Mortgage Loan Traders Being Lured with Big Bucks; There Should Be a Plethora of Eager Candidates

By LaGesse, David | American Banker, March 23, 1984 | Go to article overview

Mortgage Loan Traders Being Lured with Big Bucks; There Should Be a Plethora of Eager Candidates


LaGesse, David, American Banker


The booming secondary mortgage market has created a near-vacuum of available talent, making it a seller's market for anyone with experience in trading mortgage loans.

The most dramatic examples surface in the musical chairs under way on Wall Street: Richard Isaacs reportedly made $2.5 million a year as the top mortgage securities trader before he left Lehman Brothers Kuhn Loeb Inc.

"Word is he quit last fall because they wouldn't pay him $3 million," says another top trader on Wall Street.

Nobody's saying if Donaldson, Lufkin & Jenrette Inc. met Mr. Isaacs' hopes when the investment banking firm hired him this month. But the promise of such wages, unheard of in mortgage circles until the past few years, has started to reach into th e business schools.

"We see that undergraduates are trying to take a couple of real estate courses before they even start the MBA program," says Beverly Hamilton Chandler, associate placement director at the University of Pennsylvania Wharton School of Business.

Adds Robert Schiffer, currently organizing teh mortgage securities department of Morgan Stanley & Co.: "This business is attracting some of the top graduates from Wharton and Harvard -- they wouldn't have touched mortgage trading a few years ago."

Driving the new demand for mortgage expertise is the revolution in housing finance. Savings and loan officers once simply took in deposits at controlled rates, added their processing charges and profits, and made housing loans on the other end.

"Housing finance was a very quiet and relatively easy industry for decades," says Rodney Dayan, an attorney with Cadwalader, Wickersham & Taft, a firm with close ties to thrifts and development of the secondary mortgage market. Thrifts Were Caught

That changed with the drastic losses that thrifts suffered during 1981 and 1982 as high interest rates caught them with low-rate loans on the books. To match assets and liabilities, the thrifts learned to act more like mortgage bankers and sell loans to investors, thus renewing their cash for current loans at higher rates.

Mortgage bankers and investment bankers, meanwhile, learned to package the loans into pools, issue securities against the pools, and sell those securities to a broader array of investors. With some $1.7 trillion currently outstanding in U.S. mortgage loans, and expected annual demand of $300 million for new mortgage loans, the opportunities in housing finance promise to continue growing for decades.

Thrifts, mortgage bankers and investors -- including insurance companies, pension funds and mutual funds -- are clamoring for much of the same talent, as are the Wall Street investment bankers. They need people who understand mortgages, the cash flow from pools of mortgage loans, and the performance of securities backed by the pooled loans.

"There's a lot of demand out there," says Kevin O'Neil, president of Goldome REalty Credit Corp., the mortgage banking subsidiary of Goldome Savings Bank, Buffalo, N.Y. Go Nationwide

"If you want to build a national operation, you have to be willing to go nationwide to get the people," he adds. Goldome Realty has hired loan originators, officers and traders from the Southwest, Midwest, and South as it expands operations.

Another thrift moving aggressively on its mortgage operations is Financial Corporation of America, the holding company for American Savings & Loan Association of Stockton, Calif. A subsidiary, FCA Mortgage Securities Inc. turned ot one of the few secondary market training grounds for its top officers.

"Freddie Mac West" is what some call FCA Mortgage Securities, led by president Philip Brinkerhoff, a former president of the Federal Home Loan Mortgage Corp.

Mr. Brinkerhoff is joined at FCA Mortgage by Victor Indiek, another former Freddie Mac president, and by Ron Struck, formerly head of marketing at Freddie Mac. …

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