Through an engaging conversation with one of Fulcrum's partners, we explore the strategic maneuvers and adaptive strategies that not only helped them navigate the tumultuous COVID-19 era but also aided their expansion. This episode sheds light on the delicate balance of pricing and product mix when choosing wholesale lenders, highlighting the merits and limitations of United Wholesale Mortgage (UWM). Gain valuable insights into the decline of USDA loans and the lessons learned from rapid team growth.
Learn more on their website.
Through an engaging conversation with one of Fulcrum's partners, we explore the strategic maneuvers and adaptive strategies that not only helped them navigate the tumultuous COVID-19 era but also aided their expansion. This episode sheds light on the delicate balance of pricing and product mix when choosing wholesale lenders, highlighting the merits and limitations of United Wholesale Mortgage (UWM). Gain valuable insights into the decline of USDA loans and the lessons learned from rapid team growth.
Learn more on their website.
This is the Kestrel Country Podcast, where we discuss the people, places and events all around Kestrel Country. A company yeah, well, actually, you know, what I don't think we have done yet is really talk. So so many people that I have on I would say the majority of people that come on the podcast are entrepreneurs to some degree. Sure, what did you do to start your business? How's it going? All those kind of things around this area. And I don't think we've really done the Fulcrum story, so to speak, a-team Fulcrum story.
Speaker 2:Would you be up for digging into?
Speaker 1:that let's do it.
Speaker 2:Good, bad and the ugly.
Speaker 1:Yeah, and that would segue into some of what you're talking about, for sure.
Speaker 2:But yeah, just to talk a little bit about.
Speaker 1:I know we did do one at one point when you first, when you made the switch kind of from Synergy to Fulcrum, about that difference between retail lending and brokerage. But yeah, maybe you can jump into kind of how has how's that transition gone to, kind of how has how's that transition gone? Maybe a little bit of background about how Fulcrum you're recent to it, but how how did Fulcrum get started? And those guys who you're partnering with now.
Speaker 2:Yeah, absolutely. Transition has gone really well. So been with Fulcrum year and five months now and the the the. The most interesting part about fulcrum and what honestly continued to have me dig deeper and deeper into the, the team aspect, the ownership structure and and had me pursue ownership in the corporation, was the uniqueness of having three, um, like-minded people that all had complementary strengths and and weaknesses. Uh, that wanted each other to win so badly. Like each other not necessarily me as an individual, but you know the good of the other.
Speaker 1:yeah, that was really interesting and that was something that you found when you started working with them. What did, did the is Bryce and Brant.
Speaker 2:Bryce Brett and Brayden Bryce Brett and Brayden. And Brandon, and Brandon.
Speaker 1:No, be ours. Okay, how did the other three guys? Did they start it together? Yeah, I guess how did that?
Speaker 2:Yeah, so Brayden Shaw was a college athlete athlete brett stimpson is a 30-year veteran in the mortgage industry, the broker world, and brett was working at another brokerage down in utah. Braden had just graduated college and was looking for his you know first kind of gig, um, and brett said to him hey, you want to. You know, come learn the mortgage world with me. This was right around 2019, going into 2020, a few months in, brett said, hey, it doesn't look like this brokerage is going to be the right fit for us long-term with what was going on. So you want to go start our own? And Braden said, yeah, sure, so they started Fulcrum in in 2019. Okay, right before everything went nuts, right before everything went crazy, especially in the lending real estate world. Yeah, and what was unique is that they basically propelled the external demands from COVID into what is now the largest mortgage broker in Idaho, number one producing Idaho broker. We have 17% market share out of all lenders in Idaho and it's thriving. That's huge. Yeah, it's been pretty impressive.
Speaker 1:Yeah, so they started it 2019. And so Braden was new to the business. Then, I know, and was it just the two of them? It was Okay, every hire was and was that, was that structure or maybe not structure, but that, um, what you found, the complimentary individuals was that kind of there from the start with those two guys, and then they've added from there.
