Finance Experts Taking Charge in Mortgage Industry
Hochstein, Marc, American Banker
The can-do entrepreneurs who built empires selling home loans to baby boomers have given way to a new breed of mortgage executive.
Unlike the old guard, whose members made their names as top producers, the new leaders in the mortgage industry were incubated in banking, accounting, and finance.
"We've gone from Wild West to white-shoe," said Angelo Mozilo, chief executive officer of Countrywide Home Loans, the second-largest originator and servicer of home mortgages. "The new breed of mortgage banker has to possess substantial quantitative skills as well as a broad base of other executive abilities."
The rise of the mortgage-backed securities market, changes in accounting rules, the swallowing up of independent companies by large commercial banks, and general industry consolidation have radically changed the face of the leadership.
Top mortgage executives now need to be conversant with IOs, POs, Remics, OMSRs, PMSRs, and all manner of alphabet soup. Most of them have to justify their decisions to shareholders in the publicly traded parent banks.
Though he is perceived as a salesman, Mr. Mozilo actually got his start in the operations part of the business-as a messenger, at age 14, for United Mortgage Servicing Corp.
Mr. Mozilo founded Countrywide in the late 1960s and spent several years originating loans himself. "Life in the business in those days was much simpler," he recalled. "Securitization, yield spread premiums, FASB, and convexity were not in the mortgage banking lexicon."
Countrywide was one of the first mortgage companies to recognize the importance of financial acumen and to use financial hedges. Mr. Mozilo surrounded himself with "a whole team of physicists," as he puts it.
Mr. Mozilo's biggest competitor embodies the new breed. Mark Oman, chief executive officer of Norwest Mortgage, the top originator and servicer, started at Deloitte, Haskins & Sells, a predecessor to accounting powerhouse Deloitte & Touche.
"The big companies today have a lot of capital at play and are doing fairly sophisticated transactions," Mr. Oman said. "You're seeing that skill set on the CEO part valued."
Mr. Oman joined Norwest Mortgage from Norwest's consumer finance unit in 1985. The home loan unit had suffered large losses a year earlier; Mr. Oman was part of a team brought in to turn it around.
"Most of the new management team came out of Norwest Financial and didn't know a lot about mortgage banking," he said. "We learned a lot of lessons very quickly."
Since the late 1980s many other large financial institutions have made sizable investments in mortgage companies, bringing to them "a more disciplined approach," said Joe Bryant, president and CEO of Roslyn National Mortgage Corp., Hauppauge, N.Y.
With more focus on the bottom line, the pressure increased to entrust the reins to finance experts, rather than to risk-takers.
"The investor community expects predictable returns year in and year out," said Saiyid Naqvi, chief executive officer of PNC Mortgage, the Vernon Hills, Ill., subsidiary of Pittsburgh-based PNC Bank. …