My pride for PRMI and our partners seems to have no boundaries – growing each hour, day and month. We continue to make new strides and achievements in an otherwise insane mortgage lending environment.

I know of few mortgage company CEO’s that get to enjoy boasting an increase in volume of more than 25% (2007 to 2008). Yet myself and other executives frequently voice this fact about our amazing organization – and it truly is! We’ve done all the right things over the years – and now we are enjoying the fruits of our responsible-business model and unwillingness to chase the “easy bucks”.  Our business partners have stuck with us over the last decade, have trusted in us, and believed that this organization has something special. This collaborative effort and desire for PRMI to be “one of the greats” is apparent in everything we do – every single day.

As challenges arise, undoubtedly opportunity follows. I believe that one of the major successes of PRMI is our ability to keep a 360 degree view of the entire industry – to witness opportunity and not get stuck in the quagmire of the daily grind. Despite these being the most challenging times in the mortgage-lending industry, the great people of this company have never abandoned their core business concepts and beliefs, while keeping a sharp eye on what we want to achieve in the future. The past – well, I would simply say, learn from it and move on – it’s good for little more than casual reminiscing.

I truly believe that as new challenges arise, new and exciting opportunities will also present themselves in this ever-changing lending environment. The fabulous people of this organization have proven that they clearly have the skills and dedication to succeed and we will ultimately attain our collaborative goals. I myself am excited for the future and the abundant opportunities that lay ahead. I want to personally thank every employee of PRMI for your trust in me, your patience, and your desire for this organization to achieve greatness. Even after all of the rollercoaster rides – highs and lows – headaches and smiles – I cannot think of a business that I would rather be a part of than mortgage banking – and more specifically PRMI. There are very few things that provide me more pleasure than being the CEO of PRMI and witnessing the evolution and maturing of this organization. Thank you for your contributions and for looking out for this special oasis we all respectfully call home. 

Sincerely,

Dave Zitting

CEO
PRMI

Talk about burning the candle at both ends—it’s now the end of March and Primary Residential Mortgage, Inc. (PRMI) is breaking records in applications, funding, and lock registration numbers for a single month. What a busy time!

Without a doubt, PRMI would not be where it’s at today without each and every team member. The dedicated professionals of this organization are what make us so great! As Jim Collins states in his book Good to Great, “It’s not people that make a company great—it’s great people that make a company great!” I assure you the men and women that guide this company forward on a daily basis are nothing less than “Great.” In fact, I would have to say that they are truly amazing!

We often host potential new Branch Partners, Division Partners, and Affiliated Business Partners, and at the end of each Discovery Day we consistently hear the same question from our potential partners: “Your people are so enthusiastic for this business, but more specifically, their job. How do you do it?” My standard reply is: “I don’t, in fact, do it—they do.”

Perhaps it’s the absence of micro-management, the trust that we show in our people. But one thing is certain, PRMI’s employees do feel empowered by what they accomplish and put a great deal of pride in their job and responsibilities. It is a privilege to lead and work with such a great group of people—they make my job much easier!

I would like to thank PRMI’s Corporate Management Team for their dedication, effort, and desire to produce positive results and aid in the growth of this great organization. I would also like to request that each manager pass on this gratification onto their teams—they are equally responsible for the recent achievements that are evident within PRMI. 

Colleen Fisher - Senior Operations Manager
AJ Swope - VP Secondary Marketing
Carla Wallentine - Compliance and Licensing Director
Natalie Cheung - Licensing Manager
Scott Donaldson - Chief Information Officer
Jim Crawford - VP Market Alliance
Tom George - Executive VP
Charlie Brown - VP Business Development
Kori Seely - VP Quality Control
Ruth Green - VP Business Relations
Felipe Pacheco - Business Development Manager
Michael Hamilton - Marketing Director
Rob Zawrotny - Public Relations Manager
Matt Maruri - Document Control Manager
Ben Jacobsen - Accounting Manager
Steve Chapman - Chief Financial Officer
Jessica Cordova - Escrow Manager
Kathy Meadows - Senior Underwriting Manager
Sarah Hare - Purchasing Manager
Leo McIsaac - VP Human Resources
Carla Burton – Warehousing/Funding Manager

There are simply not enough words or time to fully express my gratitude to all of the amazing PRMI team members. I sincerely thank you for your great interest and respect for our set goals and your desire to continue our pursuit of excellence. The goals that we achieve together will certainly ensure that the products and services we provide to our respected customers will help them achieve their goals and dreams!

