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!