This month, we had a chance to chat with Steven A. Milner, president and chief executive officer of US Mortgage Corporation d/b/a Mortgage Concepts, a company he founded in 1994. Milner has been a retail loan officer since 1981.
He was born in Los Angeles, and at the age of 12, moved to the East Coast and his family settled in New York. They moved around the state a bit, moving from the Bronx, and then on to Bayside and eventually, out to Long Island, settling in Brentwood.
He graduated from Brentwood High School in 1967 and went to college at Farmingdale State College, where he focused on engineering. Steven eventually switched over to the field of education, where he became a school teacher in the Brentwood School District on Long Island.
In 1986, he formed Mortgages Unlimited Inc., a New York State-registered mortgage broker. In September 1994, Mortgage Concepts became operational, and in 1997, became a New York State-licensed mortgage banker. Steven is actively involved with the day-to-day operations of each department in the company, and is in constant communication with each department manager who represents a team of dedicated, highly-skilled mortgage banking professionals. Currently, Mortgage Concepts is a licensed mortgage banker and a FHA/VA Direct Lender, in 18 states and growing, providing retail mortgage lending and reverse mortgage lending.
How did you first get started in the mortgage industry?
As the Vietnam War began to escalate, the federal government was giving deferments to school teachers, so in 1969, I changed my major from engineering to education. I enrolled in the teaching program at Stony Brook University and finished my degree there. Ironically enough, I did my student teaching at the elementary school originally attended in Brentwood, N.Y.
I was in the education field for about 18 years, provisionally certified to teach kindergarten through sixth grade. In 1973, I got married, and at the time, I was making $25,000 as a school teacher and my wife was also making around $25,000 annually as a teacher. In 1978, my son, Scott, was born and we immediately went from making $50,000 a year to $25,000 a year, as my wife became a stay-at-home mom. The single income stream necessitated that I start hustling around, continuing to go to school at night and work part-time jobs, including a basketball coach, intramural coach, football coach and student council advisor. By 1981, I had tried every part-time job just to make a few extra bucks, including selling Amway products, while continuing my education at CW Post, studying school supervision, as my goal was to become a principal.
That same year, I went to refinance my home. When we went for the refi, the salesperson who took the application also happened to be a teacher in the Huntington School District on Long Island. I said, “Gee … if you can do this, I can do this too!” I thought it was a good idea to do loans part-time, giving up all my other part-time jobs to focus on just one thing. I asked if I could set up an interview, and the following week, came back and sat down to learn what it was all about. I was told that they did not do any training, and that I would have to teach myself the business. I was given a copy of the Fannie Mae/Freddie Mac Seller/Servicer Guide, which was about four inches thick, and was told to go home and read it.
I came back the following week, after reading the guide, and asked exactly what the position entailed. At that time, the 1003 was a one-page document, front and back, not four pages. I figured it seemed pretty easy, as you had to be detail-oriented, which I was already as a teacher. I said, “Show me the money! So, he offered me 125 percent commission. I could not believe that I was going to be paid $125 for originating a $100,000 loan.
What people forget is that the 1003 was never designed for a loan officer to complete … it was designed for the borrower to complete. It’s not rocket science. Unfortunately, we have made it into rocket science, but it was always designed for a borrower to complete with respect to their income, assets, credit, liabilities and so on. To me, it was just a matter of establishing a relationship with a borrower, interviewing them and collecting the information.
I decided to give up all of my part-time jobs in 1981-1982 to just focus on mortgages in a part-time capacity. In life, we often come to a fork in the road and must choose which side to take. Sometimes, it’s the right fork and sometimes it’s the wrong fork, and in my case, I know I made the right decision. In deciding to give up all of my part-time jobs, it created a great financial strain on my family income.
How did you find your newfound interest in the mortgage arena in the beginning?
Being that I didn’t recieve any training, I had to approach Realtors, attorneys, financial planners and accountants the old-fashioned way and hit the streets. I did this from 2:30 p.m.-5:00 p.m. each day, after I left teaching. I didn’t give up teaching because I had to still make a living. So I started to take applications and go to school at night because my objective was still to become a principal.
The first 24 applications that I took never closed in my first six months. It was getting brutal, as I had lost my part-time income and now was making nothing in the mortgage field. I was actually losing money because I was incurring expenses bringing in coffee, bagels and donuts and all that stuff … trying to establish relationships with my contacts through networking.
What was it that kept you in a field where you were losing money in?
I’ve always believed that persistence overcomes resistance, and I knew that money was to be made in the mortgage marketplace. I just lacked the proper direction due to the absence of training. I vowed, at that point, that if I were to ever have my own mortgage company, I would train my salespeople and provide them some direction. I had a tremendous desire to succeed in this business.
One day in school, I was giving a test and took out some of my mortgage paperwork. One of the students asked if I was into real estate, and he suggested I meet his father who was also in the real estate industry. My student’s father had an office in Queens, so we set up a meeting and discussed some opportunities. He was a real estate broker in Florida and what he wanted to do was sell me properties in Florida. I wasn’t interested in that, but he did introduce me to his sales manager who was running the mortgage brokerage division. She offered me a 50 percent commission. I signed on and was finally starting to close loans. I would solicit real estate agents, attorneys and financial planners, primarily to do purchase money business in the Brentwood, Long Island, N.Y. area I taught in. I would take applications in local libraries, diners or wherever I could meet clients.
