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Stearns In The News
MORTGAGE COMPANIES RUNNING ON TALENT
By MATHEW PADILLA
The Orange County Register
A few other mortgage entrepreneurs are expanding in an industry rocked by layoffs and slumping demand for home loans.
Quentin Caruana is bucking the trend in the mortgage industry. He's hiring.
He and a few other entrepreneurs are expanding in an industry rocked by layoffs and slumping demand for home loans.
That could be welcome news for Orange County's housing market and economy. Both have grown along with the mortgage industry and both are losing steam.
Mortgage companies have cut about 1,800 jobs in the county so far this year, state filings show.
But Caruana's Sage Credit Co. in Irvine hired most of its 600 employees and added 32 of its 34 offices in the county this year alone. Caruana, 31, incorporated Sage in December 2003 and spent most of the time since then getting licensed in all 50 states.
Today's turbulent market is a "great opportunity to hire quality, talented people at lesser cost," he said.
In addition to Sage Credit, Stearns Lending of Santa Ana is adding employees and two other start-ups are preparing to join the lending market. One of the new entrants is the work of William Templeton, the former head of The Money Store, who says now is the right time to start a mortgage business.
Declining loan volume across the industry makes it an easy time to find talented employees, executives said. Total mortgage volume in the U.S. is expected to drop 18 percent this year, according to a forecast by the Mortgage Bankers Association.
As Sage's president, Caruana built his business by persuading independent mortgage brokers with their own facilities to become employees. Sage is a mortgage brokerage and funds about a third of its loans.
Sage also hired people who left or were fired from Ameriquest Mortgage, New Century Financial and ECC Capital, Caruana said.
Stearns Lending has added about 50 workers this year for a total of 350, said founder Glenn Stearns, 42.
He said his company is benefiting from a focus on borrowers with good credit or credit ratings a little short of perfect.
Companies like Ameriquest and New Century, which cater to borrowers with spotty credit, known as sub-prime, are getting hammered by a drop in investor confidence, he said. They sell their loans as bonds to investors.
More sub-prime borrowers are missing loan payments as the housing market cools, Stearns said. As a result, investors are paying less for such loans.
"We never went where most of these lenders went," Stearns said. "While we didn't pick up huge profits, now we are not suffering."
Stearns' borrowers are making their loan payments, which makes buyers of his loans happy, said Doc Baldwin, of Inglewood, Colo.-based mortgage consultant Richey May Baldwin. Stearns hired Baldwin last year to review its operations for the benefit of investors.
Lenders made easy money over the past five years, Baldwin said. Amid a tougher market today, some have dropped their standards, he said.
"It's a dog fight out there," Baldwin said. "It's nasty and it's going to get worse."
Don Currie said he is forming a mortgage company after leaving Impac Mortgage Holdings of Newport Beach earlier this year. Currie, 44, a former senior vice president with Impac, decided to got on his own and will launch HighTechLending in Newport Beach in September.
He'll be leasing space from Impac, which is vacating offices to move to a new building in Irvine. Impac will also be the major buyer of his loans, Currie said.
Although other lenders are merging in a bid for cost efficiencies, Currie believes it doesn't always work that way. Larger companies have more fixed costs – office space is a good example – and are slower to adjust to a decline in demand, he said.
The bigger guys "can't pull tentacles in fast enough," Currie said.
Sub-prime lenders, for example, need to earn a premium of 1.5 to 2 percent on each loan to recoup costs, he said. He say's he'll need a 1 point premium at the most.
"There's kind of an opportunity for people to start up companies more tied in to today's market," Currie said. "There is a tremendous amount of talent that has poured into the street. You are able to pick up a lot of talent at a more reasonable cost."
Currie said he'll start with 20 employees.
Templeton, who headed The Money Store until it was sold in 1998 for $2.2 billion, also said he's getting back into the sub-prime business.
Templeton, 56, said he's forming a company, mum's the word on a name, in the county and plans to hire about 150 workers. He said lenders got so focused on volume they forgot the first principle of the business: A borrower's ability to repay a mortgage.
And companies have been paying "obscene" commissions to account executives, he said.
"You have a culture of people who expect to be paid handsomely for a product that is not profitable," Templeton said.
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