What a Sunday. Walking down the stairs with our two beautiful babies in tow, tired eyes popping at the candy and colored eggs scattered down every other step; attending mass with the wife and kids; driving back home with the sunroof open—the sun is bright and invitingly warm after a very long and cold winter. Yes, summer is on the horizon.

Friends are now scattered around the house. I’m alone in the kitchen making my famous lamb-chop dinner. People are downstairs watching “I Am Legend,” starring Will Smith, and the kids are playing with their cousins. Lots of fun sounds and laughter in the house today. I should have at least two hours of cooking, sipping Henriot Rose Champagne, watching Bloomberg, and surfing the web—love it!

Interesting times we live in. Bush is diligently trying to improve his chances of “leaving a positive legacy,” at least the one “he” would like to leave. What went wrong? It wasn’t all Rumsfeld’s fault Jr., although putting him in that position was clearly a mistake. Is that really still up for debate (or allowed to be)? Where was Colin Powell? Is our country really going to stop listening to the men of ability and men of achievement?! Please don’t allow the Democrats to nationalize mortgage banking—or anything for that matter! Oops, did I say “nationalize”? What’s the difference? Has anyone really taken time to look at some of the suggested legislation? Capitalism and free-markets cannot be fractional; they can only be what they are for them to sustain life.

The lamb is looking great. This is going to be one of the good ones; it’s really coming together well. My two year old son, Jett, brings me his new Easter Pez dispenser with a new block of candy to install. He’s so smart! Time to make the Roma, cucumber, Kalamata olive, champagne, cilantro, and cucumber salad—the last step to a perfect four course. This is going to be amazing!

There is an economist for Bank of America on Bloomberg predicting that the dollar has not stopped its continued down-ward spiral, and that the recent improvement was simply positioning for the Easter weekend. Really? Sorry, I don’t buy it. What if the dollar did gain strength substantially in the coming months? What if gold and other commodities lost ground? Well, the Fed sure would be breathing a sigh of relief due to the fact that they are getting ready for rates to plummet. The future recession is laughing in our general direction with the rude statement—“resistance is futile!”  A fun question is “what if 30 year fixed mortgage rates dropped under 5%?” Is this a prediction? (Only if it actually happens!) But “happening” I think is a real possibility—the stars are lining up my friends. There will be a few mortgages to do if that does happen, and there are, for sure, a few less companies to pick up the massive increase in business.

Multi-tasking can be a form of entertainment on its own. Cooking, watching the news—I’ve even got the laptop open, and I’m reading up on the ideas of “The Long Business Cycle.” Check out http://www.kwaves.com/kond_overview.htm. That Kondratieff fellow may actually have something here, or at least his theories and ideas sure are going to become a lot more popular. But “when” (or when will the season change) is the biggy. If the rates do fall and we see a temporary ability to control, and possibly reduce inflation, well, “they” will all certainly think that this “Goldilocks Economy” is here to stay. But that is only “thinking in the moment” my friends. You bet I’ll take another two to three years of, blow your mind, low interest rates! I should because it’s the last time I will see it for a long while after the season is over, and I am a Mortgage Banker.

The lamb just came off the grill, my beautiful wife and our friends just came upstairs from finishing their movie, “I Am Legend”—really strange looks on their faces. I’ve gotta watch that tonight when the kids are in bed. Plates are going down: lots of amazing smells, laughs, and a new bottle of my favorite cab awaits—dig in!

Dishes are done, thanks honey—and mom. Family and friends are heading home; giving the kids their baths; love reading the bedtime stories! Easter cookies are calling my name—need a snack for the movie. House is quiet, heading to the theater. My wife makes the cookies every year, and they are amazing!

The movie is over—I now understand why they had that look on their faces—good grief! I, personally, will take an era of low-level stagflation, possibly coming after the next two to three years, over that scenario any day! That was a great day—can’t wait for tomorrow—headed off to bed… 

Who would want a mortgage company in the first place right? Well, plenty of banking groups, real estate firms, and global financial services companies are seriously looking to the opportunities relating to “mortgage market share.” If you control the mortgage, you have a good chance of controlling the equity line, checking & savings, insurance, auto lending, investments—you name it.

Even though it’s currently not a popular notion to get into the mortgage business, many respectable institutions are finding that it’s just too good of an opportunity to pass up. Remember one of Warren Buffet’s most famous one liners, “When people are getting greedy I get scared, and when people get scared I get greedy.” The recent move by Bank of America to acquire Countrywide Financial Corporation is just the beginning of a new era of mortgage banking and services consolidation. Even the CEO of Bank of America, Ken Lewis, said he actually “didn’t like the mortgage business”—but made an additional offer of $4 billion for Countrywide on top of the billions already infused.

