Success Among Rough Mortgage Waters–Scott Almy & Adam Laird from Cornerstone

The drop in mortgage business hasn’t been a sinking ship for all. Some banks remain successful and continue to prosper with their mortgage business. How were some able to weather the storm when others abandoned ship?

Scott Almy is CEO of Cornerstone Capital Bank, a national provider of mortgage origination and servicing solutions and commercial, institutional and consumer banking services. He joined Cornerstone in 2019 to expand the company’s banking operations and has nearly 30 years of banking and mortgage experience.

Adam Laird is CEO of Cornerstone Home Lending, a division of Cornerstone Capital Bank. He has served on Cornerstone’s executive committee since 2014 and the company’s board of directors since 2021.

MBA NewsLink: Why did some major banks exit the mortgage business instead of waiting for the market to improve?

Scott Almy: Many banks have struggled with profitability even during normal markets, which is why nonbanks now originate more than 70% of agency-backed loans and more than 86% of government-backed loans. I wouldn’t be surprised if more banks decide to exit the warehouse lending space, too. Bank capital and liquidity rules implemented after the 2008 financial crisis make it difficult for major banks to maximize their return on capital.

Moreover, the risk-weighting rules for mortgage warehouse loans are roughly double the risk-weighting assigned to individual mortgages, even though mortgages securing warehouse advances remain on balance sheets an average of about 17 days. We’re proud to be an outlier. As Cornerstone Home Lending, we focused solely on originating residential mortgage loans. Now we enjoy lower funding costs as an insured bank.

Adam Laird: Historically, most banks are more profitable with mortgage lending during refinance cycles and less during purchase cycles. The challenge for banks in purchase markets is mainly due to the influence Realtors and homebuilders have in driving buyers to familiar lenders that have a proven track record of closing loans on time. While home lending and servicing have always been major drivers of our business, for most banks, mortgages comprise only a small portion of overall revenue, so it’s not surprising to see them pull back or exit when market conditions become challenging.

MBA NewsLink: What’s your recipe for prospering in the mortgage space, regardless of market conditions?

Scott Almy: In a word, diversification. If you’re able to broaden your funding sources and cut funding costs while also expanding into new areas—like portfolio mortgage, commercial lending, consumer deposits, business treasury management, mortgage servicing and insurance—you’re typically able to navigate changing market conditions more effectively.

Adam Laird: Having sufficient liquidity and a strong capital position are key. However, success also requires a strong team of professionals and a common commitment to an organization’s mission and vision. When you’ve overcome many different challenges across previous market cycles and continue to provide new ways to serve clients and give your loan originators all the tools, support and resources they need to excel, success tends to follow, regardless of current market conditions.  

MBA NewsLink: Why are builder relationships so important to lenders? What is the best way to build these relationships?

Adam Laird: Homebuilders are incredibly important to the overall economy. Not only do they provide families with a means to create wealth through homeownership, but they’re adding more housing supply at a time when there’s little available inventory. In the current environment, homebuilders also help solve a major affordability issue by buying down home loan interest rates for their homebuyers.

The best way to build and retain builder relationships is through on-time closings, consistent service delivery, open communication at all levels of the organization, and honoring your commitments. It’s all about providing your builder partners with a seamless buying experience, serving as a high-quality extension of their brand, and offering a single, reliable control point for closing the homebuyer’s loan on time and at a competitive price.

MBA NewsLink: Customer service is obviously important. But what do mortgage lenders and banks often get wrong in this area? How can they improve?

Scott Almy: The theme song from the show “Cheers” was right–people “wanna go where everybody knows your name.” That’s true even in a digital world. Large organizations tend to lose that personal touch as they grow, and legacy technology tools are robotic and impersonal. People expect answers quickly and personalized attention when needed. Our response to this problem has been to double down on our client-centric approach by investing in conversational AI, chatbots, machine learning, and process automation designed to enhance the customer experience, while still emphasizing direct interactions.

Adam Laird: For us, stellar customer service starts at the top with a company-wide commitment to who we are, where we’re headed, and the non-negotiable convictions on how we conduct ourselves and our business. Banking and home lending can be very difficult businesses due to constantly changing interest rates and challenging market conditions. It’s easy for companies to become transaction-focused rather than relationship- and service-focused, which causes team members to lose sight of the customer. My suggestion to executive leaders at other companies is to rethink—and formally define—your company’s purpose and share with your team the compelling vision of your company’s future, how that will drive service excellence, and what that means to the individuals on your team, because team buy-in is vital.

MBA NewsLink: What is your outlook for next year’s housing market? What should lenders be doing to prepare?

Adam Laird: It will be interesting to see how things play out as we enter the seasonally slower production months. I think we’ll continue to see banks, non-bank lenders and warehouse lenders exit the space. As the environment improves, lenders with strong liquidity and capital, experienced teams, and strong builder and Realtor partners will be poised to grow market share. To prepare, lenders should consider investing in new technology, building new lines of business to add value to their clients, and creating new service offerings for their clients and referral partners.

Scott Almy: We’re optimistic. Recent estimates suggest that our country is more than five million units short of fully meeting housing demands.

(Views expressed in this article do not necessarily reflect policies of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA NewsLink welcomes submissions from member firms. Inquiries can be sent to Editor Michael Tucker or Editorial Manager Anneliese Mahoney.)