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Many job hunters, fewer jobs.


Recruiters catering to the mortgage trade are seeing herds of job seekers currently.

One expert says it's an example of classic supply and demand that is putting downward pressure on pay.

What is unique about these times is the "number of good people that are looking for a job."

Furthermore, those who are searching are not just good managers in terms of their own backgrounds. They come from good companies and many are currently unemployed. Plainly, these are more than just those whose careers became part of the ruins of a failed thrift.

That was one assessment of the current state of the mortgage business made recently by a 15-year veteran of executive recruiting and consulting in the industry.

Beyond that, he said "bonuses have disappeared," for the top corporate managers of mortgage banking operations and base salaries have been held flat with little, if any, raises.

For senior executives who are also majority owners of independent mortgage companies, the stakes are even higher. These owner/managers are struggling during difficult times to ensure the ongoing survival of the companies they helped build and invested heavily in. Because of that, these executives face a dual challenge: "trying to survive and protect their own net worth."

Sound like the industry's executives are enduring some difficult times?

That is the current consensus of a group of four professionals, whose practices range from executive-search work for thrifts and mortgage banking firms to industry compensation research and consulting. Mortgage Banking interviewed these industry experts recently to get a better picture of what is happening in the marketplace for mortgage professionals. From all accounts, it appears the ongoing downsizing and consolidation in the mortgage industry has clearly taken its toll on the job market. The trend is only further compounded by the closing of failed thrifts and the need to shrink institutions dictated by the risk-based capital standards.

One veteran of thrift and mortgage banking consulting who has been watching the fate of senior managers in the business for some time is Terence N. Burns. He currently is responsible for executive search efforts for mortgage banking and thrift institutions with the Chicago-based firm of Dieckmann & Associates, Ltd. Burns related one instance of a CEO/owner of an independent, mid-sized mortgage banking firm that services about $500 million who has taken a cut in salary and laid off staff. Burns says he anticipates that more mortgage banking operations will be closing down because the current business environment is so hostile. He referenced one such closing in the works at a mortgage subsidiary of a bank because of regulatory pressure.

Burns, who has posted 15 years of consulting work for thrifts and mortgage banks--much of it based in California with The Newport Group, Newport Beach, says even the executive search business is feeling the pinch from the industry's troubles. Retained executive searches--the basic business of Dieckmann & Associates--appear to be off somewhat. Burns said that "the market for [mortgage banking executive searches] is off about 50 percent, versus 1989 or 1988." Although those searches still remain a viable source of business, Burns suspects that more firms are hiring on their own.

While the view of the job market shared be professional recruiters, is admittedly not a definitive picture of all hiring and recruiting taking place in the industry, it does provide one perspective on what is different about these times. Because mortgage firms are no doubt hiring more managers on their own to save money, it is quite possible that the employment picture shared by executive recruiters is more dire than actual market conditions warrant. But these interviews provide a glimpse of how the experts on executive recruiting view the employment scene today.

A fundamental shift has occurred in the types of top professionals most in demand. The shift reflects a new caution and conservatism that is pervading just about every inch of the mortgage banking business currently. Burns sees the change by the number of firms looking for top-flight secondary marketing people. The emphasis is being placed on very good people at risk management positions, Burns said. The business that has virtually dried up is the search requests for regional production managers, he said. "That's just gone away now."

As far as the one growth avenue in the production side of the business--wholesaling, to date it has not spawned much recruiting activity, Burns said. "Most companies grow their own wholesale operations, so we've had a little demand there, but not a great deal." But for those managers in demand to run correspondent operations, the experience most sought after is "quality control, quality control, quality control," according to Burns.

What's on the out list as far as production managers? Burns gives the following profile: "A guy in the 1986 boom that had a reputation for passing though junk--dealt in `B' paper." In terms of recruiting for production management positions, it has come down to a "quality, conservative, cautious environment."

The search for top executives has really slowed substantially and some former CEOs of mortgage companies have started seeking alternative careers, in some cases outside of the business. Burns said the consolidation in the mortgage lending field has reduced the number of top manager positions in the industry, thus CEO recruiting has "really levelled off."