Are they simply trying to avoid losing money already invested, as alluded to over on a Housing Wire post last week? Not likely folks. If Bank of America didn’t like the investment opportunity, they would likely join with all of the other massive mortgage servicers nationwide that threw in the towel, bowed their head in humility, and wrote off billions of dollars of loss due to bad mortgage investments—mainly poor capital markets and investment banking strategies (not necessarily all due to loans gone bad, which is an entirely different posting I plan on writing soon).

In reality, the merger between Countrywide and Bank of America is good news for the overall mortgage industry. It means that Bank of America has somewhat of an idea of how big the mortgage problem really is—i.e., there is a bottom. I would guess that the billions they have already thrown into Countrywide back when the liquidity markets first blew up, plus the new billions that they are offering for stock this month, suggests that they don’t really think that Countrywide’s problems are so bad that they will lose that investment.

Yes, I’ve said it a thousand times: there is no better lending technology on the planet than Countrywide’s platform (CLOUT & Platinum), amongst many other back-end banking fulfillment technologies that control the most efficient secondary markets’ system on the planet. Countrywide’s brand is imbedded into US consumers’ minds and rapidly spreading to be a global contributor to many economies moving towards a contemporary and western-style financial market. Is technology and brand enough for Bank of America to risk not only the billions already into the deal, but the possible unknowns still hanging out behind the scenes at Countrywide? I don’t think so. I think they have a pretty good idea of what the risks are and that owning this financial services giant, with an emphasis on mortgage lending, is simply something Bank of America could not pass up (and brilliant I might add) and could open the doors to new M&A deals to take place in the near future.  

There are many positives in the mortgage world that will surely (eventually) reward the companies that have survived the storm. Just to name a few: Major increases in refinance activity (especially if the MBS bond ratings start to improve thanks to new stability and interest in mortgage lending from recent and interesting M&A activity); market stability due to a quieting of the media (the “mortgage crisis” is now only on the news channels every 4 to 5 hours vs. every 5 minutes—talk about slowing the flow of gasoline being poured on the fire); recent home price reductions in many MSAs have given new hope to those that are watching the “affordability meter” (couple that with new record-low interest rates and an entirely new group of home buyers instantly can come into the marketplace).

As we witness major financial institutions and mortgage lending firms consolidate into one another a few very important notions come into play and/or questioned. When there are fewer companies providing mortgage products, what will the consumers experience be? If fewer mortgage bank Investors are buying loans from mortgage brokers and lenders, what price will they be willing to pay for the actual servicing of the loan? Both questions come with simple answers—service levels fall and prices for mortgage servicing falls. The later doesn’t necessarily hurt the mortgage broker or the mortgage lender. The mortgage broker will simply raise fees or rates to compensate – not pretty, but it is a reality. The mortgage lenders, however, will have an entirely new opportunity to build mortgage servicing portfolios. Why wouldn’t they? There is very little risk after 2008 and mid-2009 that rates will fall any further, and if anything, we are in for a decade of higher interest rates, which secures a mortgage servicing portfolio from running off.

But even more important, it is cheaper for a mortgage company to keep or buy the servicing on loans originated versus selling them into the secondary markets – (extremely large servicing companies like Citi, Chase, GMAC, Bank of America, SunTrust, Countrywide, Wells Fargo, et. al.). As these giants consolidate into each other and suck mid-sized companies into their gravity field, the companies that escape this or choose not to be acquired will have a new and exciting opportunity to gain mortgage servicing portfolios that will rapidly gain value.

There is a new era on the horizon that will consist of not only consolidation within the mortgage banking world, but also mid-sized companies will all of a sudden become a national household brand and even new ventures will gain popularity and enjoy an opportunity to bring new service levels to a consumer that is starving for the attention they deserve in the mortgage lending process. It’s not all bad, and there are many new and exciting changes and opportunities just around the corner.   

I wanted to take a minute to send out a Happy Holidays to all of my friends and colleagues nationwide. I have so many things to be thankful for this year, and I owe that to the amazing friendships and partnerships that I have had the pleasure of being a part of. I want you all to know that I never take my life or any aspect of it for granted, and I truly believe that partners and friends are the most important ingredient to my success.

2007 has been challenging and taxing in many ways for so many professionals in the mortgage industry. I congratulate those that “did it right” and that are in business today for their wise decisions and responsible lending practices. 2008 promises to be a year of great opportunities and challenges—change being at the very top of the list.