Speaker 2:It. Um, I would say that they're both visionaries. They have the unique talent of casting a vision and running to it and delegating if really effectively along the way, um to other people that are driven by pursuing a big vision. And this is one of the most unique transitions that we're actually making in the business right now is we're going into, you know, your our fourth full year in operations, went from zero to half a billion in production a year, based upon a group of people coming together and all wearing 100 hats at once pursuing that common vision. And now what we're doing is actually having to bring some structure a slow down to speed up. Smooth is fast, high speed, low drag, whatever you want to call it approach to internal organizational structure and how that allows you to then scale further. That's what's happening as we speak. It's pretty amazing.
Speaker 1:Yeah, so you say that number again Half a billion. Half a billion. So how many lending officers?
Speaker 2:are there 37. Loan officers?
Speaker 1:Mortgage brokers? Yep, I guess, are you still called a loan officer? Loan officer is a technical term. It is From the federal, whether you're in a brokerage or at a bank or retail lender. Okay, so how many lending officers, loan officers? 37. 37.
Speaker 2:37. Yeah, how many total people in the organization? 83.
Speaker 1:Okay, yeah, that's a lot of growth in four years. A ton of growth, obviously, not just the financial numbers, the total production, but in people too. Absolutely.
Speaker 2:Yeah, we're in 13 or 14 states now, so it's it's definitely multiplying on itself.
Speaker 1:You're lending in 13 or 14 states. Yep, how many of those states do you have offices or people in? Eight? Okay, wow, yeah, that's amazing, hats off to them. And is that relatively recent? Like how much of the? I guess um? What's the? What are the growth trajectory? Look like um in that business historic number.
Speaker 2:I wish I had my numbers in front of me, but historically we've doubled every year okay, so it's been a fairly steady absolutely steady growth. Steady growth, but that's explosive.
Speaker 1:Steady explosive, right yeah, consistently explosive growth. Yeah, this year it's not like it was fairly flat and then went crazy, but explosive. Every year.
Speaker 2:Yeah, from an organizational level that's unsustainable, but it imitates, it parallels, I should say, the way that my team growth here on the Palouse was A doubling of every year and then kind of this refining period, which is where we're at right now. Last year 2023, we did a total of 69 million. The year prior we did 70. So we're basically flat year over year. That happened because we were focusing on the production of systems and support and structure, with consistent expectations and execution, which every business, I think, that grows rapidly has to go through this year of maturing, where, if you don't do that, what you're setting yourself up for is a foundation on sand. Something's going to happen a shaking in the market, you know, a rash of attrition within your workforce that'll take you out.
Speaker 1:Yeah, well, I mean, we did see a a major shaking in the market, right I mean. So for you to be flat over essentially flat over that timeframe is pretty amazing when we've seen interest rates go up and you know total sales go down for sure. I'm sure refis are lower as well. What's a refi?
Speaker 2:Yeah, yeah, yeah exactly so that's pretty impressive.
Speaker 2:Thank you, it hats off to the team here in Moscow Josiah Rosendahl and David Schultz, denise Marissa without great people you can't do that. But yeah, as far as the journey that Fulcrum's on and where we're heading, we're not necessarily chasing down to be the biggest brokers in the nation. Just anybody with a pulse and a license, come and originate here and we'll be satisfied. What we're looking to do is really set the bar of this next generation of originating mortgages, residential loans. How are we leveraging tech? How are our people sourcing the business growing towards their individual goals? And because we're still nimble, we can make pivots really quickly without massive investment and potential points of failure. And so Brett is the behind-the-scenes Wizard of Oz guy that's making sure compliance, finance, hr is taken care of. Brayden is quite literally the visionary working on that cutting-edge stuff. Bryce is an absolute unit, taking on a $250 million a year team in production, and my role as the COO is really you know, sales operations, support structure, team, that stuff Gotcha.
Speaker 1:Yeah, that's exciting man. It's been fun. Yeah, how is that, now that you've been in it a little while? I think last time we talked about it you were still fairly fresh in the brokerage world. Yeah, what kind of advantage does that give you and how's that been working with? You know, like UWM has got to be by far your biggest. Yeah, you home a partner lender, I don't know, wholesale lender.