In terms of servicing-related job searches or visible hiring trends, Burns said that those servicing managers who are being sought out are those who can tie down the costs of their operations because servicing is the primary source of income now with originations dropping off. He recalled a few chief financial officer job searches his firm had done where large servicing divisions reported directly to the CFO, indicating the heavy emphasis on cost control.

The biases against certain backgrounds continue to make some regions either prime recruiting territory or forbidden waters for seeking management talent. Burns says that searches are tailored around these professional prejudices. For example, for those who say they don't like ARMs, the recruiting efforts bypass California. He adds, "Some large companies don't believe in commissions [for production staff], so we tell them not to recruit from California."

But the primary bias that has recruiters shaking their heads is the almost indiscriminate disfavor that has fallen upon thrift industry professionals. As Burns puts it, some thrift industry professionals are "persona non grata within the regulatory system." There is a definite, almost palpable taint that has been placed on mortgage professionals who came up through a thrift organization. However, there is some hope that future employers will be more discriminating in sorting through thrift industry alumni, identifying those with misdeeds in their past and those without. "[They] can come out of it clean if what [they] did is clean," Burns concludes. Another bias that seems not quite ready to expire is the lingering prejudice against Texas. Burns reports that in the past, there have been "explicit instructions [to look for] no one with mortgage lending experience in Texas" when they are doing recruiting assignments.

While the Texas market has been plagued by industry disfavor and economic misfortune, the opposite seems to hold true for California--the land of mortgage banking promise and high salaries. But, the spell may have finally broken, at least in Southern California, according to the founder of Peat Marwick's Orange County practice for management consulting and executive recruiting.

"The bloom is off the rose in California--it's very expensive to live here," says John Telford, now senior vice president and general manager for the Southern California region of The Stevenson Group. Telford was a partner for 13 years with Peat Marwick until he left a year ago under a management buyout. The veteran consultant and executive recruiter says that "whereas before, the magnets used to be the weather and jobs, now the only magnet is the weather."

The weather no doubt is still great in California but a freeze appears to be in the wind as far as job growth in the mortgage business. Telford says his firm was doing searches for four different mortgage companies earlier this year that were put on hold in June. He now says it looks like those searches will be on "terminal hold." The freeze showed up in searches for mortgage brokerage firms as well. Six months ago, the typical search assignments for a controller or a data processing manager or a secondary marketing expert for mortgage brokerage shops abruptly halted, Telford says. Before the lull began, Telford had done quite a number of searches for mortgage brokerage operations.

Telford, a California resident for 22 years, sums up the change with a telling statistic. There are 20 to 30 percent fewer mid-management jobs than a year ago in California. The high cost of living may have finally started to drive employers and their payrolls away.

Southern California has long been a home to major thrift lenders and mortgage banking companies, and as a result has been a healthy climate for mortgage employment. But the thrift industry problems have managed to sour employment prospects for some thrift professionals even at well-run institutions, according to Telford. "The assumption now is, if you've been in the thrift industry, you're either a crook, or incompetent. I think it's very unfair," Telford observed.

He says "a lot of people in the industry are getting hurt by the perception that anyone in that industry is a crook." Although the discrimination runs deepest against thrift industry professionals, other financial services are experiencing their own problems. Telford, who does recruiting for financial services firms as well as other industries, says, "This has got to be the worst time in 15 years to change jobs. If you've got one, keep it." He quickly adds that the job picture in financial services differs by region. There are markets, such as Salt Lake City, that are currently thriving and attracting recruits.

These uncertain times have given birth to some innovative employment tactics. Telford offers the example of one solid, Los Angeles-based, mutual fund that decided to contract out its chief financial officer position in order to save money and control costs. Contributing to that decision to contract out the CFO job was the fact that the employer could not convince candidates to move to Los Angeles, even from other parts of California such as San Francisco, Telford says. What once was perceived as an attraction has turned out to be an obstacle, primarily because of the high cost of living that prevails in the Los Angeles market.