I recommend that everyone in the industry dust off their copy of “Who Moved My Cheese” by Dr. Spencer Johnson. An absolute must-read for anyone motivated to take part in the redistribution of market share rapidly consolidating day-by-day within our industry. These are exciting times that will no doubt test the best-of-the-best. I, myself, have fueled the tanks, and I’m getting ready to make my mark on what I believe will be a “new deal” going into the next decade of mortgage banking. I am excited for the opportunities and challenges and hope that new alliances and friendships will be forged in the process.

Thank you and have a safe Holiday season!

 Treasury Secretary Henry Paulson and Housing and Urban Development Secretary Alphonso Jackson held a press conference last week to discuss the Bush Administration’s current objectives to aid struggling homeowners in an effort to stave-off foreclosure. While I love Jackson’s efforts to increase FHA lending limits and his support of the FHA Secure initiative, Paulson’s “big-plan” or his “hastily conceived and problematic solution,” as Barron’s described it, to freeze interest rates on sub-prime mortgage loans to avoid a spike in home foreclosures needs to be put up on the drawing board a few more times.

I struggle with what can truly be accomplish with this plan, as it is presented today, that won’t come back to haunt us down the road when the Note modification comes due. Why does the government even need to get involved? I’ve heard it’s due to a breakdown in communication with homeowners not knowing that their bank is interested in helping out with a possible modification. Wow, are we being serious here? Not everyone should be awarded a modification or “freeze” of their interest rate and responsibilities in the first place. Without question, there are some cases that do need special attention-if the homeowner takes the initiative to investigate all their possible options. The initiative would at least show that the homeowner has motivation to stay in the property now and in the future.

What would happen if we weren’t in an election season? This is such a great time for both sides of the aisle to throw stones and come up with their plan to save the universe. The only problem with that sentiment is that the “known universe” does not need to be saved! The nation, and more specifically our leaders, should focus on the long term issues and avoid such emphasis on short term problems that will inevitably work themselves out. Yes, there will be increases in foreclosures for a fraction of the overall outstanding mortgages written over the last 5 years (give or take). The normal market will work this out. If mortgage rates are frozen for any specified period of time, isn’t that simply delaying the inevitable problem that will rear its ugly head down the road when the modification is expired? What about the natural correction that benefits the affordability factors? When more homes are on the market prices go down and the public benefits from this, then the market inevitably swings the other way.

There is so much mud being thrown here and the issue of foreclosures related to sub-prime ARM lending is being exacerbated by the political process and the media. This needs to be worked out bank-by-bank, borrower-by-borrower. Borrowers that have a desire to stay in their homes, which are abundant in our society, will make an effort to work out terms with their bank or mortgage-servicer. This group of homeowners has multiple options that need to naturally be worked out by selling the home, refinancing, special circumstances Note modifications, etc.

Yes, foreclosure is an option, maybe not pretty, but an option nonetheless, and there is not indication, by any broad measures, that Paulson’s plan to delay the inevitable is good for the homeowner, the economy, or the real estate market in general.

This seems to be the question I get from my friends-at parties, dinners and relatives. “Dave, when do you think the real estate market will hit bottom?”

That’s the big question these days, and I’m not sure that anyone has a definitive answer to it. Some of the greatest minds in this sector of the economy are arguing time frames and dollar values with conflicting outcomes, reflecting large deltas in thought and opinion.

People posing these questions to me fall into one of two camps: camp one, “local and personal,” and camp two, “national and economic.” I try to assess the questions and determine what camp the curiosity is originating from prior to offering insight. I do this because I feel strongly that these issues cannot be defined on a national basis and can only truly be looked at on a local basis when determining “what should I do to position myself best in today’s real estate market?” I agree there is a national impact due to so many MSAs (Metropolitan Statistical Areas) reflecting slower real estate appreciation or even real estate depreciation; however, it would be a mistake for homeowners and potential homebuyers to take a “national statistic” into consideration when making a decision as to when to sell or buy a property.

Turn to any media outlet, and you will see that they have all jumped on the bandwagon to share opinion and innuendo that is based on “national statistics.” I have heard a number of comments and reported stories that flat out were not accurate as it relates to many parts of the country on a localized basis. Yes, there are areas that are bad; however, there are areas and “Micropolitan Statistical Area” neighborhoods, hundreds of them in fact, that are showing strong stability and continued appreciation rates. The public should deploy common sense when assessing how a specific media report reflects on their specific MSA-Micro or Metro.
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I believe there are some interesting and substantial changes coming relating to the “macro economic cycle.” Before I get started on this topic, you may want to know where I get my information and who I speak with concerning these topics. Well, it comes from anywhere and everywhere - both sides of the aisle and both sides of the world. I personally love economics and I’m a bit of a geek in that I enjoy feeding my brain with business stats vs. sports scores (don’t get me wrong - love sports). Some of my favorite media outlets are CNBC, The Economist, Harvard Business Review, Bloomberg, Forbes, etc. I listen and read like crazy. I try to keep up with what the Fed is saying, other central banks - and it’s fun to have economic debates with various brilliant business people and economist in my direct sphere of influence. The opinions and possibilities that I have shared (and how they relate to our industry) did not actually come from any specific source, but more a personal breakdown and employed common sense as I see and read the data. Not many have actually listened to my predictions over the last year - but some of what I have been looking out for is now showing up in various media outlets.

