Values Over Volume

It helps, too, when the company practically runs itself. That’s no accident, though. Forged in the fires of the Great Recession, Geneva Financial is that rare breed of mortgage company whose value increases when markets get challenging. Aaron VanTrojen is that rare breed of mortgage executive who knows the business so well he designed Geneva to make that the case. 

“One of the most intelligent mortgage professionals I’ve ever met,” says Breton Macdonald, a producing branch manager based in Temecula, California. He joined Geneva as a loan officer six years ago and now runs the company’s largest division. “It is the real deal. I’m my own testimonial for it.” Since mid-2022, many mortgage companies have been chasing volume at the cost of profitability, originating in the red just to keep the lights on. Not Geneva Financial and not VanTrojen, who trains his originators to protect their value by not chasing rates to the bottom. 

Over the past two years, “the bigger the branch, the more they’re losing – not the more they’re making,” VanTrojen says. “My competition’s giving President’s Trophies to these loan officers that have lost them more money than anybody.” For that reason, “there’s probably never been a better market ever for growth opportunities than today,” he continues. “Everybody’s miserable. Everybody’s had their pay cut. Everybody’s looking for a different mousetrap.” 

Nevertheless, VanTrojen approaches this market with a similar sense of ambivalence as he did 2008, the year after he founded Geneva Financial. Having over-achieved every goal he had ever set for the company, “I honestly don’t care,” VanTrojen says. “I just want to be profitable as a company and make enough money as a company that we can continue to do all the great things that we do for the employees and our customers.” 

VanTrojen was born and raised outside of Seattle, Washington. His father was a career fireman who instilled in Aaron a civil servant’s ethos: do better by yourself by doing better by those around you. He coaches his originators in the belief that when your team succeeds, you succeed, the elegance of which arises from the self-sustaining culture it creates. This mentality  is baked into the company’s mantra – “Be A Good Human” – and it’s why, at Geneva, VanTrojen serves the Kool-Aid over ice: Geneva’s originators are VanTrojen’s clients. 

Thus, Geneva attracts originators who possess the optimism of rookies and the diligence of veterans, infused with the ambition of entrepreneurs. “Like-minded people that are grateful and positive and ambitious,” as Macdonald describes employees across the company. “If you want to work here and make more money than you’ve ever made before and have the autonomy to do things, then come work here,” says VanTrojen, who encourages his originators and branch managers to adopt the mindset of small business owners. 

But, he adds, “I expect you to be a professional. I expect you to be a manager.” As CEO, VanTrojen tries to deliver more value to his employees than what he earns and encourages his originators to do the same with borrowers. “If you’re bringing more value to the table than you’re getting paid for, that’s a win.” 

He acknowledges, though, the stakes are higher now. “We have a lot to lose and so it’s more emotional. It’s harder.”

The challenge is relative, though, when the market’s in Geneva’s – and VanTrojen’s – favor.

Watch it on The Interest: Building On The Moral High-Ground

A Business Built For Hard Times

With the housing market starting to nosedive in late 2007 – three years after VanTrojen earned his pilot’s license – the last thing he wanted to do was start a mortgage company. But, a large mortgage bank had bought the retail shop where he had been originating for more than seven years, Morgan Capital of Arizona, and as a “very competent” originator, branch manager, and salesperson, VanTrojen was growing concerned about the future of the industry. 

“They were cutting compensation for the originators, big mortgage banks layered with management, bureaucracy, red tape,” he explains. “I wasn’t going to be able to survive.” Having managed gyms outside of Seattle for nearly a decade during the 1990s and early 2000s, VanTrojen needed room to grow, not a bevy of supervisors to report to. So, VanTrojen founded Geneva Financial with a clearly defined business model and mission. 

“The company’s designed not to make very much money per transaction,” he explains, “and push the lion’s share to the originators and the branch managers.” On average, those originators and branch managers net 175-250 basis points. In an industry notorious for high employee turnover, allowing producers to play with the spread defies conventional wisdom, but not VanTrojen’s intuition. Originators drive value for mortgage companies, not corporate. When you stake a company on protecting the value of originators, nothing says ‘I love you’ like cash. 

“To me, it’s hard to find another place that would give you the same opportunities and pay you more money,” says Sean Uyehara, a Las Vegas, Nevada-based branch manager and area specialist who joined Geneva in January 2023 after a three-year stint with loanDepot. He entered the mortgage industry immediately after graduating from Whitworth University in 2006, right on the cusp of the Great Recession. “I mean,” he shrugs, “I can’t imagine where that is.”