Telford says to avoid having to entice the unwilling to move to the California market, "most employers look only in a confined area that is roughly a one-hour to one-and-a-half-hour commute from their locale."

An example of what it takes to woo out-of-state executives to California jobs makes it easier to understand why employers prefer to stick close to home with their recruiting. Telford said he was recruiting a candidate from the East Coast for a CFO job for a top flight manufacturing division based in Southern California. It took four job offers before the candidate was convinced. The offer that pushed him over the edge was for a 55 percent increase in base salary, a guaranteed bonus of 50 percent of salary, all relocation expenses paid, a club membership and a company car. Telford says, "That's what it takes now." And that is why California employers typically don't like to recruit from out of the area if they can help it. Although this example applies to another industry, recruiting problems cross industry lines and are directly rooted in a growing perception that California's cost of living is too high and its lifestyle is not sufficiently compensating anymore.

Telford says that not only has California lost its draw, but financial institutions in general have lost their appeal for many professionals. The veteran recruiting expert says that many middle managers he talks to now want out of the industry altogether. The general public perception that thrifts are "bad" and that banks are heading for trouble, and anything connected with real estate is financially shaky, has left many financial stocks in the doldrums. Layoffs at major banks, particularly in the commercial lending arena, have left existing managers uncertain about the industry's employment prospects. Telford notes, however, that other industries are having difficulties in the current tight money, near-recessionary climate. "The pain is greater in financial institutions than in other [industries], but the trends are the same."

Telford says now it even is difficult for financial institution executives seeking to leave the industry to find other positions. Traditionally, one haven for such an executive was to become a developer. But with the credit crunch eroding sources of construction funds, this familiar escape hatch is not open to most financial institution executives.

Telford says the job environment is in need of a return to optimism in the country. Until then, an overall nervousness pervades the financial services sector and people with good jobs are sitting tight, Telford says.

As a consequence of these market factors, executive recruiters also are seeing more than the usual number of qualified candidates who are currently unemployed. And contrary to historic notions about the difficulty of being considered for a job if you are unemployed, the current extent of layoffs in financial institutions and the mortgage business has rendered that rule of thumb inoperative. David deWilde, CEO and managing director of Chartwell Partners International, Inc., San Francisco, says the good news is "If you're unemployed, it's less tainted now than a year ago because people have legitimate reasons for being unemployed. That's particularly true if you come out of a thrift. They really had to cut back." There are two noteworthy features about the current executive recruitment environment, according to deWilde. The large number of currently unemployed mortgage executives looking for jobs is the first, and the second is that "those with jobs are difficult to dislodge" because they are unsure about the financial health of any institution they might be moving to.

Chartwell Partners' CEO has some interesting roots in the mortgage lending business. Before entering executive search work, deWilde was executive vice president for policy and planning at Fannie Mae. He was also a former president of the Government National Mortgage Association and a deputy commissioner of the FHA. On one of his better known executive search assignments, he found Mario Antoci to run American Savings Bank, Stockton, California, the large, restructured thrift sold to the Robert Bass Group. Another member of Chartwell Partners' recruiting team is Peter V. Hall, a managing partner and a former top executive with PMI Mortgage Insurance Company. Hall says that the search firm just completed two mortgage banking-related searches--one in commercial property and one in residential. He sums up the current environment this way: "The answer is there is a glut of people looking for work--people in both areas."

While he underscores the numbers of job seekers in the commercial property arena, deWilde adds that on the residential side it appears that most cutbacks have been taken in the wholesale department. He explains that the wholesale area is the easiest place to cut in the residential operation.

The two searches Hall mentioned involved an effort to find a candidate to run the multifamily division of a mortgage banking company and another candidate to run marketing and sales for a subsidiary of a major life insurance company that offers third-party home mortgage processing.

Hall and deWilde talked about how some of the qualities sought in mortgage executives today have changed to match the business environment. Hall says that two years ago, hiring a production manager meant looking for a "super sales manager who could really recruit top loan officers." Now the credentials in demand for that job have shifted to someone who can build in more variable costs, who is imaginative in finding new ways of bringing in business, and who is "more of a profit center manager."

