Strange Bedfellows: Lung Transplants and Mortgage Forecasts

Posted By Laird Nossuli on Aug 05, 2014

Today I am writing about something different—something that blurs the line between professional and personal. It also ties together two seemingly unrelated things: lung transplants and mortgage market forecasts, which are both undertakings that require focus, hard work, and an unwillingness to quit. As we prepare to release our new forecast, I realize that this one is a special one. And I'll tell you why.

iEmergent, which produces the forecasts that power Mortgage MarketSmart, is not your everyday data collection shop, with groups of economists and statisticians creating and implementing traditional forecasting models. Nope. We are actually a small family business, borne out of what I consider to be a combination of my dad's brilliant quantitative brain, outside-the-box creativity, and an incredibly fierce determination.

Dennis Hedlund and Laird NossuliYou see, my dad is one of those people who pulls together science and art, and math and poetry in a way that breaks the mold. Yes, he is a mathematician and physicist by education, and he had much training in predictive modeling years ago when he helped design the models that predicted call volume for massive telephone networks. He devours books and papers on economic, business, and scientific theory. Yet, he also has had poetry published. And, upon rooting around in our family's attic, my sister and I just found some oil paintings of his that were—honestly—pretty darn good.

But I digress. Let's go back to lung transplants and forecasts.

Our dad (aka our boss, our CEO, our head honcho) had a lung transplant on February 1, which was performed because he suffers from a lung disease called Idiopathic Pulmonary Fibrosis. Until this ordeal, we had no idea just how difficult chronic disease and an organ transplant could be. The toll it takes on the recipient's mind and body is almost impossible to understand until you see it firsthand. And he has had a series of very serious, uncommon complications that have augmented that toll exponentially. Kudos to the Mayo Clinic medical team for their knowledge, skills, and dedication. And kudos to my dad for not ever giving up, either. His determination to keep moving forward on his road to recovery is amazing. But we should've known he wouldn't give up. When he believes in something, his conviction is unwavering and his commitment unshakeable.

Such was, and still is, his dedication to forecasting.

Years ago, he was an EVP at Wells Fargo Home Mortgage, leading solution teams and change efforts across the organization. Yet he noticed that so many commitments to businesses, markets, and people were being made without much focus on how ever-changing housing markets might quickly throw a wrench into even the best-laid plans.

Historically speaking, the development of sustainable volume growth, efficiency, and market position amid constantly changing market dynamics has never held a prominent place on the mortgage banking and lending industry's list of priorities. When he questioned this, the rationale provided was that forecasting future mortgage lending volumes at the market level was fruitless. The most common belief he encountered: It's next to impossible to forecast interest rates and home prices, so there would be no way to forecast lending volume.

He didn't agree. He saw patterns in the data he reviewed. So, in what I consider to be a bold move, he left the security and financial rewards of being a banking executive to prove his point. He founded iEmergent and the thinking began.

To make a long story short(er), he has spent over a decade amassing data, building evidence, and perfecting our forecasting methodology and models—pulling together elements of traditional economics, philosophy, physics, and game theory. It's astounding to me how our forecasts have evolved over the years to the extent that now we are forecasting down to the census tract level, with 90+% accuracy. 

For years, he's been on his soapbox about the importance of the purchase market and the need for developing and executing strategies that are forward looking, evidence based, and market focused. For the most part, his sermons fell on deaf ears, with the exception of some progressive banking executives who also had a strong commitment to sustainable strategies. But he didn't give up and he didn't change his tune. He kept right on forecasting.

Now I'm on the soapbox, too, spreading the word about forward-looking, evidence-based, and market-focused strategies. I mean, somebody had to keep the message going while he was out of commission, right? But I'm not only a messenger now. I'm a believer. I've been working closely with our clients as they navigate today's tough lending environment using Mortgage MarketSmart, and I see firsthand just how powerful good market intelligence can be.

Despite the fact that I am actually having fun on this soapbox, I'm happy to say that my dad is not out of commission anymore and he's reviewing the soon-to-be-released 2015-2019 forecast with his expert eyes. And he'll find a way to keep innovating and improving our methods, like he's done for the past 14 years.

I'm certainly not the forecaster (or the strategic mind) that he is, but I've learned that the key to forecasting is finding patterns. The mortgage data are complex because there are so many forces at play: the macro economy, federal regulations, demographic shifts, and housing-industry trends, to name only a few. Yet, if you look carefully enough, patterns emerge when data are pulled together and we use those patterns to help navigate an uncertain future. The madness behind the method of finding and utilizing those patterns is truly our secret sauce—and a blog for another day.

I do have a forecast for you, though. My dad is going to keep walking his road to recovery, although it's only a matter of time until he breaks into a jog. He has stuck with the frustrations of his own business, and had enough perseverance to keep slicing and dicing gazillions of loan records.

And we thought a lung transplant would keep him down? No way! Slowly, but surely he's taking back his health. And first on his list is the 2015-2019 forecast. Let the algorithms begin!

We hope that the U.S. economy—and, with it, the U.S. housing industry—will also keep walking the road to recovery. Will it soon break into a jog? Stay tuned to our 2015-2019 forecast to find out.

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