From the ground up: The story behind Michael Strauss and the rise of American Home MortgageEric C. PeckMichael Strauss,American Home Mortgage
At the forefront
Our nation's third president, Thomas Jefferson, once said, "I am
a strong believer in luck, and I find the harder I work, the more I
have of it." American Home Mortgage Investment Corp. chairman and
CEO Michael Strauss's business philosophy can be directly
correlated to this famous quote, as his company's dramatic rise and
nationwide expansion forges onward.
The story of American Home Mortgage Investment Corp. begins in a
New York City apartment. Much like the infancy of most major
start-up companies, American Home Mortgage is grounded in humble
beginnings, deeply enriched by an entrepreneurial spirit. With the
mind-set of a mortgage broker, Michael Strauss, armed with a BA in
business administration from Washington University in St. Louis,
began American Home Mortgage in 1987, in the living room of his
Manhattan apartment--a company that now boasts a team of 1,700
sales professionals within the organization, 270-plus loan
production offices, nationwide, and is poised to move into a new
180,000-sq. ft. complex in Melville, Long Island, N.Y. to
accommodate its increased growth.
In December of 2003, American Home acquired Apex Mortgage
Capital Inc. and reorganized into a real estate investment trust
(REIT) named American Home Mortgage Investment Corp. The day after
gaining REIT status, American Home began trading on the New York
Stock Exchange under the symbol "AHH." Under its current structure,
American Home is focused on earning net interest income from
self-originated, mortgage-backed securities, and through its
taxable subsidiaries, on originating and servicing mortgage loans
for institutional investors.
"We became a public company in 1999 because we had an Internet
dynamic that was exciting to shareholders and this allowed us to
complete our initial public offering," said Strauss in an interview
at the company's Melville headquarters. "Today, American Home is an
interconnected portfolio of high-quality mortgage assets that will
further diversify our earnings, improve our returns and lower our
risk profile. The idea of holding mortgage loans, which became a
reality with our conversion to REIT status, will help us to grow
our company by entering this new line of business which compliments
our existing origination and servicing businesses."
Michael and other members of the company's senior management
team recently returned from a nationwide investor road show, making
presentations on behalf of American Home to analysts, fund managers
and potential investors. The company raised approximately $360
million and sold more than 14 million shares when it closed the
offering on March 3, 2004. At the start of the show, AHH was
trading at approximately $21 per share and rose to the $26-$27 per
share range.
"I believe our story was well received during the road show,"
noted Strauss. "The idea of combining a strong origination
franchise with a strong mortgage holding franchise had a definite
appeal to the members of the investment community. It allows us to
have this significant lending presence which we believe will serve
mortgage brokers very well." Net earnings for the company in 2003
were $73.8 million, compared to 2002's totals of $39.5 million,
representing an overall increase of 86.8 percent. Revenue for the
year was $432.1 million, compared to $232.8 million in 2002, an
increase of 85.6 percent. Earnings per diluted share for 2003 was
$4.07 per share, compared to $2.65 per share for 2002, an increase
of 53.6 percent. As a result of the recent equity offering,
approximately 63 percent of the company's projected earnings in
2004 will come from its holdings of mortgage-backed securities,
approximately 30 percent will come from mortgage originations and
approximately seven percent will come from the company's servicing
business.
As the backbone of American Home's success, Strauss integrates a
mortgage broker mentality into the company's mortgage banker
operations.
"American Home shares a trait with many mortgage brokers in that
we try to find the right products for the consumer, first,"
explained Strauss. "We want to have many different product choices
and give the right product to the consumer, a characteristic that
gives brokers a big edge over bank lenders, for example."
Looking to instill a sense of pride and autonomy into his
employees, Michael is a firm believer in considering the input of
all employees during his decision-making process.
"We try to empower our people to do their job and then ask them
to be responsible for the company's well-being," explained Strauss.
"It's amazing to see the results when you give a wholesale branch
manger a portion of the profits and show him how this activity
might affect his revenue. Holding folks responsible for an overall
goal, but letting them reach that goal in such a way that is right
for their community, is an important key to our success."
On the personal front, Michael is a dedicated husband and father
to his two daughters, five-year-old Catherine and one-year-old
Jane. In his spare time, he enjoys taking Catherine ice skating and
spending the weekends with the family at their Manhattan home. The
influence of family has also rubbed off into the business world for
Michael, who attributes his hard work ethic and strong business
acumen to his father who was a manufacturer's representative for
stationery supplies. Artwork handed down from his father lines the
walls of Michael's Melville, Long Island corporate office.
"One of the nice things about having been in this industry for a
long time is that the high pressure that I face today isn't quite
the same as it was 10 years ago," commented Strauss. "When you are
originating, you are always doing your job, and now, I get the
opportunity to be with my family every weekend, and I get a chance
to go out with them during the week ... although not as much as I
would like."
Michael places a strong emphasis on always striving for the next
rung on the ladder and attaining that next goal.
"Take risks ... take calculated risks and take the time to think
through what's going to happen," said Strauss.
And with that philosophy, American Home Mortgage and Michael
Strauss have risen to prominence in mortgage industry market share,
and has earned the distinction of placing number two on Fortune
magazine's 2003 list of America's Fastest Growing Companies.
"If someone is truly committed to their business, they should
always be looking to take that next step," said Strauss. "If
they're committed to the business and are not sure whether or not
to invest in a training course or seminar, that's when they should
go ahead and do it. I think that you get more of a benefit than
what is immediately apparent for the different things you do to
improve your franchise."
