Reimagining The Mortgage Experience

BY NATALIE ROONEY

Growing up around CPAs, it was only natural that COCPA member Rod Shuster became a CPA himself. But after a traditional start in public accounting, he began putting his expertise to work in a new way — as a Certified Mortgage Lender. Now he’s sharing valuable advice that CPAs can use to help their clients with the biggest investment of their lives: their home.

Rod Shuster’s company, Journey Home Lending, is aptly named. While he describes it as a mortgage lending company, his focus is helping clients and their advisors navigate the mortgage journey, ensuring it is part of an overall wealth building plan.

As a third generation native Coloradan, Rod was a business major at Colorado State University with concentrations in Finance & Real Estate and Accounting. After graduation, he started his career in Price Waterhouse’s tax department, gaining valuable skills in tax and litigation. He left to join his father, Steve, in Shuster and Company, doing business valuations, litigation support, a full gamut of tax and audit work, and reviews of financial statements. After five years, Rod was ready to do something different. He spent a year recruiting for accounting and finance positions, and then he decided he wanted to be out on his own. Because of a non-compete agreement, he couldn’t recruit for a year and needed an alternative.

A friend in mortgage brokerage asked Rod to join him. It seemed like a great way to fill the year-long gap, and Rod agreed to help. He found he had a knack for mortgages. “It was consultative sales, financial, and working with a complex intangible product with a lot of moving parts that needed a lot of clarification,” he recalls. “I learned quickly that it wasn’t just about the best rate.”

After fulfilling his year commitment to his friend, he went out on his own in the mortgage business, clearing loans through Clarion and operating as Shuster, Inc. “Clarion was just an accounting shop with warehouse lines to loan money,” Rod says. “The team would find a borrower, submit the package to one of our three hundred investors, and get it approved with very little overhead.” His financial expertise helped him become a top producer for 13 years.

Clarion morphed into Catalyst, and a few career twists and turns found Rod at the helm of Catalyst as president. Eventually, he moved on to Universal Lending, and then he ran the largest retail region of Eagle Home Mortgage (part of Lennar Homes). He also served on the Colorado Mortgage Lenders Association Board of Governors. 

By 2018, Shuster decided it was time for a break. He took February off and then in March launched Journey Home Lending, a small brokerage firm originating loans and exclusively helping clients with residential mortgages. 
“If you ask me at a cocktail party what I do, I’d say I run a boutique mortgage planning firm,” Rod explains. “Think of a financial planner or advisor. I’m a mortgage planning consultant. I look at the entirety of the picture as opposed to a single mortgage transaction. This unique perspective from someone who has overseen billions of dollars of mortgage loans is designed to help those who really want professional advice and concierge service. I can remove the stress from the transaction and still offer competitive rates.”

MORTGAGE BROKERS VS. MORTGAGE BANKERS

Rod says it’s important for CPAs and their clients to understand the difference between a mortgage broker and a mortgage banker. He has been both.

A mortgage broker is independent and can shop with multiple lenders or investors to find the money to loan to the borrower. Guidelines may be more flexible to help borrowers.

A mortgage banker loans its company’s money, uses their own underwriting, and has their own rules and guidelines. Most of the loans originating through mortgage banks end up being sold to agencies such as Fannie Mae and Freddie Mac or insured by Ginnie Mae and must meet certain guidelines, such as minimum credit score. However, Rod says the mortgage bank may have rules it overlays on Fannie Mae’s rules to help protect it against risk. These overlays are where Rod’s experience is invaluable. “Consumers don’t know about these additional rules, which can create challenges,” he says. “A broker who knows which investor has tighter rules or different programs can help consumers navigate the system.”
Ultimately, both transactions end with an investor. “One way, I’m brokering and not lending clients our own money,” Rod explains. “The other way, it’s my company’s money, and we’re selling it off after closing.”

It’s about looking at the totality of the investment and the mortgage vehicle and what is the best solution for the individual client.

