When he first came up with the concept for LenderCity Home Loans just before the turn of the century, Gregg Harris ended up being a few years ahead of his time. But the technology-oriented mortgage broker has kept refining the idea and while there still might be a ways to go, that hasn’t stopped him from developing the model while at the same time being a top producer.
Harris applied for his first job in the mortgage industry in the St. Louis area after seeing a classified ad; he was looking for sales positions in general. He knew nothing about the business other that when he bought his first home, he paid two points for a three-year adjustable-rate mortgage.
“Not until I got into the mortgage business did I realize what a bad deal I got on that first mortgage,” Harris said.
He worked for the company for six months. After two months there, and having an entrepreneurial background from being in the restaurant business, Harris realized, “I could do this on my own.”
Back in 1996, all it took to become a mortgage broker in Missouri was filling out a one-page application and paying a $100 fee.
By December of that year he made the decision to go out on his own way along with another co-worker and by January 1997 he opened his office.
The brokerage he left was Enterprise Mortgage, whose name was similar to other companies in the financial services business (although not otherwise connected to them). It did attract business to the mortgage company, and he realized that his new business needed a name that would pull people in.
Fidelity Mortgage was available and at first the company was known as Fidelity Mortgage Group.
In 1999, Harris registered the Internet domain name LenderCity. Back then the LendingTree platform was just getting started and he was looking to do something similar.
“And I thought what a cool concept to have a platform where it is not mortgage lenders, it’s just mortgage brokers and real-time bidding on loans,” as well as just the concept of doing business over the Internet, Harris noted.
But soon after registering the name, the technology bubble burst and debate raged on whether the whole Internet was a fad or not. So Harris shelved the LenderCity concept until 2009. His plans for reviving the name involved a franchise business model “and build this thing into a bigger brand. To me it was a good brand name.”
As he was trying to get this concept off the ground, Harris was still originating loans and in the Origination News 2011 Top 150 Loan Officer list, he ranked 40th with $77 million in volume. The product mix is mostly conforming, conventional; with credit scores over 750 and the borrower has verifiable income.
Even more amazing is that he is the sole originator in his shop. Back in 2001, Harris had seven loan officers at his company and a processing and closing staff. Over the years, “I just kept pulling back.”
In the industry boom years of 2005 and 2006, the product of choice was alt-A, something Harris stayed away from. His business concentrates on conventional lending. Stated-income programs were only done “when they made sense” for the borrower. “We didn’t take the ball and run with it like a lot of brokers did. Looking back at that I’m happy about the decision I made,” Harris declared.
In 2008 he cut back on staff and overhead because the projected business environment was so gloomy. In November, rates fell dramatically; at the same time the new licensing rules kicked in.
Still, Harris operates his shop “lean and mean” with one processor, a closer and himself.
LenderCity is licensed in four states right now, and it has plans to expand into others. It primarily operates in Denver (starting in 2001), Kansas City (1998), St. Louis and Milwaukee (which he entered in 2010).
“It is really tough to grow when you’re originating, especially with the volume that I’m doing in the last two years,” he said.
There are some discussions involving his shop’s business direction right now that he was unable to go into. Harris did say he still believes in the franchise idea and it is a great concept.
But as he first started marketing it to mortgage brokers, he found a lot of them were looking for licensing and a business home rather than a business model. “A lot of brokers could use a brand name and the marketing that we do,” Harris said.
As for his own expansion, growth in Internet lending has been slow so far, but could really take off in the next two years, he noted.
The company does not have an online application form. Rather it has created an application packet it can email to potential customers. But it is looking to create an online 1003 as well as have automated rate quoting.
LenderCity, because it has served a lot of consumers in its 15-year history, gets a lot of repeat and referral business. But it also does local newspaper advertising in the markets it takes loans from.
It is the Internet era that makes it easier for Harris to do business in those widespread markets. People are more willing not to deal with their loan officer on a face-to-face basis, even in the St. Louis market, he notes. He only sees two or three customers a month in the office.
Before the growth of the Internet, he used to send application packages out by overnight mail.
Today, most people are willing to communicate by email or fax. For example, customers have taken a picture of their driver’s license on their cell phone and sent it to LenderCity. And as the home buying base becomes younger and more tech savvy, the trend is going to increase.
“But it always amazes me, with the older borrowers I talk to, the ones that you’d think that this guy probably checks his email once a week, they’re emailing me two or three times a day,” Harris said. “And I love it, because it has become as easy to them as (using) the U.S. Mail.”
Or even easier, he continued, pointing out that with email there is no need to get a stamp or go to the mailbox. Now, the customer has a question, it is typically asked through email; Harris said he rarely gets telephone calls for this purpose.
“My philosophy is a little different than a lot of brokers out there. For us it starts with the rate and it starts with the low closing costs that we offer. It is very consistent with every borrower in terms what they can expect.
“To me it is all about price. I kind of look at us—for the lack of a better term—as the discount store, the Wal-Mart of mortgages. I want to build it on volume, and we’ve done it on volume,” he said.
Even with the technology, sometimes the process is not that easy because of the changes in industry rules and regulations. He said customers have told him it is easier to become a U.S. citizen than to get a mortgage. But those customers also realize it is not LenderCity that makes the process difficult.
In line with the franchise philosophy, he wants LenderCity to become known as one of the lower-cost providers for mortgages.
Wholesale account executives become frustrated with him because he tells them it takes price to get more business from LenderCity. “It takes price. I can’t use you if I’m losing half a point. I’ve got to be able to share that with my borrower and that’s what brings value to LenderCity,” Harris said.
That being said, he has dropped a wholesaler which he declined to name that had great rates, but the company is difficult to do business with—”you can’t get a loan closed with them.”
