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This month, we had a chance to chat with Chris Frost, vice president and business development manager of Frost Mortgage Banking Group. Chris was born in Monterey Park, Calif. and moved to New Mexico with his parents when he was eight-years-old at the urging of his uncle, noted industry speaker Greg Frost, noted as the industry’s first $1 billion loan originator. Greg was a graduate of the University of New Mexico and saw the tremendous growth opportunity in Albuquerque. Chris's father, Mike Frost, started his homebuilding company shortly after relocating and has served New Mexico families ever since. Mike also currently acts as Frost Mortgage Banking Group’s facilities manager.
Chris attended New Mexico State University in Las Cruces, N.M., majoring in finance. While in college, Chris was a member of the Lambda Chi Alpha fraternity, and worked part-time in commercial banking for three years.
He spent a total of seven years in banking, culminating with his role as assistant vice president and branch manager at the Bank of Albuquerque. He made his move to mortgage banking and Frost Mortgage Banking Group in December of 2002, learning the business under the tutelage of his uncle Greg.
Chris has been a top loan originator, sales trainer, sales manager, and now serves in his current role as Frost Mortgage Banking Group’s vice president and business development manager. Chris is a member of the New Mexico Mortgage Lenders Association, the New Mexico Association of Mortgage Professionals, the Hispano Chamber of Commerce and the National Association of Hispanic Real Estate Professionals.
Under Chris’s watch, he has helped grow the company from five local branches with $100 million in annual volume to 20 national branches encompassing 13 states and $300 million in annual volume. Chris and his team currently have another seven branches committed and in the process of being vetted and approved by Frost’s parent company, Primary Residential Mortgage Inc. (PRMI). His team has a 2011 divisional goal of 30 branches and $1 billion in annual volume. Frost Mortgage Banking Group finished as the second most productive division in the PRMI organization. The goal for 2011 is to finish in the top spot.
Chris has been married to Holly for 10 years and has two children, 15-year-old Destiney and eight-year-old Ryan. When not in the office, Chris enjoys traveling with his family, golfing with friends and colleagues, participating in parent associations at both of his children’s schools and philanthropic organizations, including the Full Plate Society of Roadrunner Food Bank.
How did you first get involved in the industry?
I was born in Monterey Park, Calif. and my uncle Greg [Frost] came to Albuquerque, N.M. to attend the University of New Mexico on a football scholarship. After he graduated, he had a friend of his who got him into the financial sector, and at that time, Albuquerque was relatively small with a population of around 400,000. Greg saw tremendous growth opportunity in the New Mexico market and urged my father to move here from California. When I was eight-years-old, my parents relocated to New Mexico.
My father was in the construction industry, so he came out here and started work with a company, ultimately opening up his own company, Arcadia Homes. He’s been running that operation ever since.
I interned for my uncle Greg a couple of summers while I was going to high school and I found my path in the financial services arena. I also worked for my dad during the summers in the homebuilding industry, out in the elements, so I really got to see both sides of the fence. With my grandmother being a Realtor, my uncle being a mortgage banker and my father a builder, it was obvious I would be in the residential home sector in some fashion.
When you started school, were you looking at a career in retail banking? Were you planning all along to join up with your uncle Greg Frost in the mortgage industry?
No … actually when I went to college, I wanted to be a corporate accountant for a Fortune 500 company. What I didn’t realize, at the time, is that you actually have to start at the ground level to get to one of those spots. They don’t just hand out positions like that. Once I got to school and started to realize the amount of time and effort you had to put into sitting in a cubicle and doing nothing but crunching numbers on a sheet, I realized corporate accounting just wasn’t for me. I always thought I was going to be interacting with the public and exchanging ideas and growing, but that’s not an accountant’s job. Their job is to sit behind closed doors and maybe give a presentation, but ultimately, its time alone behind doors buried in spreadsheets and I just didn’t want to do that.
I chose finance because it was closely related to accounting, but gives me more of a business perspective. I interned with Greg [Frost] over one summer performing entry level tasks: Driving to the U.S. Department of Veterans Affairs (VA) office and taking verifications, picking up mail, going to title companies and picking up packages, and sitting in on interviews for pre-qualifications and applications. Greg’s objective was that everybody in the organization is integral to the success of the organization and that I needed to learn the most fundamental task and its importance. My take is that it doesn’t matter if someone is simply sitting behind a desk and answering phones, you are still the “Director of First Impressions.” Everybody in the organization is a piece of the puzzle. When I was finished with my internship, I realized this is really where I wanted to be, helping people achieve the American dream of homeownership.
I started working for Sun West Bank, who was ultimately bought out by Boatmen’s Bancshares, who was eventually bought out by Nations Bank, who was sold to Bank of America. I started to work for an offspring of the merger with Bank of America and Nations Bank with a bank called Bank of Albuquerque. I started as a consumer banker and worked my way up relatively quickly to the position of vice president and branch manager.
