We’ve seen this movie, back in 2007. A lot of customers had institutional capital, and money was easy to come by. Once the banks pulled their warehouse lines, lending came to a grinding halt. You all know what happened after that – the great recession.
Following that, our typical customer went back to the basics – they either lent their own capital, or they had different investors that they worked with. They might have put investors directly on a loan, they may have funded part of it, or they might’ve had a Pool/Fund set up as the investment vehicle. Either way, for most of this past decade, they didn’t rely on one funding source for capital. This was for for good reason – if that funding source happened to dry up or got frozen, they wouldn’t be able to lend.
That’s exactly what happened about 30 days ago. Some of these people are no longer lending, had to lay off staff, and may shut their doors. It’s unfortunate – some of these people are our friends and colleagues.
With all that said, it’s not a coincidence that most of our customers are surviving and thriving during this crisis. They are still lending! With The Mortgage Office®, they are originating loans, managing the servicing of the portfolio, and giving the royal treatment to their trusted investors. And they have a leg up on their fellow lenders: They have maximum flexibility with deferral requests and forbearance agreements, since they are servicing the loans (not a 3rd party). They also give their investors bulletproof, gorgeous, and accurate investor reporting or give them 24/7 online access, because investors like to count their money 24/7
With the stock market acting like a roller coaster, investors are looking for a safe place to deploy capital. They also like that there’s less competition now, and lower LTVs.
So the long story short is that our customers are still lending. Nothing makes us happier and more proud.