NMP Mortgage Professional of the Month: John Walsh, President of Total Mortgage Services
Each month, National Mortgage Professional Magazine will focus on one of the industry's top players in our "Mortgage Professional of the Month" feature. Our readers are encouraged to contact us by e-mail at firstname.lastname@example.org to be considered for a future "Mortgage Professional of the Month" feature article.
This month, we had a chance to chat with John Walsh, president and founder of Milford, Conn.-based Total Mortgage Services, parent company to wholesale lender, TMS Funding. A finance major at the University of Connecticut, Walsh began his journey in the mortgage industry with a sales job at a bank and founded Total Mortgage in 1997, with a customer-centric approach and a clear mission of responsible lending, and an emphasis on a strong back office and customer service. Total Mortgage has not had a buy-back in more than 14 years, which is a true testament to the lender’s responsible lending focus throughout the lending value chain.
Licensed in 24 states and the District of Columbia, Total Mortgage offers a variety of home loan programs, including low-rate, fixed-rate and adjustable-rate mortgages, jumbo mortgages, reverse mortgages and mortgage programs for struggling homeowners. In addition, Total Mortgage offers a Federal Housing Administration (FHA) streamline mortgage refinance program, including the 203(b) FHA loan. In September 2011, Total Mortgage received approval with Fannie Mae to be a seller/servicer for one- to four-family first lien mortgages and can now retain mortgage servicing rights, expand product offerings as well as sell and pool loans into mortgage backed securities. Total Mortgage was named to the 2011 and 2010 Inc. 5000 list of “America's Fastest Growing Companies” In late 2009, Total Mortgage Services announced the formal launch of its wholesale residential mortgage lending platform, TMS Funding, which has been expanding rapidly and is currently aggressively hiring account executives.
John Walsh’s views are quoted extensively in the national and mortgage trade press and he has written numerous mortgage industry bylines. He is also an advocate for the mortgage and housing industry. In early November 2011, John authored an “Open Letter to Members of the United States House of Representatives,” urging them to temporarily raise the GSE lending limits back to $729,750 without delay and not just for “high-cost areas,” but nationwide to help put the nation’s housing sector and economy back on the road to recovery.
How did you first get started in the business?
I attended the University of Connecticut and earned a degree in finance. I really enjoyed my time in college and graduated with honors. After I graduated, I took a job in sales. I always knew I wanted to be fairly compensated for what I did at work, so sales was the perfect job for me. The harder you worked, the more you were able to make. I held various sales jobs, but in 1993, I was speaking with friends who were mortgage brokers and they were telling me how much they enjoyed the work and the pay. At that point, I thought that I could also be successful as a mortgage originator. So I interviewed at a couple of banks, and I ended up accepting a job at a banking institution where my friend, Joe Bartolomeo, worked at in Connecticut. I did really well right out of the gate, but the bank was bought out two years later.
After that job, I moved on to work for another institution for about six months and then went back to work with my friend who initially introduced me to the mortgage business. At that time, I told him that I wanted to own my own company. Coincidentally, my boss at the time approached my friend to see if we wanted to buy him out. So Joe Bartolomeo and myself made the move. The company eventually became the foundation for Total Mortgage Services, and I currently own 95 percent of the firm.
Where was the business coming from when you first started?
In the beginning, business was coming from traditional referral relationships. I would bring donuts to Realtors’ offices and reach out the old-fashioned way. Most of these Realtors had offices and held meetings each Tuesday. I would attend these meetings and field questions for about 20 min., but many times, I would be there for over four hours. Before long, I would find myself at the Realtors’ office all day. That was when I first realized how important a great back office is to a mortgage originator. I could go out all day, and not worry about the processing aspects of the business and just focus on maximizing my earnings potential and grow production.
Tell us about both of your companies, TMS Funding, your wholesale business, and its parent company, Total Mortgage Services.
They are two separate entities, but from a turn time perspective, they are very similar. Our turn times are declining in both our retail and wholesale channels. I hired Victoria Bextel as senior vice president of operations and Elaine Presta as wholesale operations manager about six months ago and our turn times have significantly improved. We are focused on hiring the right people and having the right processes in place. We are now looking at a general 24-48 hour turnaround time. I do not believe any other firm is doing that on the wholesale side. We tell our mortgage broker partners that if they deliver a complete package, we can guarantee we will underwrite the loan within 24 hours.
What about time to close?
On the retail side, from application to close, we are closed in under 40 days. There are plenty of loans closed within a month, but on average, we are usually done in less than 40 days. If it were not for delays getting information from borrowers, I have no doubt that we would close in less than 30 days. I believe we are staffed very differently than other firms, as we have always been heavily staffed. There was a time when I had 10 loan officers and 20 support staffers and everybody thought the model would not work. I did it because I grew up in this business as a sales guy and I always wanted to sell and wanted people on the operations side to operate. I try never to be short-staffed. It is hard to say “never,” because there are times when refinance booms hit and no one is prepared to double the amount of loans you do in a month. But, I have always had the philosophy that if you can hire a great staff, you can provide a better customer experience, along with a better loan officer experience and better operations experience. It takes care of everybody.
