Tim Rood is the Co-Founder and Chairman of the Collingwood Group, a Washington, D.C.-based advocacy group for the housing and mortgage industries. Collingwood works to identify and secure business opportunities with the federal government and the GSEs; helps financial services companies comply with, interpret, and operate within the ever-changing regulatory environment; and works directly with CEOs and boards of directors to help increase market share and profitability.
Rood brings more than two decades of mortgage industry and entrepreneurial experience to the Collingwood Group. Rood recently spoke to DS News about his day-to-day role with Collingwood, how the industry is evolving, and where both he and the market are headed in the future.
DS News: What do you see as Collingwood’s role in the market right now?
Rood: We’re evolving just as the market is evolving. Collingwood, through the Obama administration, was laser-focused on advisory services related to risk management, compliance, and advocacy in certain circumstances to give lenders, service providers, and technology companies the best chance for commercial success in Washington, and that’s given us a solid foundation and customer base from which to work.
In a situation where you’ve got razor-thin margins, lenders and servicers are having to evaluate where to make investments today. It’s historically been a binary choice. Do I invest more in compliance and risk management, or do I invest more in operational efficiencies, taking friction out of the process, and delighting my customers? Technology has caught up to that business problem and can solve the compliance and risk management problem while solving for the efficiency and delighting the customers.
When Collingwood was acquired by Situs, that put us in a fortunate situation where we could rely on the infrastructure and capital of a much larger parent company in adjacent industries, multi-family, and commercial, and then repurpose some of those tools and leverage that infrastructure so that we became a higher-value business partner to our clients as it relates to transaction services across the continuum—origination, servicing, claims, professional services. We can get into business process engineering and help folks advance from strictly a compliance, risk management culture and then focus on how we can wring efficiencies out of the process while achieving all of the compliance and risk management objectives.
DS News: What does your role with Collingwood look like on a day-to-day basis?
Rood: One of the great things about this company is, it’s so dynamic. We find ourselves advising lenders, servicers, technology companies, outsourcers—anything that has to do with some intersection with Washington. The variety of topics that we are involved in, and the people that we interface with, never ceases to amaze me and excites me every day, just because you find yourself in the pocket of such mission-critical issues for the industry.
We only take on causes that are about enlightened self-interest for the industry. If the cause we’re taking on is good for the industry—housing, mortgage, the economy—then we should get involved. However, the opposite is also true. We don’t take up causes that promote the self-interest of companies or individuals if it’s at the expense of the industry.
The work is dynamic and fulfilling. Our days involve advising the executives of these organizations, getting a roadmap to achieving their objectives in and around Washington. We then leverage all of the tools and resources available to us to make sure that we’re part of not just the advice but the solution as it relates to how to operationalize things that they’re trying to accomplish, whether that be compliance, risk management, operational efficiencies, outsourcing, resource management. For a long time, we’ve been bootstrapping this business and had some hard-won success building a brand and our reputation in the industry. It’s empowering now to have a trunk full of tools at your disposal, and a well-funded parent company to underwrite our growth into these transactional business services and professional services.
DS News: What are the challenges you’re preparing for in 2018 and beyond?
Rood: You’re at what some would argue is a cyclical and secular crossroad here for the industry. Many companies need to reinvent themselves, particularly companies that don’t have a mortgage servicing rights (MSR) portfolio. Then they’re focused on obviously how to feed the beast on the origination side. We’re reaching an inflection point for some companies that are not properly capitalized, where they’re going to have to rationalize how they do business and explore partnerships with larger, well-capitalized companies that have more diversified business models.
We’re alert to that and are looking at the industry regarding what role we play in that. Whether it be on advisory services or matchmaking, we are working with companies to make sure that they’re taking advantage of every opportunity to lower their costs and enter into a variable-cost business model to make sure that they’ve reached the elusive equilibrium between production capacity and product demand. That has been the bane of the existence of mortgage lenders for as long as I can remember.
DS News: What are you seeing happening with home equity conversion mortgages (HECMs)?
Rood: All the things that I’m hearing about the HECM program coming out of the administration and out of HUD are positive, well-intentioned, and earnest conversations. There’s alignment that the program needs to be sustainable. HUD needs to find ways to make the program less volatile, and they need to ensure that it is commercially marketable to enough seniors to make the juice worth the squeeze.
