Mortgage Banking: No One Ever Leaves, Really

What's that old F. Scott Fitzgerald line about there being no "second acts" in American lives? I know I've probably misquoted the great author, but I think you get the point.

But in mortgage banking - perhaps more than most financial service sectors - there frequently are second, third and fourth acts. So, maybe old F. Scott wasn't really talking about financial matters.

Yes, old mortgage bankers don't really leave the industry. After they sell their companies to Washington Mutual or Wells Fargo they might retire for a few months, play golf, go the Galapagos Islands, spend some time with the kids and/or grandkids and then lo and behold, they get antsy. They might start out doing some "consulting" work, maybe hook up with a mortgage tech firm, and then the next thing they know they find themselves smack back in the middle of the action - funding and servicing mortgages.

Take Jack Mayesh, an industry veteran known for his shepherding of Long Beach Mortgage, a successful California- based subprime lender. A little more than three years ago Jack sold his company to WaMu. When his non-compete expired this past fall, he began conspiring with some ex-Long Beachers to re-enter the business. In January, he launched ResMAE Mortgage of Brea, Calif., a subprime wholesaler. (Long Beach was a subprime wholesaler.)

Then there's the case of Bill Starkey Sr., who made AccuBanc into a real company, and then sold it to National City a few years back. (AccuBanc was a fairly large servicer as well.) Last I heard Bill was trying to correct his golf slice, but gave up. Guess what? Gray-haired Bill's back too. He recently bought the wholesale arm of Matrix Bancorp in Denver. A friend of Bill's told me: "He just can't stay out of this industry."

Then there's the case of Bill Dallas, a well-known industry sage who sold First Franklin (a nonconfirming lender) to National City. Dallas insists that he's not "back" in the industry, but consider this: He owns a small stake in a Northern California mortgage broker, he runs a mortgage fraud detection company and he's still chairman emeritus of First Franklin.

When I recently called Bill asking him whether it's true he's nosing around a deal or two he swore that no, he had nothing going on. Maybe so, but by the time I got off the phone with him he had told me his views about the current state of mortgage banking.

Of particular interest to Dallas is what he calls "MNA" customers. MNA stands for "mass non-affluent." Bill described MNAs as consumers/couples, "earning under $100,000 and with assets less than $100,000." He said MNAs are a growing demographic segment, one that smart mortgage bankers should tap until the cows come home.

He added that MNAs are "living on the edge - they're the disadvantaged class." So, Bill, who isn't really back in the mortgage business, is spending his spare time thinking about, you guessed it, mortgage banking. Five will get you 10 that as soon as his non-compete expires he'll be back in as well - with both feet.

The only thing I have to say about this is: good, good, good. A sure sign of a healthy industry (and one with a decent future) is an industry that constantly churns with activity. Activity is good. It brings new ideas, new life and new money to the sector.

A lot has been said (and written) about how commercial banks have dominated the industry over the past five years by gobbling up - and overpaying - for many once-independent non-depositories.

The story line reads like this: commercial bank buys mortgage banker; senior managers/loan officers stay for six months to a year, maybe less; they get tired of bank management/bank meddling/bank-related paper work, meetings, and so on. Commercial bank moves to cut costs which means good people get laid off. The survivors struggle, get disenchanted, morale slumps, then they leave.

Then the brains behind the operation goes out and starts a new firm, hires some of his/her old co- workers/subordinates, gets a warehouse line from GMAC-RFC and they're off to the races again. A new mortgage banking firm is born!

How long will this movie keep playing? I don't know, but I hope it does keep playing. It's good for the people who work in this industry, it's good for consumers and it's good for the overall health of the U.S. economy.

Paul Muolo is executive editor of both Mortgage Servicing News and its affiliate National Mortgage News. He can be e-mailed at Paul.MuoloThomsonMedia.com.

Copyright 2003 Thomson Media Inc. All Rights Reserved.