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Navigating mortgage market cyclicity: Stan Middleman, CEO at Freedom Mortgage

Sanat Mohanty
January 18, 2023
5 min read

First off, we’re super-excited to kick off the new year with the upcoming Independent Mortgage Banker Conference, 2023. 

Not only because of the impact it’ll have on IMB’s roadmap for 2023 but also because of the impressive speaker line up that’s set to delve deeper into various tactical details.

Very interestingly, over the last one year, we hosted some of these prominent leaders on our weekly leadership podcast - which became a treasure trove of timeless insights for IMBs.

That’s why we decided to spotlight some of these conversations & bring out key insights that’s relevant for IMBs even in 2023.

We’re kicking this off with an excerpt of Stan Middleman’s episode on Mortgage Vault Podcast.

Stan is the founder and CEO of Freedom Mortgage Corporation. Freedom Mortgage is one of the largest non-bank lenders in the country with 1.7+ million customers. In this article, Stan shares his perspectives on how to stay resilient during a mortgage market downturn.


Before you dive in, here’s a small note:
If you are attending the conference, be sure to connect with us.
Let's discuss priorities for the new year and explore potential growth synergies.

Now, back to the conversation between Murali Tirupati (CEO, Vaultedge) and Stan Middleman (CEO, Freedom Mortgage)

Murali: Welcome to Mortgage Vault Podcast, Stan. 

As a first generation entrepreneur myself, I'm really keen to hear your story on how you started Freedom Mortgage? Looking back, what were some of the key turning points in your journey of building Freedom Mortgage?

Stan: Well, that might be too big a question, but the reality is - in life the first thing you worry about is feeding your family and making a living.

Early in my career I was more focused on those types of activities. 

As time passed, we were able to create a valuable customer base at Freedom Mortgage. Eventually, we got better at it and built the critical mass necessary to be successful in this industry.

At the end of the day, you need to focus on one thing -
how to deliver products and services that are valuable to the consumer. If you can do that with enthusiasm and energy, then everything else becomes fairly tactical.

Since the early days of Freedom Mortgage, we were trying to deliver products and services that would be important to the consumers.
We thought about how we can help consumers put a small amount of down payment into an asset and have it levered many times over - the greatest of which probably is your home.

This in turn becomes a great system for building wealth.
The premise was - how can we help people build wealth, own their home, and someday have a big nest egg that they could retire with.

I guess when you got the information on us, we were at 1.25 million customers, but today we're over 1.7 million customers.

It's still growing. So we're on a continuing journey.

The first 30 years have been fun. Hopefully the next 30 years will be at least as much fun.

Murali: Very interestingly, Freedom Mortgage just completed its 30th anniversary in 2020.
What factors made Freedom Mortgage resilient to mortgage market cyclicity over the last 30 years ?

Stan: So I think there are a couple of things.

Firstly, we try not to make markets, but rather exploit the markets that are available to us.

It's been my experience that not only do you have to work hard and be smart, because everybody works hard and everybody's smart, but you also need an opportunity.

And you have to recognize that opportunity is - more tidal than it is consistent.

Opportunity doesn't always exist. It comes in and goes, more like the tide.

Recognizing when the tide is coming in and when the tide is going out can keep you drier and help you be more successful. So it's a combination of being in the right place at the right time and understanding where you are in the business cycle.

Secondly, if you want to be resilient, you must not shoot yourself in the foot.

I think there is always a chain of events before a new cycle kicks in; accordingly we should prepare in advance & take advantage of it, as opportunities arise.

For example - Our business is extremely interest rate sensitive and one of the things that made us successful is that we've always had a long view of our business.

We've been riding a wave of interest rates down since we started in business.

In the mid 80s, interest rates were probably at their all time high and we rode them all the way down to today's all time lows.

Lastly, I think we did a better job of managing risks and understanding that property values rise and fall, interest rates rise and fall. We also understood the impacts of these ups & downs and never clinged to a philosophy - they can't go lower, they can't go higher.

Rather, whenever the word never comes into play in the common vernacular of your industry, that's when it's time to get out or pare down or get tight to find risk havens - that's exactly what we've done through these years.

Murali: These are a ton of practical insights that I think we can apply to what I am building at Vaultedge.

Now, that brings me to the next question.

