Each month, National Mortgage Professional Magazine will focus on one of the industry’s top players in our “Mortgage Professional of the Month” feature. This month, we had the chance to chat with Gregory Lutin, executive vice president and national sales manager of Flagstar Bank, headquartered in Troy, Mich. A 1987 graduate of Skidmore College with a degree in business, Greg joined Flagstar in 1994 as an account executive when the company was known as First Securities Bank. He was there for three years and left for a brief two-year span (1997-1999) when he joined Equibanc, World Mortgage, only to return to Flagstar.
He returned to Flagstar as Florida area sales manager in 1999, moved up to vice president/sunshine regional manager in 2003, first vice president/southeast regional sales manager in 2006, senior vice president/divisional sales manager in 2007, and in 2009, became Flagstar’s executive vice president/national sales manager. He resides in both Boca Raton, Fla. and Bloomfield Hills, Mich., and is married with three children, Danielle, Allie and Grayson.
How did you first get involved in the mortgage industry?
I grew up in the northeast, having not worked in the mortgage business when I was up there. The economy was slow in 1992, and that same year, Hurricane Andrew hit south Florida. In rebuilding the area, there was plenty of work available, and I spent six to eight months as a catastrophe adjuster. I had a bit of a construction background, and was able to fit right in and hit the ground running.
I enjoyed my time in Florida, and in order to remain there and enjoy that lifestyle, I needed a career. I answered an ad in the newspaper seeking a mortgage originator. Just prior to accepting the position, a friend of mine had a family-owned bank, Prime Bank, in Boynton Beach, Fla. and informed me they were opening a mortgage department. He asked me to come in and gave it a whirl, and I truly enjoyed it.
I would see the rate sheets that would come across in the morning and it opened my eyes to the wholesale world. The fact that we were selling whole loans to investors was a foreign concept to me. It made me realize that there were investors, people underwriting these loans, and from there, I learned about different products and programs. I enjoyed interacting with the investors to whom we were selling these loans. One of my investor contacts gave me a call and asked if I was interested in coming to work for them. I went to work for Unitower Mortgage in 1993, a servicer that was acquired by a bank, and from that point, I must say, I was pretty successful.
I lived in the area, but didn’t know any mortgage brokers. I got a list of active brokers from the Florida Association of Mortgage Brokers (FAMB), and just smiled, dialed, faxed and ran the phones. I was drawn into it. I liked the concept of providing value to mortgage brokers.
At that point, it was 1994 and rates started to rise. I got a call from First Security Savings Bank, now known as Flagstar Bank, who was looking for an account executive in southern Florida, and I joined the company in 1994.
What keeps you in the mortgage business and drives you to remain in this industry?
I have always seen opportunity. When I made the move over to Flagstar, it opened my eyes to a number of inefficiencies in this business. It was antiquated. The fact is you just need to apply basic business principles … we recognized the opportunity, and did things faster.
We always had something interesting to sell. I think that’s what has kept me in this all these years, knowing that we have always been visionaries. People look at this place as “just a mortgage company,” but we were an evolving mortgage company. We weren’t the size of the bigger companies. We did things differently, and that was what intrigued me. If you think outside the box and take advantage of the flexibility of our systems, you will realize that this is truly your own business. This has afforded many of us a great opportunity for success.
In January 1995, we rolled out automated underwriting, we were one of the first at the third-party originator (TPO) level to use Loan Prospector (LP). We did that in conjunction with using live video conferencing. We could sit down at the originator’s office, complete the application and have the underwriter on video conferencing from the desktop, run through LP and give the conditions on the spot. It was unheard of at the time.
Do you think if the mortgage professional thinks outside the box, there will always be an opportunity for them, despite the state of the economy?
Absolutely. Relationships will always be at the forefront and serve as a driving force. But it’s time we took a look—after this restructuring period—on the broker, banker and correspondent sides. We need to set the appropriate standards for mortgage professionals. We need to implement standard quality control procedures, and improve the overall perception of the mortgage broker. Right now, the broker, in many cases, is looked down upon and is seen as one of the many causes of our current economic situation. We obviously believe there is a definite need for brokers. Some of these originators will make the transformation to the correspondent side, which many will need to consider, and depending upon what type of regulatory restrictions they face, may or may not be a reality for some.
What is the difference between the companies that are failing and a company such as Flagstar that is still standing among this current crisis?
You had traditional A-paper lenders that either set up sister companies or were cross-selling conforming and non-conforming products through their channels and a lion’s share got sucked into it. The margins were high, and those, like us, who chose not to loosen credit as much as the rest of the industry lost market share. Based on our view of risk, we did not believe the yields justified the risk during the years where a number of the riskier loan products were prevalent. The industry jumped in, and is now paying for it with severe losses. At Flagstar, we stayed true to our core business of agency products and did not get heavily involved in many of the riskier non-conforming products.
When we look at those times, we see that Flagstar kept account executives who could have went elsewhere. Flagstar was able to maintain these employees and the fact is that AEs normally stay with their companies an average of three years. How has Flagstar been able to retain their employees in creating a corporate culture that fosters longevity?
Many of us were here prior to going public in 1997. It was a family-driven company and still is today. The Hammond family has done a phenomenal job … they’re personable and remain in touch with what’s going on in the street. They’ve always allowed their salespeople to have certain flexibilities and opportunities.
Technology has been the driving force here. We’ve invested heavily in technology over the years in building a first-rate platform. People who come aboard and recognize how to truly take advantage of that and utilize it to its fullest extent, have been more successful than they would have been at any other company. We take pride in being able to sell something other than rate. Our team services the broker and correspondent channels, as well as warehouse lines of credit. We have a great emerging correspondent program that we’ve done a great job with over the years, and in a normal environment, having two-hour underwriting turnaround time doesn’t hurt either!
