Being considered a “legend” in any pursuit in life is quite the accomplishment. It signifies more than simply longevity … it signifies extraordinary achievement as well. That is certainly true of National Mortgage Professional Magazine’s “Legends of Lending” designee for September 2013, GSF Mortgage Corporation. Formed in 1995 by two castoffs from what had been formidable financial firm ITT, Jim Guzanick and Phil Siebert laid the strong foundation for what became a legendary firm, presenting a successful role model for others to emulate.
How do you spot a legendary firm? From my experience in working with and interviewing the leadership of these types of firms over the years, it is clear that they have one thing in common—they have a story to tell. Legendary firms are filled with leaders who are completely immersed in the history, value and culture of their firm. They view themselves as the keepers of the flame, with a responsibility to those who came before them, those with whom they currently work and serve, and those who will follow in their footsteps.
Recently, I interviewed Chad Jampedro, GSF Mortgage’s newly appointed president. Well, interviewed is not exactly the correct term. I scheduled an interview, but what occurred was simply me listening to a flame-keeper’s story of his legendary firm.
Listening to Chad, who was recruited to join GSF as an originator in 2001 shortly after graduating from college, I was able to discern the key components of the GSF story: Meeting challenges, selectivity, risk aversion, control, poise, recognizing opportunity, relationships, communication, fundamentals, getting better with time, fun and being focused on the future.
As I take you through the highlights of the GSF story, you will hear all of these components referenced.
A history of challenges met
GSF’s very existence is due to the response of two men, the aforementioned Jim Guzanick and Phil Siebert, to what could have been a very negative experience. Their employer ITT was a diversified conglomerate that split into four subsidiaries in 1995. Financial services was not among the priorities going forward for ITT, and this led them to shut down their financial services division at that time. Jim and Phil had known each other since the 1980s, and despite being based in different states (Wisconsin and Illinois), the two believed that they could create and manage a successful mortgage brokerage operation together. They took a chance, but one they believed was not risky. They believed in their own abilities, in each other and felt the economy was strong enough to give their venture an excellent opportunity for success. Chad described the company’s founding this way: “Phil and Jim were essentially out of work. They had severance packages and took them, plus, I think, mortgaging their homes to come up with the capital to start GSF.”
Challenges were presented to everyone in the mortgage industry in late 2007. Chad’s reflection: “We knew the ‘writing was on the wall’ in the later part of 2007. We had an investor approve us on a Monday morning, and by Tuesday afternoon, they had issued a statement saying that they were totally out of the mortgage business.” While all firms faced the liquidity crisis that unfolded in late 2007, many fewer firms had the makeup to meet it head on and come out stronger on the other side.
How does Jampedro remember that time? He says, “We have always had a tight-knit group of branch managers. We kept them in the loop as far as what decisions we were making from a company standpoint and the potential risks we were facing. We got on a conference call with the group and told them what we saw. We discussed how underwriting was going to get tighter and how every loan was going to be gone through with a fine-toothed comb. We had to be prepared for a secondary market that was going to be scrutinizing loans like never before. We told them we would need their help because the loan doesn’t begin on the underwriting side, it begins with origination.” Then he added a crucial nugget as it relates to understanding why GSF Mortgage Corporation is a legendary-type firm: “We told them we would need to embrace this change in order to make it a competitive advantage for our customers and to reassure our referral partners.”
During the crisis, GSF focused on the “fundamentals of loan origination,” which Jampedro defined simply as, “carefully originating and underwriting loans for customers who are worthy of being extended credit.” But another fundamental important during this liquidity-constrained period was careful management of their lines of credit, which represented their ability to stay in business. Jampedro remembers it as follows: “We were very careful about the loans we did book so they would come off our lines quickly and allow us to meet contract dates and satisfy demands from our referral partners.” Chad continued, “We originated through it. Our referral partners calmed down, our originators calmed down and got back to work. It allowed our management to deal with the regulatory and investor issues that were coming up.”