Any idea what the pull-through rate is on the wholesale side?
At TMS Funding, our pull-through rate is around 60-65 percent. We always stress the same thing, just make sure mortgage brokers deliver us a good package and we will guarantee to underwrite the loan quickly. If brokers get us a good file, we are able to give them a good price, and can close the loan quickly. It’s a win-win situation.
Are there any business practices that you started out with 14 years ago that are still an important part of your company today?
From the beginning, I have always strived to do the right thing at all times. This must be working, as Total Mortgage has not had a buy-back in over 14 years and it is a true testament to us doing the right things throughout the lending value chain. When Alt-A and sub-prime products were popular, I would talk to my loan officers and say, “Look, I don’t necessarily believe in doing refinances on investment properties at 100 percent with a 580 credit score.” I knew those types of products were out there, but it seems just plain crazy. It takes a little common sense, but I told my team that we were just not going to do those types of loans. We did maybe two or three option ARMs and realized you really needed a sophisticated borrower to understand that product. We have done maybe $7 or $10 billion in business with no buy-backs. We do not place borrowers in mortgages that they cannot pay or do not have a likelihood of paying. To paraphrase what Vince Lombardi once said: “Gentlemen, we are going to relentlessly chase perfection, knowing full well we will not catch it, because nothing is perfect. But, we are going to relentlessly chase it, because in the process, we will catch excellence.” Each day, I try to improve the process. I am not afraid to say when something goes wrong and seek out the root cause of the problem and attempt to fix it. When people make mistakes, they tend to keep it under the carpet, but those small problems can easily turn into big problems, so we attempt to fix them and take the opportunity to get better through constant learning and communication. I say it all the time … problems are just opportunities to get better. We just need to keep reinventing ourselves and get better and better every day.
In terms of any kind of referral business, how important is it to underwrite a loan versus just being able to network?
I really became successful in this business once I fully understood how to underwrite a loan. I think that is an extremely important aspect of being a great loan officer. If you want to build a great business, you need your people to understand how the process works so they are selling the right products.
Besides changes forced upon the industry by regulators, what technological innovations have you seen of late that stand out in the mortgage banking side of the industry?
All the software and measures that are now in place to prevent mortgage fraud stand out to me. If those same tools were in place back in 2002, the industry wouldn’t be in such a mess.
The whole Home Valuation Code of Conduct (HVCC) issue has created many challenges and it remains a problem in terms of getting a quality appraisal. But the idea of having a completely separate individual appraise the property has been very good for the industry. It actually helps Total Mortgage, especially our wholesale channel. If we are working with a mortgage broker that is going to have a friend appraise a home, that is not good. But by sending out my appraisal company, I know there is a very good chance that the value is in the home. At the end of the day, there are things they can do to make it better, but I think HVCC has helped the mortgage industry.
What do you feel is your greatest accomplishment to date?
I am very proud of our turn time at Total Mortgage Services and TMS Funding. I am also proud of the way we have been able to grow as a company. We have progressed from a broker to banker to wholesaler, and we are now working on plans to enter the correspondent channel. We are always searching for the next best thing in the mortgage industry to help us grow.
I still love the business. It is a fun and challenging business, not for the faint of heart, but for me, it is still the best place to have a career. Each day is different than the previous and brings with it new challenges. Is there another business where you could literally double your production overnight? A lot of people exit this business because it is so demanding. Total Mortgage has grown and accomplished a great deal, and we are aggressively seeking out new opportunities each day. We have grown 100 percent organically and have not purchased anyone else’s problems, so it’s been a fun ride, with a great group of people.
Getting into correspondent lending is our next big goal. It is sort of an interesting time, as you have a major player like Bank of America walking away from this market. But we will enter the correspondent channel as we entered the wholesale channel: Slowly and carefully. From a wholesale perspective, I did not want to make any mistakes. I wanted to understand clearly what I needed to do first in order to be the best in this channel. There are other companies that are growing more quickly than us right now, but for every one of those, there are companies going out of business because they grew too fast and did not have the proper procedures and processes in place. You hear stories about how companies have grown, for example, by 500 percent in six months or so. To me, that could be a sign of trouble because you have to look at how they are handling their operations with such drastic growth. It’s easy to get the business, but it is what you do with it once you get it that will determine your longevity in this industry. If you get the right team in place, who want to do the right thing, share a similar mindset, and have the same morals and ethics, you put yourself in a good position to be successful.
Do you have any regrets to date in your career?
