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10 The Exchange With over 30 years' mortgage industry experience, William J. Tessar joined CIVIC in March 2017. He previously founded and served as President of three mortgage companies resulting in residential funding volume exceeding $35 billion. Tessar was formerly one of the nation's top loan originators. Having been in the shoes of the originator, he has a unique vantage point that creates a recruiting, training and management style that sets him apart from other originators. What do lenders anticipate on the refi front as we head into 2021? Mortgage volumes have been at record numbers over the past three decades, mostly due to low rates. e sequence at which it dropped has allowed a lot of borrowers to refinance multiple times throughout the course of the year. e old rule of thumb is that if you can drop someone between a quarter to three eighths and do that at little to no cost then it would make sense. What's happening right now is that those spreads are tightening. In 2021, I think there will be much more room for rates to go up and down. We are at the high twos, low threes right now, depending on loan amount. I think this will remain through Q1 2021. e new administration takes office inside the first quarter, so I think there are really no economic indicators that tell me that rates are going to go up. e next question is how much further down can rates go? ey would really have to go down significantly in order to refinance the loan again. As such, we can expect refinances to shrink because you can't do that loan over and over. Purchases should remain equal or a little bit better. I think overall volume in 2021 is less on the conventional side because of these factors. Civic Financial Services provides loans to real estate investors. Can you tell us about some of the advantages of investor real estate financing for brokers? I spent the vast majority of my career on the other side of the island—conventional for almost three decades and loved that time there—but I would say the three main differences. Number one is quick closes. Our loans close in five to 10 days. Whereas, on the conventional side it can take 30 to 75 days depending on volume and type of loan. e benefit is very Pavlovian—the reward is quick and originators like that. Second, there is minimal documentation. It's not like the old non-QM days. We're equity-based lenders so there's no tax returns, W-2, TRID, Dodd-Frank, etc. ere's a lot less paperwork on a business purpose loan. e thing you've got to get right as a lender is the value. If you get the value right, you have a lot of flexibility in other areas. Lastly, there's multiple transaction opportunities with the customer and not just on the original business purpose loan. e average investor will complete two and a half transactions a year. If you do your job well, they're going to come back to you for their other opportunities. On top of that, if you're a conventional lender offering this product you're going to do the takeout financing, either for the investor or the end buyer. As a 30-year mortgage veteran who has seen the market ebb and flow, what are your predictions for the future of the market? ere are many lending companies that operate close to the line. Margins are paper thin, while government regulations and operational expenses are at historic highs. You have a whole bunch of companies on the outside trying to fix that. Big companies will get bigger. We will see the acquisition, consolidation, or disappearance of middling companies. e brokerages will survive. Why do you think brokerages can weather today's market challenges? Low cost overhead brokerages are a lot nimbler. While the top 15 lenders may get bigger, there are tough times ahead for the top 21 through 100 if they don't hook their wagon to a bigger player or get really skinny. ere's just not enough meat on the bone. Even in today's boom there are many companies that are only just getting ahead. ese are the absolute best of times in the space, but the truth of the matter is when you look at the economics it's tight Smaller brokerages will always prevail because they can adapt quickly, and they don't have the same overhead burdening them that larger lenders do. William Tessar President, CIVIC Financial Services Get to Know Industry Executives Beyond the Boardroom