The Return of ABN AMRO: After Missing the Boom in Nonconforming Lending, ABN AMRO Mortgage Group Is on Its Way Back

By Bergsman, Steve | Mortgage Banking, November 2006 | Go to article overview
Save to active project

The Return of ABN AMRO: After Missing the Boom in Nonconforming Lending, ABN AMRO Mortgage Group Is on Its Way Back

Bergsman, Steve, Mortgage Banking

When Thomas Goldstein became chairman and chief executive officer of Chicago-based ABN AMRO Mortgage Group Inc. (AAMG) in February 2005, the company was seriously limping. [??] The former high-flying mortgage banking firm stumbled badly in 2003, and two years later was a shadow of its former self. The parent bank holding company, LaSalle Bank Corporation, also based in Chicago and a subsidiary of Netherlands-based financial giant ABN AMRO Bank N.V., could have sold off the mortgage unit. But when Goldstein looked around his domain, he still saw fire in the eyes of his employees and, more important, marketplace strengths that could be building blocks for the future. [??] Goldstein decided he was going to bring AAMG back to center stage. When the company was peaking in terms of origination back in 2002, it owned approximately 5 percent of the national market. That's now Goldstein's goal. "We can get back there," he says with firm commitment. "We are determined to get back there." Of course, some people might say Goldstein's a bit too ambitious, maybe even crazy, because the mortgage business has made a cyclical turn south. "When we started this, people said you cannot turn around a business in a declining market, but we are defying the skeptics," he says.

One of the key points in Goldstein's playbook of turnarounds is an improvement in profitability--a tough objective in a competitive, declining market, yet it is one of the first goals AAMG seems to have attained. "Profitability is much stronger this year than it was a year ago," he says. "It has steadily improved every quarter, and has continued to improve in this down market."

Loyal customers

Two intangibles that have worked for AAMG are loyal customers and creditworthy loans. Suzanne D'Angelo has worked with AAMG for about 12 years, the past seven after she formed her own mortgage brokerage firm, Family Mortgage Network Inc., Rocky Point, New York.

"As soon as I opened my own firm, ABN AMRO was the first bank I wanted to get with," says D'Angelo. "[It is] an incredible bank, very innovative." Today, Family Mortgage does 25 percent of its origination business with AAMG, she reports. "If I ever had to work for a bank, this would be the one," says D'Angelo.

The other thing that has worked for AAMG in these leaner times is that it traditionally sold its product into the more stable end of the credit spectrum.

"If you look at where we are positioned," notes William Newman, AAMG's executive vice president of business development and president of InterFirst Wholesale Mortgage Lending, Ann Arbor, Michigan, a unit of AAMG. "We have been in the prime credit space, and we haven't layered on some of the risks--in particular, segments where repurchase risk has become more prevalent, which the market has yet to fully account for."

Newman proved an accurate pundit. By the summer of 2006, repurchase problems in the industry began to surface.

Kansas City, Missouri-based H & R Block Inc. reported a big hit on its balance sheet for the fiscal quarter ending Aug. 31, 2006, because of increases in mortgage loan repurchases at its Irvine, California-based Option One Mortgage Corporation subsidiary. According to the company, the first-quarter numbers included a provision for losses of $102.1 million, reflecting the estimated recourse liability recorded by Option One for loan repurchases and premium-recapture reserves.

"We've modified our operating procedures and loan products to improve loan performance and profitability," noted Mark Ernst, H & R Block's chairman and chief executive officer, in a prepared statement. "We have tightened underwriting criteria and pricing guidelines while continuing to reduce origination costs."

In one sense, AAMG and the rest of the mortgage industry have been going in different directions for the past four years. While the industry continued to post record origination numbers until this year, AAMG floundered.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
Loading One moment ...
Project items
Cite this article

Cited article

Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited article

The Return of ABN AMRO: After Missing the Boom in Nonconforming Lending, ABN AMRO Mortgage Group Is on Its Way Back


Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

While we understand printed pages are helpful to our users, this limitation is necessary to help protect our publishers' copyrighted material and prevent its unlawful distribution. We are sorry for any inconvenience.
Full screen

matching results for page

Cited passage

Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.

Are you sure you want to delete this highlight?