Someday - and Jerry Schiano is counting on it - a humongous hurricane of air will whoosh across the nation.
The collective exhale of tens of thousands of people in the housing sector, from Realtors to furniture retailers, sighing with relief as the millennials finally start buying homes.
Schiano, 56, will be among them. He has started two mortgage companies, including the one he now leads, New Penn Financial LLC. In 2016, New Penn wrote $8 billion in mortgages, funded by Fannie Mae and Freddie Mac and others.
Are the millennials ever going to start buying?
A: Sure. There's more of a delay in people growing up than there seemed to be in the past. Student loan debt is a problem.
Millennials, at some point, will have a family. When people have a family, they no longer want to be in a small apartment, because all of a sudden you have one kid and 12 plastic toys. I think incomes are going to go up this year, so you'll see more [buying] as they age. They're no different from anybody else. They're not going to live in their parents' basements forever.
Any other sources of growth?
Immigrants are going to be more and more of the market. I know there's a lot of good and bad with immigrants, but my dad came over on a boat from Italy, like many people before him. I'm hopeful that we'll figure out immigration.
Is their borrowing behavior different?
In some Asian and Hispanic households, it's more difficult to document the income.
You could have, in some communities, where, let's say, three or four generations of Chinese or Hispanics are paying the bills. Some of what they make is not very well documented. Some of their credit is what they call nontraditional credit, which is a big buzzword now. But we lend based upon a [credit] score. So, if they're in an immigrant community and they're paying their bills by cash, how do you determine if they're a good borrower? We have people who sit [in] on some of the Fannie and Freddie committees and they're trying to figure out how to [evaluate] nontraditional credit.
Bad mortgages sent the economy into a tailspin as 2007 was coming to an end. So you started a mortgage company. Why?
Every business I've started has started when some segment of the business has been depressed. The bet has been it will come back, because everything ebbs and flows.
No one else wants to be in the business, so entry costs are low.
Right. That happened when I set up Wilmington Finance [in 1999]. That happened at New Penn, and to a certain extent, that's happening at Spring EQ, because home equity lending hasn't been vibrant. Get in at a [low] point and then have a belief that if you do the right things, and you focus on costs, controls and customers, when the market comes back, you will be able to rise with it.
So, with New Penn ...
I said that no matter what the headlines say, at some point in the future, people will get mortgages, because without mortgages, I don't think we could have an America. It's so centric [to the economy]. So even though nobody was lending, it was going to be fixed. I did a lot of planning to set up a mortgage company with a very simple concept: I would look at what the [mortgage] companies did wrong and set up a company not to do those things.
Any advice to people buying their first homes?
Not to over buy. When I saved for my first home, we stopped spending. It was a painful year. We were like everybody else and we bought from credit cards. We made the transition of paying off credit cards and then we saved. We were lucky. We started making more money.
That's a lesson from the financial crisis. You can blame it all on the financial institutions. They have a lot of blame. But, there's another side and it's not popular. People need to buy what they can afford.
Interview questions and answers have been edited for space.