Around early November of 2002 my uncle Greg was heavily focused in public speaking, coaching and training sessions across the country. He was in strong demand and knew he was going to get out of the origination business physically. It was at that time that I moved onto Frost Mortgage Banking Group.
Is there anything that you feel you would’ve done differently along your career path? Looking back at your history, do you feel like you came in at the right time or do you feel that you would’ve liked to have spent more time on the banking side, learning operations before you joined Frost Mortgage?
Back when I started working at the bank, the hours were 9:00 a.m.-3:00 p.m., you wore a suit and tie, and people came in to visit you dressed as though it was an important appointment. That was a good experience for me to be able to work up the ranks and learn from the banking side commercially. I was able to grow professionally and individually with each challenge. In the long run, it gave me a strong foundation.
Our goal with Frost Mortgage Banking Group is to do $1 billion annually in funding. That may seem like a lofty goal and Greg [Frost] wrote an e-mail to our team that said, “Dream … dream a big dream. Make the dream your goal.” The idea here is that if you have a dream and set a goal, and if you attain 30, 40 or even 50 percent of what that goal was, you will have attained more than you would have had you never set one at all. It’s just a challenge to yourself.
What sort of management philosophy have you implemented at Frost Mortgage Banking Group?
Greg [Frost] always says, “Communication is the lubrication in any well-run organization.” The idea behind it is that 99 percent of all errors or failures are based on communication. It’s either a total lack of clarity with communication, a miscommunication, an e-mail to somebody when you should’ve spoken to them ... it’s the execution that’s flawed and the reason why is because the communication didn’t come through.
For example, I took my office from upstairs at Frost Mortgage and moved it downstairs into the heart of the operations center. I wanted my door open for all to come in and stay on top of day-to-day operations. To me, effective communication begins with listening to find out what it is that people want, then taking a step back, putting a plan together as a group and then moving the plan forward. That is what we were are trying to accomplish.
At Frost Mortgage, we hold monthly meetings and issue monthly reports. We address all items of concern, put out a scorecard and everyone sees what everyone else is doing production-wise. The goal is to never be at the bottom of that scorecard! We use things like this as a motivational tool and urge them not to take poor production numbers personally, but to use it as a means of motivation to work harder and build upon that the following month. It’s constant evolution that makes you better.
Effective communication is just simply asking questions and listening to what your employees say and then finding a way to implement some resolutions on what it is they want.
As a branch partner under the Frost division, do your branches partners also receive guidance on how to run their operations?
Our parent company is PRMI, Primary Residential Mortgage Inc., headquartered in Salt Lake City, Utah. Whenever I am doing a presentation or sales demonstration to prospective branch partners, I say to them that they are basically the wall outlet and Frost Mortgage Banking Group is the power strip. We plug into PRMI, but everybody else plugs into us, so their direct source is us.
PRMI handles the compliance end, they have the warehouse commitments, they’ve got the correspondent investors and their products. We plug into those things. Every branch partner that is beneath us, including our local loan officers that work for us, plug directly into us first.
We have a monthly sales meeting with our local loan officer staff where we invite the processing manager and senior underwriter so that we can share all the things that are going on specifically within their marketplace. We highlight things they need to address themselves because they are really not partners managing a branch. They are loan officers, so their needs are a little bit different, as they are more of a microcosm of what the business is. I also hold an individual monthly call with each manager of our branch network across the country, where we spend time discussing the econometrics in their specific market, analyzing programs, trends in their local market, networking opportunities, etc.
PRMI holds two underwriting training conference calls each month as well, in addition to marketing calls presented by Greg Frost, PRMI’s marketing director. Our branch partners have the opportunity to plug into Greg, which is a tremendous asset to any organization.
Who is the right fit for Frost Mortgage Banking Company and who isn’t the right fit as a partner?
From an operations standpoint, a staff member from an underwriter to a processor, we’re looking for folks who have been in the industry for eight to 10 years. Today’s lending environment is very cumbersome. It’s more challenging than it has ever been. People must know the ins and outs of the government product offerings, whether it be Fannie Mae, Freddie Mac, U.S. Department of Veterans Affairs, Federal Housing Administration (FHA) … but they also have to know investor-specific guidelines in conjunction with any overlays that you may have in your own firm. It’s a challenge if you take somebody who came from an assembly line process where one individual performs five tasks and then the loan is passed off to another individual. There wasn’t a cradle to the grave concept where they came from; therefore, they are sort of shell-shocked.
From a sales standpoint and a branch partner perspective, we are looking for much the same kind of concept as far as longevity goes. We are not looking for people who came into the industry in 2006, when at the height of the refinance boom, they did a ton of volume under an old product mix. Those people are starting to suffer as the referral partner relationships aren’t there because they were buying leads and were doing mostly refinances. We tell people when they come on board that we want them doing $3 million in volume monthly over a 12-month average.