Hall says the other positions where there is still strong recruiting demand include professionals involved in the cost control aspects of the business, such as quality control managers, internal audit professionals and corporate controllers. He added that salaries continue to escalate for professionals involved in the technology side of the mortgage business.

For the CEO position, the key qualities in demand now are a true understanding of the economies of the business and an awareness of the importance of transforming fixed costs to variable costs to match the volume swings. Top mortgage executives today also must be adept at cost containment and at maximizing the benefits of technology, deWilde said.

Hall and deWilde discussed the difficulties of recruiting out-of-state candidates in general and the compensating factors that are often required to clinch acceptance of such offers. Hall said he has learned in the course of doing executive recruiting that "people are very attached to the places where they live and are very reluctant to leave." He related one such experience that involved someone being recruited to Buffalo and another individual being recruited away from a job in Buffalo. In both instances, it was "equally difficult" to convince the candidates to make the move, Hall said. This just shows that the attraction of the place itself is less of a factor than the person's ties to their current homes.

However, cost of living differences do complicate recruiting efforts. Chartwell Partners recruited one CEO to a mortgage banking firm from a prior job in a hard-hit area of the Southwest, deWilde said. The candidate complained that he had to leave his home, which was one of the nicest homes in the Southwest that sold for $600,000, to come to Southern California. The CEO lamented that his sale proceeds would not "even buy a starter house out here."

Hall also said he had a discussion with a candidate from Texas who was making $110,000 plus a bonus. This person was estimating it would take $140,000 to break-even in the California market due to the higher cost of living.

Contrary to the notion that a Texas background may be a negative, Hall added that Texas is a good area for recruiting, particularly for workout professionals. He says that's the case because "Texas people are ahead of the rest in dealing with problem real estate. Texas is where most of the talent is."

Chartwell Partners has been involved in recruiting senior managers for several of the insolvent thrifts sold by the government in the past year.

Finally the compensation expert Mortgage Banking talked to said that out of all these sobering accounts of the job market, the good news is that companies are not having to spend so much on compensation because of the large, available labor pool of unemployed candidates.

Mark Lipis, a principal with The Wyatt Company, Sherman Oaks, California, says, "What's happening is there is an awful lot of folks looking for a job. When that happens, the compensation system softens and you don't have to pay as much." Sometimes, however, during periods like these, the market will experience a great polarization in salaries, he says. "The really good people still command a lot of money," Lipis says. But the underperformers see a marked decline in income.

Lipis says that all compensation plans are being scrutinized carefully to see that the costs are more than offset by increased results. "Everybody right now is very, very cautious. Every plan is penciled out to see if it costs less than it produces." Lipis maintains that any incentive compensation plan that is properly designed will make more money than it costs employers. However, in today's tight budget environment, Lipis says he knows of some executives with $600,000 base salaries who say their companies cannot afford to foot the bill for the professional design of an incentive compensation program. Lipis pegs the cost of such an effort at roughly $5,000 to $10,000.

Lipis calls the current job market a case of "classic supply and demand." FIRREA and higher capital ratios have caused many large thrift mortgage players to downsize in order to meet their ratios. Those that can't are merged or sold. As a result, "there are a lot of people out looking for jobs." Lipis offers an example of the numbers of thrifts who are no longer operating. He says that out of a list of conference attendees present at a commercial property session he addressed last February, 75 percent are now out of business.

However, one bright spot is that if you are currently in the job market and you have some loyal customer relationships and can bring a book of business with you, there is clear hiring demand awaiting you, according to Lipis.

Janet Reilley Hewitt is editor in chief of Mortgage Banking magazine and Real Estate Finance Today.
COPYRIGHT 1990 Mortgage Bankers Association of America
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1990 Gale, Cengage Learning. All rights reserved.

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Title Annotation:mortgage bank management recruiting
Author:Hewitt, Janet Reilley
Publication:Mortgage Banking
Article Type:Cover Story
Date:Dec 1, 1990
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