MMP 148 | Executing Your Business Plan


Nick Pabarcus, the EVP of Stearns Lending and Board Member of CA Mortgage Bankers Association, talks about executing your business plan and sticking with it. 

Highlights include:

  • Develop a detailed plan with controllable factors;
  • Three high and three low scenarios;
  • Review fixed costs;
  • IT plan and sales headcount.

Nick has been in the mortgage industry for over 20 years, and you will hear his ideas on the importance of pivoting to navigate through turbulent times.

Executing Your Business Plan And Sticking With It With Nick Pabarcus

This episode’s topic is executing your business plan and sticking with it. Our expert is Nick Pabarcus. He is EVP at Stearns Mortgage, which has been acquired by Guaranteed Rate. Nick has a long history of mortgage banking. Previously, he was with Bank of America/Countrywide and is on the California MBA board. Before we get to the main topic, let’s talk about you. So, how did you get into the mortgage business industry and into managing?

I’ve got to go back a little way. I started with Long Beach Mortgage back in the ’90s, well prior to the Washington Mutual acquisition. At the time, it was a crash course in credit. This was before credit scores, where in the wholesale channel, you were credit grading loans based on the percentage of good accounts versus bad. It was a very interesting environment, but it gave me a good baseline around credit and credit risk. I was very thankful for my time there. I transitioned to Countrywide and was with the combined Countrywide Bank of America organization for almost thirteen years. I’ve only been in the third-party space in wholesale and in correspondent.

As an Account Executive at Countrywide, it was a hard-charging sales culture. I thrived in that environment. I did well. During the Go-Go years of the early 2000s, I joke about that. Maybe from a management perspective, I wasn’t the best. I was just the best one available at the time. I was able to move into a management role there. I was a sponge. I learned a lot from some of the executives and the senior leaders there and in the industry. Over the course of time, I ran a division within the wholesale unit as we migrated over to Bank of America.

At the time, Bank of America made the decision to wind out of wholesale due to financial crisis. I then moved over into the correspondent division, which was a masterclass in mortgage banking at the time, Pat. It was a tough environment if all of us can remember back to those days. There were only five other buyers in the marketplace for a period of time. It was Bank of America, GMAC, Citi, Wells, and Chase. I worked in loss mitigation than anything, and it was a challenging time.

No question about it, Nick. It’s interesting how a lot of the perceptions about the future years are going to be similar to those. It’s a great experience in a lot of ways. Nick, what’s the biggest challenge that you have in your role now?

It’s probably the market of the dynamics, Pat. It’s interesting to see how quickly our environment changes. If you’re in the mortgage business, you have to be more of the Gumby DNA. You have to be able to morph and change extremely quickly. The Mortgage Bankers Association estimates that Q1 will be about 70% of the refi, and Q4 will be about 25%. It’s about making sure that our business is positioned for that transition, along with the fact that, off on the MBA estimate, it’s a frothy market still. It’s a $3 trillion market, but if you take a look at their quarterly estimates, $1 trillion of that will already have been executed in Q1. It will be an interesting environment for a lot of lenders as they shift from a refi focus to a purchase focus and adjust to what is going to be a smaller other market sizes.

If you're in the mortgage business, you have to be able to morph and change extremely quickly. Share on X

What has been your biggest surprise so far in 2021?

There have been a couple of them. For us in the third-party space, it’s been the perfect storm where you see a massive selloff in the MBS of the market, starting in February 2022. I’m not sure if anyone thought that it was going to be as steep of a selloff as we’ve experienced. Talking to you here, it’s continuing as we go. The MBS selloff has been a bit of a surprise.

We all thought interest rates were going to go up, but probably not as quickly as they have. There’s an interesting dynamic in the market within wholesale, which will permeate through the retail channels eventually, which is the Quicken and the UWM of the dynamic. If you and your listeners have been keeping abreast of the trades, there’s an interesting battle going on through those top wholesalers out of Michigan. That is leading to an exacerbation of the margin compression we’re seeing.

That’s a good point. It’s going to be interesting to see how that plays out. Mortgage banking is all about something new every day, so how do we stay on top from the standpoint of learning new things? What’s the biggest area that you’re concentrating on for this 2021 to be up to speed on?

It’s a constant challenge. What keeps a lot of us young in the business is that you will never know everything, ranging from capital markets to credit risk, to IT, to post-closing a delivery, to personnel management. There’s a myriad of things to be an expert on. I read a lot. I carve out time each morning and evening to make sure that I’m abreast of not only the current happenings but the whitepapers out there on different market dynamics and anything that I can get my hands on to lead me to more prudent decisions within the business, and then having a network.

It’s having a network of folks that I would call the safe place where I have a challenge, and I want to bounce it up against somebody who I trust. Having a half dozen of those folks in the different areas across the enterprise is extremely important. I learn something from everybody. It might be what to do or what I shouldn’t do, but having those sounding boards is extremely important to continue being a student of this business because I don’t think any of us will ever know everything about it.

MMP 148 | Executing Your Business Plan

Executing Your Business Plan: Continue being a student of this business because no one will ever know everything about it.

That’s terrific, Nick. I certainly agree with you 100%. There are so much great changes within selling, let alone the mortgage business. I’m glad to hear that you’re doing that. It’s really smart about the networking and be active with the California Mortgage Bankers because that also is a great avenue to keep up speed. Let’s talk about today’s topic because it’s so appropriate executing your business plan, and the big issue on how you stick with it. Why don’t you share your thoughts?