Wholesaler Grows Up ...
American Brokers Conduit explodes onto the wholesale
arena
Offering a competitive product line, American Home does not
limit itself to a core group of products, but is constantly
expanding its offerings in order to remain ahead of the
ever-evolving and sometimes volatile mortgage market. The company
has a product committee comprised of account executives, branch
managers and upper management. This committee goes out into the
market, identifies where the demand lies and tailors a product to
meet that particular need.
"We're not just a conforming lender, a jumbo lender or an alt-A
lender; we're across the board ... a whole soup to nuts concept,"
said Donald Henig, executive vice president of wholesale, Internet
and direct-to-consumer operations.
Don brings years of experience as a mortgage broker to his role
with American Home Mortgage, including terms as president of both
the New York Association of Mortgage Brokers (1987-1988) and the
National Association of Mortgage Brokers (1989-1990). In 1999, Don
became the first mortgage broker to sit on the board of governors
for the Mortgage Bankers Association, as a member of the MBA's
board of governors.
"When we come up with a product and put it out into the field,
your AEs may say, 'Well, if you tweak the product this way, it may
be even more effective,'" explained Henig. "The product is then
brought up to our product committee and we evaluate it to make a
quick decision. We get personal feedback from our AEs, since they
are the ones who are out in the field, working with the brokers
directly."
At its core, the company is unwavering in its dedication to
satisfaction of its AEs, some of whom were once mortgage brokers,
all the way down the line to the mortgage broker and consumer.
"One big plus is that many of our AEs are actually ex-brokers,
so they bring a unique slant to our feedback," said Lisa Schrieber,
chief administrative officer of American Brokers Conduit, American
Home's wholesale division. "They can tell us what they sold as
brokers and share those experiences with us. We love those types of
people on our product committee."
Lisa joined American Home Mortgage in March of 2002, having
previously worked as the regional wholesale vice president for
Arbor National, and later, as the southeast regional vice president
for Bank of America Mortgage. Earlier in her career, she held
positions at MGIC in northern New Jersey and worked with the
wholesale division at Dominion Bankshares in northern Virginia.
Lisa has served on the board of directors of the Maryland
Association of Mortgage Brokers, is an active member of numerous
broker associations and has been a featured speaker at various
state events and trade shows.
At the heart of American Home's operations is the company's
continued dedication to its job: complete satisfaction across the
board. And with that dedication comes the company's unique business
model and the addition of the broker relationship manager (BRM).
The BRM acts as a guardian over the entire loan process, managing
the lines of communication, serving as a personal contact for the
company's AEs--a refreshing and personalized take in today's world
of automation.
"The BRM is a way for us to fill the void that brokers complain
about, that service level of communication that many wholesalers
talk about but don't really deliver on," said Schrieber. "Many of
our competitors today have gone to automation, which is fantastic,
except that if they fall out of automation, there is no one to
catch you."
American Home's AEs each have approximately 30-50 active
mortgage broker accounts and each BRM handles two account
executives. As a fully functioning symbiotic unit, the BRM and/or
AE are always available, troubleshooting issues that may arise in
the loan process, while providing a personalized touch along the
way.
"If the broker needs something in a rush, who are they going to
call?," said Henig. "The BRM has the power to push things through,
as opposed to the broker dialing an 800 number, getting into
voice-mail and looking for the underwriter who has your files. If
your AE isn't available, then the BRM can be called and assist with
any problems, maybe lock a loan or even get a loan cleared and
closed."
Schrieber added, "Even if the BRM doesn't have the answer
immediately to a specific issue, they call the other party to
inform them that they are looking into it and will get back to them
with a follow-up. Service is a big thing for us, and even if the
BRM doesn't have the answer readily available, they always answer
the call and provide a service guarantee."
In addition to American Home's AEs having a BRM guardian
watching over them, AEs are trained and educated on a companywide
"Product Call of the Week." BRMs and AEs log onto the weekly
conference call to learn the parameters of the week's featured
product, along with how to sell it and to whom the target audience
should be. If the conference call is missed, it is recorded,
archived and can be accessed at a later time or listened to
repeatedly for clarification and deeper understanding.
In addition to the "Product Call of the Week" and the strong BRM
system, American Home's AEs benefit from its Automatic Marketing
Portal, which includes economic updates and promotional sales tools
designed to be passed along to the mortgage broker. A weekly e-mail
is then sent out at a specified time by the AE which summarizes
market trends and provides the broker with tips on topics ranging
from how to run their business to new product summaries and
critical economic data. The company is currently working on flyers
and promotional materials that can be customized by the broker for
use in marketing to real estate agents and consumers.
Schrieber continued, "As a wholesaler, we provide the brokers
with the tools necessary for a changing environment. American Home
not only provide the products, but if there is a regulatory issue
such as bundled services or fee packages, we will move in that
direction in order to keep the broker in business."
Instilling the broker mentality is an easy task when a healthy
majority of the company's employees have a history as mortgage
brokers. Taking that mind-set from upper management and conveying
it companywide is also a task handled well by the American Home
Mortgage crew.
"This is not a bank mentality place," described Henig. "If
anybody at American Home worked for a broker, they'd fit right in,
because everyone here works themselves hard, all day long."
"I'd have to say that I've never worked anywhere where I've seen
people work so hard," added Schrieber. "I think the reason for that
is because they all feel that they are part of the company's
overall success. We're listening to solutions from the field, every
day, from the people who contact the brokers."