Speaker 2:Yeah, what a learning curve. There was a detox period that I had to go through of the retail model that I had grown up in, essentially how I produce a mortgage, the assembly line that had to be built around a retail model. Having to detox from some of that because wholesalers are really good at a few things and every different wholesaler can be different, have different strengths, and so learning to build an assembly line that is still as efficient, if not faster a lot faster in our case so I can deliver the same execution for my referral partners and the clients that are expecting us to get them in the home. Nobody's leaving, you know, in a moving trucks for a week. But but even more so is how do we make sure that we're doing what's right for the consumer?
Speaker 2:And UWM has by far hands down the best systems, process, operations, speed to close out of anybody that we use. They carry about 60% of our volume every single month because of that. But it's just a different, it's very entrepreneurial. I'll say it that way. I'm not selling, I'm not paid to sell a company's money, I'm paid to source the best option for the client's goal, and that's been a fun addition to the skillset that was there.
Speaker 1:How many different lenders do you have that are as options, and how different are they? Does that make?
Speaker 2:sense. Does that make sense? Yeah, so 70 plus different wholesale lenders Okay, and to get signed up with them is an application. The owners have to fill out a credit app and do a background check and you're basically eligible to use them. Wholesale lending is essentially broken down like this Rich guys or gals get a big line of credit, they get a license to originate or to sell loans directly to Fannie, freddie and HUD, and then they go out and produce a rate sheet that is based upon the investor's goals of their returns.
Speaker 2:Some want to do a ton of volume with very thin margins, meaning low rates, and others want to be very good at a few things and make the biggest return they possibly can. But every single one of them has to have an interface with the broker underwriters compliance. You know process. So it's really just a big operational house with a large line of credit that they're funding these loans off of.
Speaker 2:So I would say that a lot of these wholesalers probably are going to go away again and you'll start to see what you're seeing in the in regional banking spaces bigger, better wholesale lenders with better technology and a scalability will start to absorb market share and push the bad performers out, like you and I right, we could probably go get a line of credit for I don't know, 15, 20 million and just start to sell that money to these lenders, these brokers. You and I would have to underwrite the loans and do compliance and all that stuff. We could be good or not good at other things. So I would say that there's probably 10 really, really solid for conventional FHA, va, usda.
Speaker 1:And what I guess some of what I'm asking is what you know. It seems like one of the advantages of working with a broker is the optionality right. That's at least kind of how it's marketed to a degree. Sure, not necessarily that you guys market it that way. It's mostly about speed, process, all that. But how different are all the different options that are out there? Are all the different options that are out there? I guess maybe one way to ask the question would be you said you had about 60% of your volume month over month is UWM. So the other 40%, what are some of the reasons why you might go with another lender? What are the differences between what they're offering? And then I guess the question behind that question too is how has that been different from retail or from a bank where you're really at one lender right? How important is it to have these other options and what options are they giving you?
Speaker 2:Yeah, very, very good question. A lot of it starts with pricing and product mix. So one wholesaler, let's say UWM, isn't the cheapest. They know they're not the cheapest. They've never. Well, since they transitioned away from a game on which is basically we're going to buy market share by lowering our rates substantially, since they transitioned away from that, they have focused on technology and delivery. So I know exactly what to expect every time. But you'd use another wholesale lender for if you have a borrower that's extremely price sensitive and is looking for hey, I'm coming to you as a broker to get me the best interest rate possible. Okay, cool, I have 70 different options.
Speaker 1:And that will, and those will probably change Absolutely Like day to day.