I’m encouraged by all the things that I’m seeing. I was anxious that the new administration might not value the HECM program, despite some of the demographic realities in our country in terms of baby boomers aging, their desire to age in place, and the sad reality that too many of them are living in poverty yet are house-rich. That creates an opportunity. One of the things I’ve liked about this administration is, while fairness is still important and you’ve got to take care of people who need help, which there’s also a calculus that says, “It’s not just about fairness.” There’s a macroeconomic calculus to helping people achieve homeownership, to helping people tap the equity in their homes so that they can maintain a reasonable quality of life. There’s plenty of work to be done, but I like the direction in which we’re heading.
DS News: Do you see any other challenges as far as this huge group of seniors or near-seniors who are aging up?
Rood: We’re in this enigma wrapped in a riddle around the whole inventory problem and the affordability problem. There does not seem to be an easy solution there. The inventory that boomers occupy, if their bias is to age in place, then you break the housing ladder in half, where entry-level owners can’t move up. There’s just not enough inventory. At the entry level, you’re seeing demand stymied because builders can’t make the economic calculus work for building entry-level homes when regulatory costs can be $80,000 or more just to build a house. You’ve got record-high raw material costs. You’ve got the supply-chain issues in terms of finding qualified labor to build. We’re stuck here. Americans still have a bias towards living indoors, so something has got to break. We’ve got to find a way to remove some of the cost burdens to incentivize builders to build at the entry level, and we need to give seniors options other than aging in place.
DS News: As I’m sure you know, the Mortgage Bankers Association (MBA) is going to lose its leader later this year with the retirement of David Stevens. How do you think that that transition into a new head of the MBA could potentially affect advocacy within the industry?
Rood: There is only one Dave Stevens, so trying to find a mini Dave would be a fool’s errand. He was the perfect guy for the times. The challenge for the MBA as it goes forward is that a lot is going on in the industry, and there seems to be some separation between what the large financial institutions have as their agenda versus the agenda of independent mortgage companies. How you keep those companies aligned with a common set of objectives is one of the biggest things for the MBA and the industry to wrap their heads around.
Advocacy for the MBA during the housing crisis was about trying to keep the administration and regulators from over-correcting and killing the industry in an attempt to save it. Now you’re dealing with a completely different environment, where the bias for the industry is to deregulate, and to be more transparent, and to be better business partners with the industry. So, it’s going to be a different set of issues. They need to contribute to whatever the solution is for the inventory problem. The MBA needs to contribute to the ongoing progress made from a regulatory and enforcement standpoint, to make the government and the private sector more aligned and less adversarial. They need to make sure that there is adequate and affordable access to credit.
The housing finance industry still probably would benefit from a makeover. There’s still probably a negative and largely false narrative that exists in the administration and with lawmakers that needs to be addressed. I’ve spent my entire professional career in housing finance, and I know that the housing finance system and the actors in the system are, by and large, well-intentioned and good business partners for the government, and certainly are critical to the vibrancy of the economy and the housing market. The MBA will be an important voice for the housing finance industry as it looks to ensure the right people in the right places have the right impression of our industry.
You can’t dismiss the fact that housing, in a normal year, can contribute upwards of 20 percent of the economy. Regulators need to be sensitive to the fact that patriotism doesn’t compel mortgage lenders to make mortgage loans. Capitalism does. If the lenders don’t have the confidence, if they can’t quantify the risks that they’re taking and an ability to mitigate those risks, sooner or later they’re just going to stop taking those risks. There’s going to be cataclysmic fallout to the economy if that happens. There’s probably a benefit to an advocacy campaign, making sure that people see all the value that this industry brings to the economy and that any cautionary tale from the past belongs where it is, which is in the past.
DS News: What are some of the qualities you think will be necessary for whoever takes over as head of the MBA?
Rood: It’s going to have somebody who still has Dave’s passion because it’s going to be a body blow to the MBA membership when Dave leaves. The person who takes over is going to have to instill confidence and energy in its membership base at a time where they’re going through a tough market. Anybody in the industry has got some anxiety over how 2018 will shape up, so it has to be somebody who understands the issues and energizes the membership base. Somebody who has a clear and compelling understanding of how Washington works, and the ability to pull the right levers at the right time to achieve the best outcome for their members. This is not a “learn on the job” point in time. That’s critical. At the same time, it has to be somebody that the industry is excited about, can relate to, and trust to represent their interests going forward.
DS News: You sound like you might be a good candidate for the role yourself. If that opportunity came your way, is that something you would consider?
Rood: That’s a good question. It would be an honor to be considered for something like that, but I’m thrilled with the job that I have, and I’ve never been more invigorated for the work and the opportunities that are in front of us.
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