TECHNOLOGY AND THE INDUSTRY

Just as financial planners are dealing with robo-advisers, the mortgage industry is dealing with rocket mortgages: Push a button. Get a loan. Rod says some mortgage banks are investing millions in the technology to create their own rocket mortgage programs while others are buying off-the-shelf programs from third-party vendors. 'Some of it is working; some isn't,” he says. As a broker, Rod says he can shop for the technology pieces to suit his needs and pay a fractional monthly fee. “It allows me to function more smoothly and quickly. I can give Millennials that ‘rocket’ experience along with mobile apps, while the functionality is top shelf.”

The key is in keeping the borrower experience from being so general and just about rates, especially with companies like Amazon and Zillow expressing interest in the mortgage market. “A mortgage transaction, from all of the consulting and review of complex prices at the beginning through closing at the end and follow up after, doesn’t fit nicely and neatly into an online checkout cart,” Rod says. “There are many things that come into play, including complexity and emotion.”

TIGHT MARKET, CHALLENGING TIMES

Rod says, thanks to the never-ending refinancing boom, rates collectively have come down over the last three decades. Now, they’re definitely going up, and short of some sort of cataclysmic event, it’s unlikely they’ll come back down in the near future. In addition, the nation’s housing market is tight, especially here in Colorado. “With little inventory, clients are house shopping so much longer and often times presenting several offers on homes,” he reports. “Loan originators are working longer with each client until they are able to buy or just get tired of looking and decide to rent.”

This scenario has caused a surplus of originators and compressed margins for mortgage companies. That means layoffs and reduced commissions are creating challenges. “We continue to see more people getting out of the industry because companies can’t sustain the lower volumes,” Rod says. Thankfully, he and his small company with low overhead are in a different world. “I can adapt and survive because I’m doing my own loans.”

HELPING CPAS’ CLIENTS

Clients can benefit from meaningful information to make an informed decision. CPAs should refer clients to a loan originator who can help them see clearly and concisely what the loan is going to cost. An experienced originator will evaluate different loan products, the rate, and any charges or credits, and determine the best alternative. That could be a higher rate with a bigger credit and no closing costs; closing costs and a lower rate; or a different product altogether. “It’s great that someone can show the break-even, but what if, instead, we look at the total cost over the life of the loan and the length of time a client will live in the house and compare those?” Rod points out. “This is the type of information a CPA or a financial advisor would want clients to have — not just that the rate is X. That doesn’t tell me anything. It’s about looking at the totality of the investment and the mortgage vehicle and what is the best solution for the individual client.”

Rod uses a total cost analysis to show options side by side in graphical form. He encourages clients to take the information to their CPA or even bring in their CPA to see what makes the most sense for their situation. “Doing that results in the best long-term decision for clients,” he says.

Most people just don’t understand their mortgage transaction. “I don’t blame them,” Rod says. “It’s complex with lots of moving parts, so many people tend to focus on what they know: the rate.”

For most clients, it’s hard to know what questions to ask. “It’s like asking a store the price on a television. There are many variables involved such as screen size and picture quality. Price is only one consideration.” Therefore, it’s important to work with a professional who understands the entirety of each client’s situation. 

Rod explains that rates are generally tied to the Fannie Mae bonds. “When bonds are up, rates are down. If you called someone when bonds were low and rates were higher at the beginning of the day and then call me at the end of the day and rates were lower, my rate would look better. While I appreciate that, it’s not about me. It’s the market. It’s more important to understand how your mortgage advisor is getting information and the technology used rather than the rate, which is changing all the time.”

In addition, having someone who can navigate last minute changes and challenges is non-quantifiable. “A delayed closing creates huge issues,” Rod says. “Your clients should find someone who can meet them where they are technology-wise and do it with a secure portal that protects them from identity theft.” Yes, in this arena, too, cybersecurity is one of the biggest challenges.

“For most people, this is the largest purchase they will ever make,” Rod emphasizes. “So, it’s important to understand the intricacies of the situation and to work together to develop the best solution for the client’s journey home.” Hence the name: Journey Home Lending.