Speaker 2:Even Yep One might be cheaper than another Okay, run incentives and product mixes, the other one. We're on incentives and product mixes the other one. So in our market we're primarily a conventional market, but we also have investors, we have veterans, we have zero down families that are looking for no down payment options, et cetera. And UWM isn't the best at everything. They're the best at a few things. So that's why most of the time, we do a few things, and that's primarily with UWM. But let's say you're looking for an investment loan where you as a business owner, um, right off all your tax, all of your deductions, you show very little income but you have a ton of cashflow Great. Well, we have a great lender with great pricing, with great underwriting delivery that does bank statement loans for businesses. Gotcha, that's another option. A DSCR right when you're just looking at the performance of the property and not you and your income at all. Great, we have another option for that. So product mix is the second reason why you'd see that delineation.
Speaker 1:Curious about one. To hit on something you just said about in our market we are conventional, conventional heavy. Why is that, like? What do you mean by that and what is the reason for that? Is it the type of employment, the type of housing we have here?
Speaker 2:Yeah, I'd say it's those two things. It's the demographic starts with employment base two universities, two hospitals, sel I almost said Emsi, but Lightcast right. Primarily, we are a white-collar, highly educated area within a 20-minute radius of Moscow. Of course, you have bedroom communities that have different employment mix, but that's probably that's primarily why educated middle upper middle class.
Speaker 1:That's, that's why, and not a lot. There are veterans, of course, of course, but not a huge veteran population that you might have in near mountain home or whatever. Yeah, okay, that makes sense. Yeah, what about as a rabbit trail? But sure, usda. I haven't heard usda loans. That all of a sudden, just the employment kind of what you're talking about, the demographics here made me think about it. What's up? Are usda loans gone? I mean, essentially, is it what happened? Usda loan?
Speaker 2:usda kind of fell off the map. Uh 20 in 2019. They're still there. Actually, at one point they did run out of money for a little bit, but then they came back. But okay, the us department of agriculture created a home loan product that was designed to serve rural and agricultural communities. The problem is is that it's the department of agriculture and they still have to underwrite the loan. So even in the retail world where you have an underwriter in-house, they still have to underwrite the loan and then send that package to the USDA for the final stamp of approval.
Speaker 2:Well, that imploded during COVID. And USDA also is a big challenge because their guidelines are the most restrictive on debt to income, and so, when we see this growing delta between average median household income and home prices, to fit within a debt to income ratio that is extremely restrictive is a non-starter. So what you're seeing is especially in Idaho, which, by the way, shout out to Idaho Housing and Finance Association. They are known as one of the premier housing agencies in the nation. Other states model their down payment assistance and closing cost assistance programs from what Idaho Housing has their standards, which is phenomenal. So you're seeing those agencies.
Speaker 1:There's also just other options for people that have taken that away. That's interesting. Yeah, I feel like when I first got into real estate, we were that away. That's interesting. Yeah, I feel like when I first got into real estate, we were doing quite a few USDA loans and just something that I hadn't really heard about much lately.
Speaker 2:That's income.
Speaker 1:Interesting yeah, pretty unique. So you guys have grown very quickly. You obviously did that with your team before joining Fulcrum. What are some things you learned about growing that quickly, whether it's how to hire the right people or what systems to put in place. What are some lessons that you can take away from the last couple years?
Speaker 2:the laundry list of of, uh, humbling experiences that have been here could take up hours. Um, I would say one you can hire the best people, but if you don't have a great culture, if you don't have the pursuit, the consistent pursuit of a common vision and culture, um, you can hire the best people with the best wages and still fail. So you have to know what you're after, how to communicate it consistently, and that is even it's most critical to do when you're in the good times, because when the hard times come, if there's not that foundation to fall back on, it's almost like hard times come and things shake and you fall to the level of your systems. We hear that all the time, but really what you're doing is you're falling to the level of the trust that your people have in the vision and the culture that you've created. So that's number one, um. Number two is nobody can read your mind, and if you think you're a mind reader, you're wrong.
Speaker 1:That's communicate, communicate communicate always um.
Speaker 2:And lastly, especially in our industry where we see a phone call as a potential commission check, right Like at times that's the thing that gets you through being absolutely inundated. There's a need for emotional maturity in the lending and real estate world, where things are very fast and other people are at high emotion, a high emotional state with a lot.