Not many at all, but I wish that I had the operations manager and team I have now back in 2003. In addition, I wished I transitioned sooner from broker to banker, as I left a lot of funds on the table from 2002-2004. In 2005, we became a banker, so it took us eight or so years to make that transition from mortgage broker to mortgage banker. Fortunately, I had experience in being a banker, so I was able to capitalize on that when we began the broker-to-banker transition. Had I done it in 2000 instead of 2005, it would have been a whole different story for Total Mortgage. If I had the proper staff in place, I could have done a lot more business. You look back at 2003 and it was such a tumultuous time in this industry. I try to learn those lessons every day.
Is there any particular management style or philosophy that you employ?
I am a firm believer of open communication from top to bottom of our organization. It doesn’t matter if it is an administrative person that has a great idea or a top salesperson in the firm; we at Total Mortgage Services try to foster a culture where no idea is a dumb idea. I have implemented ideas from people who have been here only a few weeks. I want to hear what everyone has to say.
Are there any social media strategies that you have implemented into your business model?
I think it is important to deliver useful information and content to borrowers. Putting information out there just to put information out there will not be a big help in the long run. I believe it is important to deliver relevant information about your company or provide relevant education to the market place. You need to make sure your information is accurate, timely and useful. You want to be a resource for borrowers.
As a message to your wholesale clients, what are some of the ways in which a small- to mid-sized mortgage originator can grow their business? Should they focus on consumer-direct, referrals, infinity programs?
The most important thing brokers should focus on is their own operations. If you have a sound operation with confident salespeople who know the products they offer, then the programs begin to sell themselves. That was the secret to my success … take care of the back office operations first and the sales will come. All of the traditional ways to get business are still viable in today’s market and the purchase market is definitely going to come back. If you can support the purchase market and get people to commit to closing on time, your business will grow.
Besides real estate agents, are there any other groups that mortgage professionals should be networking with?
In addition to past clientele, I would say financial planners, insurance agents, and pretty much the standard list of resources. If you did a great job for your client in the past and provided a great customer experience, you have earned the right to ask them for referrals. Total Mortgage is always looking to get business from our current clients. It’s always at the tip of our tongues.
When I started this business, I always gave five business cards to everyone. I would say: “I’m going to give you such great service, that I’ll expect you to get me five great referrals when we are done.” I did that for about a year, and after a while, I thought it was ridiculous. But after a year, I didn’t have to go out on the road anymore. I was still going to Realtors offices, but my business was made up of repeat customers as they trusted doing business with me. If you do a good job, they are going to tell others, the same thing if you do a bad job, they will tell others.
Do you miss interacting with borrowers?
I am at a different stage now, but I definitely enjoyed it when I started in the business. I took loans until 2001. I enjoy people, and I like to help people, so I did enjoy that side of the business. I had fun, and sometimes, the interview would take two hours because I loved talking with people and learning about them. You get to learn everything … the good, the bad and the ugly.
Do you think that the loan originator compensation rule has helped or hurt the individual mortgage loan originator?
I think there has been a lot of wasted time and energy, and at the end of the day, I really don’t think it benefits the consumer. I believe there are a lot of factors they didn’t consider when they put the LO compensation rule in place. It is hurting the LO and the client, and you’re going to have less competition because there will be less professionals out there offering products. It has been tough on the industry, and it is an example of overregulation. There are pieces that are good and pieces that are bad, but telling how much an LO will make does not compute to me. I don’t understand how that can be applied.
Are there any books out there that you’ve found influential?
I love Good to Great: Why Some Companies Make the Leap... and Others Don't by Jim Collins. In fact, I have read the book several times. There are so many points that I like about that book. It discusses getting the right people aboard the bus, and it is a book that I quote quite often. I have given it to many co-workers to read. It’s definitely my favorite business book. Collins also wrote another great book, Built to Last: Successful Habits of Visionary Companies. I also recently read another book, The Billion Dollar Mistake: Learning the Art of Investing Through the Missteps of Legendary Investors by Stephen L. Weiss that discussed Fortune 500 companies that went by the wayside. The book looks at about 10 different Fortune 500 companies, and you see how these companies make mistakes and that there are always pitfalls out there that must be avoided. We need to learn from these mistakes, as well as from their success.
Do you draw inspiration from any one particular person or have a mentor?
I am inspired by my family. My passion is my kids … it’s not the money, it’s wanting to provide a better and safer life for my kids.
Is there anything that worries you about the future of the mortgage business?
I am worried about more regulation. I wonder what could be next. They have done so much so fast. There are some benefits to regulations, but some of it is over the top. When you look back at loans that were acceptable in 2005 as compared to today, the banks underwrote them and told me they were okay and they closed these loans. Now they are coming back and saying they should not have approved the loan and now it is our fault. That scares me because it happened to a lot of people.
Are you excited about the future of the mortgage industry?
I think there is tremendous opportunity out there for companies that are well-positioned. There is a lot of business to be had and I think Total Mortgage and TMS Funding are both in a position to grow.
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