You have two main topics of discussion, very closely related, but two topics nonetheless that I find extremely interesting and “Global Shifters” as I like to call them. I want to attack the “savings vs. spending” issue first - then move on to the Stagflation concept (and possibility).

Think of it like this: Try to visualize money flowing between the two spheres of our planet on a big highway - coming and going. Now, think of a highway during rush-hour - in most cities one side of the highway is packed and the other side cars zooming to their destination. This is pretty much how the “money highway” looks today that stretches between the US (major economic power) and Europe & Asia, et al. The “traffic” is on the inbound to the US side of the highway. Why is this? Simple - Europeans and Asians are “savers” and Americans are “spenders.” As Americans maintain a healthy appetite for spending - Europeans and Asians are happy to aid the US in financing such habits. Again, visualize the money highway - Europe and Asia money flowing inbound to the US - but very little money is flowing back due to Americans borrowing and spending it - which is what has sustained our economy for the last few decades - and predominantly the last 15 years of growth.

Now, you may ask: Why does Europe and Asia save instead of spend? Well, there are a few answers to this question and it is not only private consumers, but also private and public businesses that have followed a healthy regime of savings vs. spending. In both Asia and Europe it can be argued that they are simply more conservative than the average US citizen. In addition to this, without going into a two hour dissertation, these massive economies had suffered big booms and big crashes in the past that set a “new tone” for financial behavior - both “people” and “corporations.” When there is a great deal of dollars, or liquidity, flowing into the market it spills over into other countries that need to borrow it - thus the “pump was primed.” If the US is the proverbial pump then Europe and Asia is the proverbial well.

Now - here’s the big question: What if one of two things or both happen?

1. What if Americans change their spending habits and start to save?

2. What if Europe and Asia start to spend?

3. Or both, what if the pump stops needing water and the well runs dry and needs water?

The answer is simple-the traffic on the money highway flips the other way - the traffic jam would be headed into Europe and Asia and traffic heading into the US would be drastically less congested.

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 I would like to share a little bit about myself in my first post. This is a great place to start due to the simple fact that what I am attempting to achieve is a more “personal approach.” I want you to know what “I think”-not what would be “presented in a memo.”

My goal is to provide open and honest information relating to every aspect of my career. I don’t think for a minute that my opinion is necessarily the “right one”-collaborative intelligence is the only way to achieve true understanding. I hope that the information I provide will enhance my sphere of influence’s understanding of my beliefs, passions, and directions I take as a leader.

I believe this blog will be a powerful tool so that people within the PRMI organization, investor conduits, banks, people in the industry in general, and other important relationships in my life will have a better understanding of the direction I chose to take or the opinion I may have about any number of subjects.

If you were to ask me: Where do you see yourself in your personal life?

I love it! I can’t get enough! I only wish I could slow down the clock when spending time with my wife, Tracy, and our two kids, Rae and Jett, each night or weekends-it really is the best part of my life. I love the times I have with friends-or “down time” with Tracy. I truly believe that I know how to have a great time and take full advantages of any and all resources to emphasize “play times.” Watching my kids grow is truly the most amazing thing I have ever experienced. My time spent with friends and recreation is accomplished with fervor-always looking for an opportunity to create an unforgettable memory!

If you were to ask me: Where do you see yourself in your career?

Again, love it and can’t get enough! I feel as if I’ve built a great rocket ship, set it on the launch pad, we’ve lit the engines-and now we are ready to take it to the moon! That is the best analogy I could provide to best describe PRMI and my career. I am extremely passionate about my work. I try very hard to improve my skills as the CEO of PRMI and as a businessman and salesman. I hope that my industry and the people I work with in my business community see me as a fair and honest professional. I believe in those qualities and feel that I naturally look to those values when leading my company. I believe I have attracted those type of people into the PRMI organization and that is a major factor to our success over the last 9 years +.

Moving forward:

This blog will obviously be focused on my career and topics (new and old) relating to mortgage lending. However, I will certainly share some of my personal life-this is an outlet to share opinion and insights on any aspect of my life.