Approximately a year ago, you turned your organization inside out. How do you find the balance of being both consistent and flexible as an organization in today’s lending environment?
We had to buckle up, pull up our sleeves and work a little harder than we had ever before. I’m not going to lie to you … it’s not as though we were working just 8:00 a.m.-5:00 p.m. and then decided to do this overhaul. We had to put some work in over the weekends and had some long nights as well. We had to literally sit, evaluate our current position and then make concerted decisions for change, just like when we were with First Magnus, for example. We’ve always been a net branch division of somebody since 1991 when we first opened our doors. We were with First Magnus from 2002 until the day they imploded. When First Magnus fell apart, we had to scramble and figure out a way to keep the group together, keep morale high and also find the ability to continue to do business.
Greg [Frost] and I decided that we were going to tear apart several different models from different companies. We had people calling asking, “Hey, come and work for us,” but we had to just break it down and look at several components: Technology, corporate platform, pricing, revenue standpoint, financial stability, etc.
With our analysis, we realized that just one individual could not do it all, and that is where we broke down certain tasks within the organization where Greg [Frost] is the president, I am the vice president and business development manager, and we realized you need additional components beneath you because you cannot physically do it all. We decided that we needed to go with a processing manager, a closing manager and rely on a senior underwriter to assist with day-to-day activities in those respective departments. There was no way I could do all of that in conjunction with everything else. We had to bring on some folks and incurred increased costs, but it streamlined the business model significantly and enhanced the overall morale of the company.
What challenges has Frost Mortgage Banking been faced with in light of all the regulatory changes that have occurred over the past year?
It’s quite cumbersome actually. Currently, we have six different investors that we bank with. When I say “bank with,” I mean we are selling our loans to them. Each of these investors has their own interpretation of what’s going on in the marketplace, plus their own microscopic look to protect their company and they too change their guidelines constantly.
We are facing one of the more daunting changes right now with the impending loan officer compensation rule set for April 1, 2011. It’s going to change the whole scope of the mortgage industry by virtue of how a loan officer can be paid and there’s so much interpretation out there. On one hand, you have the Mortgage Bankers Association (MBA) with their perspective, lobbying against the LO compensation rule, while other groups such as the National Association of Mortgage Brokers (NAMB) are presenting their point of view.
On the flip side, you have investors like Wells Fargo, who does both banking and brokering, out there giving two messages and they don’t just want broker volume to stop, so they are assuring the brokers they will be okay and are committed to the wholesale market.
We make sure that we do the best we can to follow the letter of the law to make sure our folks can still earn a competitive living in this industry. We meet once a week with some legal experts at the corporate level and scour new rules and regulations, paragraph by paragraph, making sure we have all of our compliance bases covered.
Do you think it’s possible that a mortgage loan originator working within the Frost Mortgage Banking organization could actually make more money under the new loan officer compensation rules based on their bonuses/performance overrides?
Yes, I do believe it’s possible. As a mortgage broker, the law says you can only be paid by one source—either by the lender or by your company—one of the two and that’s it. As a mortgage broker, you are getting paid on a yield spread premium (YSP) which is fully disclosed, so you’ve really got one option.
In a mortgage banking environment, we get paid a service release premium (SRP), which, as you know, is not disclosed. So by virtue of that one difference, we have the ability to set our pricing model at a certain threshold higher than what a mortgage broker can because we are correspondent bankers.
What do you do when you are not in the office?
I spend a lot of time with my family. My daughter is a high school freshman on the cheerleading squad and in the chorus. My wife and I are members of the Parent Teacher Association (PTA) at LaCueva High School in New Mexico, as well as the PTA at Georgia O’Keefe Elementary where our son attends third grade.
We do a lot of philanthropic work with the Full Plate Society of Roadrunner Food Bank, an organization here in New Mexico that gathers food and feeds the less fortunate.
I am involved with the National Association of Hispanic Real Estate Professionals (NAHREP) and the Hispanic Chamber of Commerce. Greg [Frost], my father and I all look very Caucasian, but we come from a Hispanic background. My mom is of Mexican descent and my father is of Spanish descent.
My family likes to travel a lot. We visit San Diego, Calif. at least once a year and rent a beach house in the area, in addition to random road trips we take as a family.
I also like to golf. It’s a great sport that’s harder than hell, and it’s a great time to be out. The golf course is a great place to conduct business and cultivate friendships. You can play golf with complete strangers and you can see a lot of places you wouldn’t normally see just by virtue of playing golf.
I’ve closed a few deals through the game of golf where I played with someone, passed them my business card and ultimately did a loan through that connection made on the course. We had one large builder account that we picked up by virtue of playing in a golf tournament with these folks. You can really a lot of connections on the golf course, not to mention that if you don’t build a relationship that’s a direct referral source, you can pick up a lot of information that’s going on in your community.