I try and keep things extremely simple. I don’t claim to be the smartest guy in the business by any stretch. The first thing would be to have a plan. I’m shocked by a lot of folks out there that don’t have a detailed production, financial headcount, and operational capacity plan. It’s extremely important that the planning process starts early. It is a very robust, comprehensive, detailed plan of what you think you would be doing if you had a crystal ball. There are a lot of controllable factors within our industry that a lot of senior leaders don’t necessarily control because they focus on the uncontrollable, “What is the tenure doing? What is the MBS doing? What are my competitors doing? Are they rational or irrational?”

Staying very disciplined on the controllable factors is critical. I noted some of the Mortgage Bankers Association data earlier. I’m not sure that many would argue that a guy like Mike Fratantoni is one of the most astute folks in our business. He would even admit that his forecast would be wrong. He just doesn’t know where. With that said, you have to have branches on that plan. I would recommend 3 highs and 3 lows in each of those areas.

Leaders get into kerfuffles at times or are stressed out because they’re surprised. I don’t think in this industry that we should be surprised by any of the happenings if we’ve been doing this for as long as we have. We’ve all seen a lot. With that said, having those branches to that plan eliminates that level of stress as a leader. It’s okay. “I thought that this could happen. I hoped it didn’t, but because it did, this is my action plan and strategy.”

Why don’t you talk a little bit more about what you consider controllable factors? That’s a great point.

It’s your operational capacity and your fixed costs as far as how your support structure and what exactly you’re able to drive. A lot of that is predicated on the market conditions. Your IT spend and plan, if it was a good year, there’s a lot of Christmas presents underneath the tree. If it wasn’t, there might not be. Having a responsible IT plan is certainly a controllable factor. There’s your sales strategy around headcount and sales of the disciplines. Most of the time, a lot of your sales cost is a variable cost, which is a good part about this market that necessarily isn’t delineated by the market size. If you wanted to flood the market with sales personnel in a more down market, you could certainly do that and not add to your fixed cost a ton as long as you had the operational capacity to go ahead and support it.

When do you do this process? How do you do the updating? This is a market that’s changed dramatically.

That is the right question because it takes some time to do it. Traditionally, you would start this process at the beginning of Q4 of 2020. You would be able to land on your plan in late November or early December. Everybody would agree that December 2020 through February 2021 was a very different market. Having the reforecast along the way each month is an exercise that is very prudent. It’s certainly something that doesn’t require a lot of work because the market conditions, while they change in the middle of the month, is an update to that plan. All of those independent variables would go into that model.

When you’re doing your planning of putting it together, is this something where you’re taking information from the field? Is this a top-down where you’re starting off with your view of what you think’s going to happen in the next twelve months?

It starts top-down, but I pivot a lot based on what the folks in the trenches are feeling. It’s important not to make decisions based on passion or feeling to do a degree, but you have to get color from your associates. Frankly, some of the items you might be looking to execute might not be in line with culture, employee sentiment, and how it comes together. All of those factors have to be part of that plan. Garnering feedback from the field, your operational personnel, and your 2 down and 3 down of the leaders is critical as you go through it. You can construct your plan top-down, but you have to adjust and get feedback along the way, or you are going to miss something.

You can construct your plan top-down, but you have to adjust and get feedback along the way, or you will miss something. Share on X

When you roll that out because you have had participation, do you find it’s a better acceptance because they’ve given their view of what they’re seeing? Talk a little bit about that.

It is much easier to get the buy-in when you have some of your influencers within your organization who are bought in. A portion of the review group has to be some of your top people and influencers, but not only limited to that. If we put ten people in a room and pointed up and said that the sky is blue, some people would argue with that. Getting buy-in from 100% of your associates within a large organization can be challenging. Certainly, there’s more art than science around the presentation and the communication of that. As a leader within the organization, I have to have a logical and robust explanation of the reason that we’re doing something because if I don’t have that, then our plan isn’t fully formulated. I owe that to all of our associates as we talk through any strategic.

MMP 148 | Executing Your Business Plan

Executing Your Business Plan: As a leader within an organization, you must have a logical and robust explanation of why you’re doing something. If you don’t, then the plan isn’t fully formulated.

Nick, they’re all great thoughts. Summarize a couple of takeaways and also emphasize sticking with the plan because that, to me, seems to be where things people start with plans, but they never stick with them.

I almost think of it as a tree. The easiest way for me to think about it is that you have your tree trunk, which is your base plan. As I had talked about, you have your tree high side and your tree on the low side. Those are your branches. You’ve got your six branches of that tree. As you are going throughout the year, you’re going to migrate to one of those branches. Once you hit one of those branches, there are going to be other ones on that tree because once the market moves to a certain way, that trunk isn’t a valid plan anymore. It’s the branch.

You need to go ahead and do high and low off of where you think the market conditions are now so that you’re not surprised. I’d like to shake anybody’s hand who knew that 2020 was going to happen. That was an interesting one. I’m not sure any of us had a branch on our tree for the COVID impact we all experienced. In a normalized market condition, you can cover a lot of what those other dynamics could be. That’s the important thing as an executive.

That’s terrific. Nick, I appreciate you sharing your thoughts.



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