While other mortgage executives made “five times more” than VanTrojen did in 2020 and 2021, Geneva’s originators earned “multiples more than any originator in this industry” during that period, VanTrojen says, because the company is designed to keep corporate profitability low per transaction. When mortgage demand plummeted in mid-2022 in the wake of rising interest rates, many mortgage companies continued chasing volume at the cost of profitability, digging wells that they prayed would fill with water. For many mortgage lenders, those wells never filled. 

Mortgage Bankers Association (MBA) data show that in the third quarter of 2023, independent mortgage banks (IMBs) and mortgage subsidiaries of chartered banks reported pre-tax net losses of $1,015 per loan, marking the sixth consecutive quarter that the majority of mortgage companies originated in the red. Low profitability led to the trimming of margins and headcount at companies across the housing finance ecosystem, but not Geneva Financial.

“We didn’t have to do any of those things,” VanTrojen explains, “and of course the company can’t lower margins because we don’t make very much to begin with by design. It’s on the branch managers and the loan officers to decide whether or not their value should go down just because things get challenging. They decided that it wasn’t going to go down.” VanTrojen, who isn’t moved by volume, but profitability, says this differentiates his originators as professionals.

Difficult markets demand diligence and creativity, not desperation. When down markets arrive, he continues, “if you don’t have leadership, if you haven’t put ownership on the branch managers to manage and ownership on the loan originators to be professionals in this industry, you wind up in a race to the bottom, which is what the industry did.” Not all loan officers are equal, and not all loan officers sell the same thing. This differentiation becomes clear, and drives value toward Geneva, when markets get challenging.

“We are profitable,” VanTrojen says. “We’ve never lost money in a quarter in company history.”

Good People, Good Process, Good Profits

VanTrojen says generous compensation motivates his originators to do more transactions “because they realize they can make seven figures working with me.” But, he demands that they originate profitably and compliantly, two aspects of salesmanship he says the industry lacks. For every hundred originators he hires, only a handful fully embrace the training Geneva provides.

“There’s only one of me,” VanTrojen explains, “and while I’m trying to duplicate that, that in and of itself is a challenge.” But, he adds, “I’m moved by helping people obtain success by their definition, not mine.” Character, profitability, aspirations to improve, and a receptiveness to his unflinching transparency matter most to VanTrojen. “What bothers me,” he laments, “is when somebody wants to work for me and they appreciate my transparency, but then they’re not transparent to the people they manage. I think it’s a double standard.”

Demanding compliance makes reprogramming new recruits a persistent challenge for VanTrojen, who prefers hiring originators from other companies rather than first-timers. Sixteen profitable years have proven to VanTrojen that molding good humans into skilled branch managers has a much higher conversion rate than molding skilled branch managers into good humans. Deride him as obnoxious or an idealist, but VanTrojen offers Geneva’s sustained success as proof that mortgage companies can abide by the letter and the spirit of regulations while originating profitably and doing better by their borrowers and the industry. 

“They all assume because they came from a larger mortgage company that violated these laws that I must be the one that’s wrong,” he says, bemused, calling it an industry failure that more originators than not join Geneva believing that their former employers’ noncompliance was, in fact, compliant. From unwinding all those “bad behaviors,” VanTrojen says, “I literally don’t know of a single mortgage company that is remotely compliant.” By correcting compliance with Geneva’s new recruits, VanTrojen hopes he can raise the standard for originators elsewhere. 

“We don’t allow you to get paid on loans in states that you’re not licensed in because it’s not legal. Most of my competition does. When you get into a competitive situation, I’m not going to lower your compensation because it’s illegal.” That kind of leadership, VanTrojen says, is the antithesis to Geneva’s founding principle of protecting originators ability to originate.

“If you are losing money in this environment,” he levels, “I think it’s mismanagement or a lack of.”

Net Margins, Not Gross Margins

No matter the year, no matter the market, VanTrojen’s principled approach to running Geneva Financial has little to do with mortgages. In 2007, he “absolutely did not” want to start his own company. But, he refused to work for his competition and saw an opportunity to differentiate: a business model that holds producers accountable for profitability.

To that end, the most important lesson VanTrojen has learned as Geneva’s chief executive is that more is not always better. “Very rarely is it,” he says, asking rhetorically: “When a branch is doing $10 million in volume, but losing $100,000 a month, certainly more is not better, right?” 

A company can usually be more profitable by cutting that volume in half, he explains. Even in this environment of low supply and elevated costs, “I can solve almost everybody’s problems, assuming they’re productive,” VanTrojen continues. “That’s where the more challenging thing is: finding loan officers that actually do loans and finding branches that don’t lose money.” 