In the silicon valley, they say culture eats strategy for breakfast.
So my question is, during tough times & black swan events, how did you preserve your organizational culture ?

Stan: One of the largest management challenges that is faced and probably the greatest part of my responsibility is keeping the workforce aligned and everybody moving in the same direction.

By definition, that's the responsibility of the CEO and his direct reports.

If your number one responsibility is keeping the workforce aligned and moving with purpose towards common goals, then it's really important that they are tangible and real to the people that you're asking to achieve them.

So I felt that the number one thing that we needed to do was create connectivity.

We created a series of daily meetings that I ran with 40 top executives of the company each and every day for an hour.

We did that for months on end during COVID. 

In addition to that, we needed to make sure that every other employee was not going on vacation, but were pulling their weight and were working.

So we had a responsibility to ensure these people had access to the tools they needed to do their job, the right equipment, the right Internet accessibility and so on.

At the core of it all, we needed to keep them aligned on a singular purpose.

So we did a lot to create purpose inside the organization.
We had a lot of charity drives, we raised a million dollars for Feed America, we did a backpack drive for the USO so that folks were doing things that were bigger than themselves, their day to day business.

We drove the point home on a regular basis that collectively, we should help people lower their interest rates or extend support if they were having trouble making their payments.

And we really made it an org wide mission statement where everybody was involved in one of those two things.

We were either helping people that couldn't make their payments or we were helping people get their payments lower so that they would have more cash flow in their day to day lives.

And I personally put out a message once a week where I communicated with all the company personnel every week and let them know about what’s going on, share our weekly wins and  keep hammering a sense of purpose.

Murali: Great to learn how you leveraged a sense of purpose to keep your team aligned & focused. 

Now, I would like to put on my technologist hat and understand, what are the emerging technology trends that will prove critical to Freedom Mortagage in coming years ?

Stan: I'm excited about all the technology that's at our fingertips, the AI and the use of portals and creating the opportunity for folks to be able to self serve themselves.

I believe that unlike opportunities that are transient in nature, technology is cumulative.

One technology stacks on the next, which stacks on the next.

So when I think about technology, I think about not getting painted into the corner and not being stuck or committed to any particular technology, but by leveraging those technologies to move us from where we are to where we could be without becoming obsolete.

However, I don't try to get married to technology.

What I try and do is use the tools at my disposal to become effective at delivering value to my consumers, wherever it is needed.

Murali: Now, Stan, I want you to make some projections, right?

How do you see the market shaping up over the next one year & beyond? 

Stan: I would expect that through the course of the year, we'll see interest rates rise and a lot of interest rate volatility as a result of the COVID relief bill. While origination volumes - both purchase & refi will remain robust much of 2021, they’re likely to fall in 2022-23.

I expect the economy to slow down around 2022 fall, all the way into 2023

I think housing prices will continue to go up over the next couple of years. Depending how high those property values go, will determine what the future correction in housing prices will look like.

Again a big part of my job is understanding that there are tidal effects in our business and you have to be sensitive to what those effects are.

Now I will also give you the disclaimer that historical events are not indicators of future events and I could be completely wrong, but that's my point of view as I'm sitting here today.

Murali: Now at this point I want to get maybe a little personal and I want to ask you what is the reason behind your own personal success? Of course Freedom Mortgage is hugely successful, but I want to understand what is the secret behind your own success both in your professional life and personal life?

Stan:
Well, I think that you have to be sensitive and aware of what's going on around you.
If you don't know the who, what and why of what's happening, whether it's personal or professional, I think you get left behind.

I am lucky enough to have a wonderful wife, a couple of nice kids and now I've got a couple of grandchildren - being in touch with them and understanding what's going on in their lives is important.

But professionally, I think at the end of the day it's that sensitivity and awareness.

Where are we today? What are the factors that led us till here?
What are the factors that’s going to shape tomorrow?
And having an ability, an intuition to anticipate ups & downs is a fundamental to success in mortgage industry

You don't have to be 100% right all the time, but you have to be directionally sound.

Murali: That’s really great, Stan - You don’t have to be 100% right all the time, but you have to be directionally sound.

First of all, thanks a lot for actually taking this time and sharing your insights.

There is a whole lot that I personally learned and I'm sure this would be amazingly useful for our readers as well.
On that note, let’s call it a wrap & talk to you again soon !

Sanat Mohanty
Marketing Director