MPA spoke to an Interfirst VP about the company's relaunch process and why it chose to turn the lights back on in the middle of a pandemic
With thousands of American businesses teetering on the brink of collapse because of the economic shutdown imposed by COVID-19, last week’s return of Interfirst Mortgage Company to the origination market after a self-imposed three-year exile may seem oddly timed. But according to Mark Freedle, Interfirst’s executive vice president of production, there were larger factors at play than the coronavirus.
When discussing Interfirst’s return, it’s important to remember the circumstances around its exit in 2017. As Freedle explains it, it was a strategic decision driven by a breakdown in the day’s pricing models.
“MSR’s had gotten way out of whack, and margins were being driven down on the origination side, so we felt like it was a time to press the pause button,” he says, adding that several companies the size of Interfirst were borrowing significant amounts of capital in order to purchase MSRs at the time.
“You’re playing a game with your balance sheet at that point. Instead of going out and playing the game, we opted to keep our cash position intact and wind down the company to protect the assets until we saw a more favorable market point to re-enter,” Freedle says.
Even though it was a methodical, smooth wind-down that didn’t wind up costing borrowers, investors or the company’s broker partners, shuttering the company was still a painful experience for all involved.
“It’s never a good thing to shut a company down,” says Freedle. He describes his feeling at the time as “absolutely awful.”
The comeback
Although Interfirst ceased operations over pricing and profitability concerns, the company’s shutdown provided it the opportunity to take advantage of the incessant technological innovation that’s taken place in the industry over the past three years. Rather than simply wait for pricing to normalize, Freedle says the company wanted to come back to the market stronger than ever: more diversified in its offerings and better able to provide a digitally-enhanced origination process that would benefit both loan officers and borrowers.
“We had some very innovative technology on the broker side of the business,” at the time of the shutdown, says Freedle. “Though we knew there was still lots of room for improvement there.”
The first two years of Interfirst’s pause were primarily filled with discussions over what the company would be once it resurrected itself. Freedle credits the company’s CEO, Dmitry Godin, for providing a constant source of ideas.
“He would call me and say, ‘Hey Mark, what do you think about this? Why didn’t we do this? We could deploy this this way.’ There was this constant brainstorming going on that really started gelling for us about a year ago,” when the company and its tech team started reworking Interfirst’s systems, Freedle explains.
As the company’s programmers were plugging away, combining big data applications with AI machine learning in a way Freedle says will allow the company to double or triple production levels in its more expensive positions, the market was undergoing a transformation of its own. The irrational pricing that drove Interfirst from the market began improving, making the company’s return imminent.
COVID-19 has had surprisingly little impact on the company’s decision to relaunch. Keep in mind that Interfirst initially entered the wholesale market in 2007, a truly brutal time to be in mortgages. With the current pandemic not yet having the same dire impact on the housing market as the previous recession – “The dynamics of the carnage are different,” Freedle says – and its tech reinvigorated, Interfirst has returned with confidence – pandemic be damned.
