Greetings my fellow NSA colleagues,
I wanted to share some of my insights and observations from the financial world that I see from my Tax Practice. My first observation is the recent, 9-12 month, decline in the number of NSAs participating on NC and other forums. This is to be expected with the cooling down from the highs of the last 2.5 years.
My second observation, and this one is obvious, the drop in interest rates essentially putting mortgage refis on hold. There has been a slight uptick in my region, Central Texas-San Antonio-Austin, of home equity loans. There is still a rather healthy market for new home financing due to the migration into this area. Complicating are the purveyors of 6-fixgure university, convincing folks that you can get rich in this business.
Third observation the number of signing services that have disappeared, gone radio silent, or are having cash flow problems seems to be on the rise. The days of the quick cash are over for the foreseeable future. Sorry for the gloom and doom. Keep sharing your stories on these SS companies as you’re helping your colleagues avoid financial ruin.
Fourth observation, the recent turmoil in the Banking system. We’ve have 3 significant failures of mid-sized banks [MSB]. All three of these failures were banks that had considerable Venture Capital [VC] holdings. VC has a higher than average risk profile. VC funding is more sensitive to economic winds than less risky forms of investing. I think most of you know the economy is not as simple and straight forward as some would desire. The economy is what Engineers would call a complex adaptive system. A bump at one end can result in a significant ripple as the other end. Anytime you hear the phrase ‘The problem is…’ has no idea what the problem is.
Unfortunately, my crystal ball is bit fogged up, This makes what I offer next is based on rather thin substantiation and you should take what’s next as just my opinion. I expect to see the following in the next 12-24 months:
The Merger and/or Acquisition in the MSB sector. This will result in several MSBs coalescing into fewer entities. The of acquisition of MSBs by larger institutions. For example New York Community Bancorp as agreed to purchase a major portion of Signature Bank. NYCB has a subsidiary known as Flagstar Bank. Most of the Signature Bank locations are suppose to be rebranded as Flagstar Bank. Some of you may have closed Flagstar mortgages.
We’ll see a continuation of Signing Services leaving this industry and a return to closings via Title Companies. Keep in mind TCs are swamped with notaries.
We’ll see many of our colleagues returning to the traditional work force or launching a different business ventures. I’ve observed several our fellow NSAs becoming more combative in their comments as the reality of this situation continues to evolve. I believe these rough comments are a symptom of the stress they are experiencing. Some of my comments haven’t been as kind as they should have, so I offer my apologies as I adapt to changes in my business and will try to do better in the future.
Contrary to the talking heads in Washington and Wall Street, we have been in an economic recession for the past 9-12 months. This recession doesn’t fit the orthodox definition of a recession as unemployment numbers are still running low, albeit with low wages. This may change in the future.
One of my theories is low unemployment is being driven by the exit of workers due to Covid deaths/disabilities. There was a large number of older workers, 60+ yoa, who decided to retired and not return to the work force. There’s also ageism that complicates employment further. This is one of those Complex Adaptive conditions mentioned earlier.
With every big economic recession has left us with a different economy. For those of us old enough to remember, as we say it Texas this ain’t our first Rodeo. We road out the late seventies stagflation, the early 80’s recession, the 1987 stock market tanking as we moved from an industrial economy to the information age, the mid 90’s oil bust, the 1998 recession, Y2K, the 2007-2009 Real Estate bubble, and now Covid and the current recession. I don’t hold that Covid caused this recession, rather it exacerbated. We’ve been over due for due a cyclical down turn as everything has a return to the mean.
We will come out the other end of this mess a bit battle scared, we may have to accept a new reality, we may have to find new sources of income, etc… They key to survival is to remain flexible and adaptable, not get set in old ways of thinking.