The early move from broker to banker
In addition to the circumstances of its founding and the crisis that began in 2007, there was one additional period of significant challenge in GSF’s history. In 2003 the firm made, what was, at the time, a seemingly unusual decision—to move from the broker to banker business model. In a booming time in the mortgage industry that featured extreme competition and an array of product choices, brokers and their originators were growing market share and making considerable money.
But something about the broker model didn’t fit with the philosophy of the firm’s founders. As Jampedro explains, “We made the switch from broker to banker at a time when it was not considered an advantageous business plan. As a result, we lost 30 percent of our originators.” But the change was crucial to GSF’s ability to weathering the coming industry crisis Jampedro asserts, “Phil and Jim are risk-averse, but also visionary. Control was the big reason. Not simply control over the business, but control over individual transactions.” According to Jampedro, GSF’s founders wanted a say in the decision-making on underwriting because they saw that as key to developing relationships with customers and referral partners.
This control over the service that is provided becomes even more important in the future as the industry faces the transition to a purchase-orientation and rising rates. Jampedro’s forecast is this: “The market will become ultra-competitive and that competition will be very much focused on service levels. We believe superior service levels are achieved through communication. Real estate agents want to know that originators have an open line of communication to underwriters and can pass information back and forth quickly to meet contract dates. For real estate agents, nothing is more important than meeting contract dates.”
One benefit is already being seen in the new competitive environment—originators are getting better and having more fun. According to Jampedro, “It’s great to see the energy that is coming from originators as they get back to the traditional building of relationships and marketing. They are coming in with new ideas. It’s great to see everybody working in that way and having fun!”
GSF’s founders recognized an opportunity in 1995 that existed in mortgage loan origination. They recognized the advantages that come from the banker business model much earlier than most of their contemporaries. They later developed a specialized wholesale channel, and more recently, a servicing platform to capitalize on other opportunities they saw in the marketplace.
Due to their geographic base in the rural and semi-rural Midwest, they developed an expertise in underwriting USDA Rural Development loans. Both through their retail branches and as a wholesaler, GSF has become a leader in the USDA lending space. Jampedro says, “In most of the areas in which we lend, USDA loans are prevalent, and every one of our underwriters is an expert in these loans.” Regarding their wholesale lending, Chad adds, “We are committed to the wholesale channel as long as it remains viable. We will continue to invest in it. It grows for us each month, particularly as originators move away from refinances.”
For the future, Jampedro sees opportunities in lending to the emerging millennial market of homebuyers. In response, the firm has taken bold steps to update and expand its brand, Web and social media efforts. He believes that, “Although the Internet has changed the way that people do business, customers still rely heavily on word-of-mouth recommendations, a reliance that’s especially true in the mortgage and housing industries. When it comes to big purchases such as homes, customers consistently turn to the Web first.”
As it relates to future growth, Jampedro expects to follow the same path as his predecessors … deliberate and selective growth. “We will continue to add branches where there is a strategic fit. We are looking for experienced branch managers who understand the concept of running a branch and want to get back to originating.”
With all they have accomplished over nearly 20 years, you might wonder if they ever get nostalgic. Jampedro puts it this way, “Do we ever get together and have a beer and talk about the good old days and the old people? Sure … for about 15 minutes, then it’s on to the new. Our philosophy is to embrace what is in the market rather than what was, and to respond as quickly as possible.”
Legendary status for a mortgage firm requires longevity … check. Legendary status requires extraordinary achievements … check. But even more, legendary status requires overcoming major obstacles and the ability to have great vision and clarity for what lies in the future … check. GSF Mortgage Corporation has a great story to tell and is a worthy recipient of our Legends of Lending recognition. For more information on all of GSF's offerings, visit https://gogsf.com on the Web.
David J. Coster is senior editor of National Mortgage Professional Magazine. He may be reached by phone at (919) 559-2171 or e-mail [email protected]