When he founded Geneva Financial, VanTrojen was the company’s sole originator, so the company was designed to support his needs and priorities. “I was the one that needed to maximize my profitability, not the company,” he says. As the post-Great Recession market recovered, he realized this corporate model “would do just fine, and has done remarkably well in all markets, just trying to aim at the small basis points we try to net off every single transaction and paying the money forward.” 

Paying the money forward grants originators the benefit of their ambition and the leeway of the liquidity that their own branches generate. 

Despite rising mortgage rates and plummeting originations, the Temecula-based Macdonald has expanded his operations from three to 28 branches over the past 15 months. Recruiting enables Macdonald to study the P&L statements of many of Geneva’s competitors, offering him a glimpse into pricing and compensation structures across the industry. He rarely sees Geneva beat on pricing and never sees Geneva beat on compensation; it’s the best deal for both borrowers and originators. 

What’s still killing other companies’ branches, Macdonald explains, are the corporate margins that VanTrojen started Geneva to eliminate. “I’ve never seen anybody do it the same,” says Macdonald. “Other corporate margins, from what I’ve noticed, are maybe 200 bps, whereas ours is 50. It’s just less – he’s taking less. There’s nobody between a branch manager and Aaron.” The thin corporate margin means most of the revenue that branches generate stays within the branch. By VanTrojen’s design, branches report net profitability, not gross production.

“It’s scary,” says VanTrojen. “A lot of people in this industry don’t know the difference between net and gross.” In the balance, he says, is profitability. Despite market challenges, VanTrojen accuses leadership across the industry of failing to protect the value of originators by enabling them to originate at a loss for nearly two years. “You do a couple billion in dollars for a loss, that’s not a winner,” he says. “The biggest mortgage companies right now in our industry are the biggest losers. They shouldn’t be proud of how much volume they did at the greatest losses.”

He also says this isn’t a new problem. Salesmanship in the industry has been diminishing for years. As if measuring his own resolve for 100% transparency, VanTrojen pauses, then continues: “I think it’s disgusting. I would never want to run a business like that. But, it’s just the industry’s mind and I can’t throw stones because those companies – again, assuming they survive – will likely make multiple higher net profits next year or the following year when they jack up their margins and they’ve already cut everybody’s pay.”

VanTrojen empathizes with originators and branch managers at those other mortgage companies – it happened to him 16 years ago. “When they raise their margins, they won’t raise pay,” he says. “They never raise pay. They’ll always just take more and more and more from the originator, which they’ve been doing since I’ve been in the industry.”

“What Would Benioff Do?”

VanTrojen credits his dad, the Seattle firefighter, for the high standards he sets for himself and Geneva Financial. “I was going to follow in his footsteps,” he recalls, but, “life doesn’t always go the direction that you think it’s going to go.” 

For that reason, working in the fitness industry taught VanTrojen that “choice” often plays an even more important role in attaining success than opportunity or timing. “I had a mentor that taught me, first and foremost, that I could be successful if I wanted to,” VanTrojen explains. “I could be as successful as I ever wanted to. Nobody had ever taught me that before. I thought rich people and successful people were born that way.” 

Working 80-hour weeks for eight years, VanTrojen “learned how to win.” When he walked out the doors of the fitness industry, he slipped and fell into mortgages. “It really didn’t matter the industry that I got into, I would have probably been successful in it,” he believes, “because I knew how to manage. I knew how to train. I knew how to lead, at least to some degree.” 

Being a capitalist, a leader, and a good human is a difficult juggling act, though, so VanTrojen takes cues from Marc Benioff, co-founder and CEO of Salesforce, the cloud-based software company. “If you’ve ever read his book,” Trailblazers, VanTrojen says, “you’ve seen how many times through the success, growth and evolution of that company, where he’s been challenged by the moral things he should be doing when it countered the capitalistic things that he should be doing.” VanTrojen does not care how productive or profitable his originators are if they cut corners with compliance or are “not good humans.” 

Too many companies inside and outside the mortgage industry, he says, struggle to manage morally in a capitalist society. Though he often feels like he’s howling into a void, “If the herds go in one direction and you’re the one person saying something different, people will listen.” Geneva’s balance sheet has listened, in any case, proving that, even in this market, a profitable company can be built on the moral high ground.

Success, though, he admits, entails making mistakes. Humbly bragging, VanTrojen claims to have made “more than most, which is probably why I’ve become more successful than most.”