If you figure out the way to be successful in this company, and many have, there is no reason to leave. The grass isn’t always greener, and believe me, I know! We’ve had a lot of people who have left and returned.
What is the next big thing mortgage professionals need to embrace?
It shocks me that everyone hasn’t already, but we’ve been paperless for years. Back in 1999, we were doing a pilot program, which means we’ve been completely paperless for nearly a decade. The benefits we’ve gained from it have made us a very efficient operation.
One of the things we’ve rolled out is DocVelocity. DocVelocity is a turn-key imaging platform we offer to all industry professionals. It’s not just exclusive to a Flagstar customer, as it can be used for any investor. People ask why would we do that, and the answer is that we know the importance of becoming paperless and the benefits it has provided, and as an industry leader, we need to be there and make things better for our customers.
Brokers need to get on the bandwagon and need to invest in this technology for their companies. They need to be a professional operation, not just for doc retention, but for overall efficiency. We have a whole Doc Velocity team and that’s all they do, they educate, train and help customize workflows.
Recently, we’ve been pretty heavy involved in our eClosing initiative, something that also needs to be embraced by the industry. It expedites the process, and it makes the most sense, especially if you are a correspondent using our warehouse line. Your loans are going to be purchased within 48 hours, regardless of the normal acquisition times.
The paperless environment, the eClosing platform, its all there … people just need to come to terms with the fact that they need to embrace these concepts. It’s similar to automated underwriting. People refused to use it. We were using automated underwriting in 1995, and I don’t think it became mainstream until around 1998. Everybody needs to move forward and we provide these technological solutions.
Do you feel that the mortgage industry will come out better as a result of what it has had to go through?
Yes, I agree 100 percent. Those who survive are going to make it by changing old habits, moving forward with professionalism, and implementing certain initiatives throughout their organization. When you let things continue without change, it becomes tougher going in the other direction. I’ve been pleased to see our competitors finally saying, “You cannot have a 40 percent lock fallout rate with us … it costs us money and not a way we can do business.” Flagstar has always done that. I think that the broker community has to understand that there will be minimum standards of performance that they have to adhere to, and it’s vital for the long-term survival of the industry.
Flagstar has played a major role in converting brokers to bankers and there is currently a major shortage of warehouse lines available. Is the broker-to-banker platform something that you’ll continue to support?
Yes, we will absolutely continue to support it. Warehouse capacity is an issue, especially with several of the larger players exiting. We support our emerging correspondents, as we like to call them. In this environment, we need to be very selective in terms of the quality of whom we do business with and their overall financial condition.
What we’re trying to accomplish now is getting loans through our system in a much more rapid manner. Loans are already underwritten, closed and are sitting in our acquisitions department, but how do you get them through? We are encouraging those who do business with us to use the eClosing platform and it’ll turn within two days, rather than normal turnaround times that fluctuate. Correspondents need be going in that direction. To me, it’s a no-brainer. Again, I’m not sure if it is a matter of lack of awareness, but what we’re trying to do is spread the message of paperless technologies and electronic closings. The industry should be paying attention and know how to operate efficiently.
How will Flagstar continue to support the brokers and expand its wholesale operations?
First of all, being a financial institution that has the ability to service its own originations has and will continue to give us the stability necessary to fund our production. That alone has helped us. Of course there are always regulatory pressures and capital requirements from regulators, but we’ve always had to deal with that and have been successful in raising capital, both privately and through the Troubled Asset Relief Program (TARP).
When I started in 1994, we had one retail banking location in the lobby of our corporate headquarters and that was used to fuel our mortgage operations. We were never a bank that entered the mortgage business. We are a mortgage operation that expanded into the bank, and we currently have approximately 180 retail bank locations.
Wholesale comprises approximately 90 percent of our business. We’ve grown our wholesale platform over the years to the point where there’s no stopping now. We are committed to it, we do a good job at it, but it’s not easy. If it were easier, there’d be a lot more competition right now. We know what we need to do to remain profitable. We aim to maintain minimum standards and demand that those standards be met by our employees and customers. If you don’t move forward and manage your business in today’s environment, you’ll never live to see tomorrow. We’ve always known that, so we are always trying to look a little further down the road to see what lies ahead.
Do you have any particular management style or business philosophy that you’ve exercised over the years?
I want to surround myself with the best people. I’ve learned not to be a control freak, to relinquish control and delegate assignments. As long as I’m kept in the loop on everything going on, I try not to get knee-deep in it. I’m comfortable knowing that, with the right individuals executing and understanding a particular vision, we’ll get the job done. I’ve been successful hiring managers under me who understand my thought process, and challenge or question when something doesn’t seem right. I don’t micro-manage and don’t like to be micro-managed. If I need to be micro-managed, then I’m not the right guy for the position.
Are there any books that have influenced your career?
Good to Great: Why Some Companies Make the Leap … and Others Don’t by Jim Collins is one book I always enjoy referring back to. On a plane, I occasionally read different economics books and trade publications. I stay on top, as best as I can, of the latest regulatory changes by the agencies, which is a full-time job in and of itself.
Any closing comments?
I hope that we all come through this current situation a lot stronger and take along those survivors who won’t let history repeat itself. We shouldn’t look for shortcuts and should look to elevate the level of professionalism, and treat this as a true profession. People need to realize that there is a reason why we survived. We need to partner with someone strong and increase the level of efficiency in delivery and do things with quality in mind in order to ensure future success of the TPO channel.
For more information on Gregory Lutin and Flagstar Bank, visit www.flagstar.com.