In 1986, I received my doctorate in mathematics and supervision, and was ready to move on to the next step in my career as a school principal. I was making $45,000 as a teacher and $115,000 selling mortgages.
In those days, we didn’t have cell phones, and fax machines were a novelty. The only real form of advanced communication that I had was a pager. In my recorded pager message, I said that I would return their call in five minutes. That became my trademark, to call back within five minutes … no matter where I was. That’s how I ended up developing my business, going from five loans per month, to 10 loans, to 15 with nothing more than a stack of business cards and the reputation of working hard, being responsive and delivering on my word.
Did your success in the mortgage field and the opportunity you saw to make money in this field lead you to quit teaching?
Yes, I came to yet another fork in the road, and in 1986, I had the opportunity to open up a mortgage company with two other partners in Bayside, N.Y. When I left teaching, I gave up 60 percent of my pension. If I had taught another two years, I would have received my full pension, but I had to evaluate what was right at the time and made my decision to go full-time into the mortgage industry.
My two partners worked the the Five Boroughs, and I worked Nassau and Suffolk Counties on Long Island. At any given time, I would have $30-$50 in quarters in the glove compartment of my car and I knew the location of every pay phone on Long Island! Cell phones did not exist.
Our primary business was purchase money, all Realtor-based. I would hand-deliver the commitments to the attorneys, the selling agent, the listing agent, and market myself to everyone involved in the transaction. It became a strictly referral-based business. I did not know how to do consumer-direct telemarketing or how to buy leads.
We eventually opened up a satellite office on Long Island in Hauppauge, N.Y. in 1991 and another larger office in Bohemia, N.Y. in 1992.
We dissolved that corporation in 1994, due to a difference in opinion. I wanted to become a mortgage banker and my partners wanted to remain mortgage brokers. We weren’t processing our loans the way mortgage brokers processed their loans, as we were using the Citibank Mortgage Power Program, the Williamsburg Power Program and GreenPoint. Basically, we’d fax the info over to them and they would do the loan. We were doing 125 loans per month with one or two employees, making a lot of money with very little overhead, but I felt the industry was changing and that we should become mortgage bankers.
I formed US Mortgage Corporation in 1994, with the intent of opening up and getting my mortgage broker registration approved by Oct. 1, 1994, which I ultimately did, and during that time period, I developed the logo for US Mortgage Corporation or USMC. The USMC name looked too much like the United States Marine Corps, and I didn’t think I was getting the right message across, so we made it d/b/a Mortgage Concepts. We developed a unique selling proposition, which was “Helping You Make It Home,” the slogan we used on all of our business cards, Web site, literature, etc.
Why did you want to make that change from mortgage broker to mortgage banker?
I felt that I needed to control more of the process, specifically, the underwriting of the loans. Additionally, I felt that the future was in mortgage banking and not mortgage brokering. We stayed a broker until 1997, and then received our banker license in 1988.
I developed a nice tight knit group of retail referral-based loan officers, dong business exclusively in Nassau and Suffolk Counties, primarily receiving business from the Realtor community. Our business was consistently 90 percent purchase money transactions.
I have always worked very hard at this business, working 16-18 hours every day. I have always told my staff that I am like a Motel 6 … ”I will always leave the light on for you.”
I started to see a change around the last quarter of 2004, a very unusual drop in originations that had progressed into 2005 that got much worse in 2006. I eat, sleep and breathe this business.
In 2004, there were no FHA [Federal Housing Administration] loans on Long Island to speak of because of the high loan amounts, and the loan limits were very low on FHA loans I had my Mini-Eagle, but did not use it very often.
The one decision I made that saved the company was that I never put one sub-prime loan on my warehouse line. I could have made a lot more money like many other people did, but I would rather make less and stay in business.
I’ve always had the philosophy that bigger is not better … better is better. I think that philosophy has transcended through everything I do with Mortgage Concepts. To me, it’s not about making millions, it’s about getting loans closed the right way, assuring, to the best of our ability, that the loan is going to get repaid. We’ve always consistently done 80-120 loans per month, with an average size of $400,000 per loan, and keeping the economies of scale in place. Mortgage Concepts is closing approximately $30-$35 million per month consistently.
In 2006, I felt that I had to change my business model because I saw a tremendous decrease in values in the Long Island, N.Y. market, which is where we are focused. Values were decreasing, and it was affecting the purchase money business. I love what I do and I felt like I really needed to re-invent Mortgage Concepts, which required that I change from having a one-dimensional business model, which was primarily purchase money out of Nassau and Suffolk Counties, to a multi-dimensional mortgage company doing business in other states.
In changing your model, how did you attract new salespeople?
I changed and expanded my business model and basically applied the J. Paul Getty theory where I’d rather have one percent of 100, than 100 percent of one. To do that, I decided to become licensed in as many states as I possibly could, starting in 2007. This way, I could attract salespeople from all of the states we were becoming licensed in. I felt that I was strong on the operational side, from origination through closing. In terms of sales, I had to create an opportunity in different states by opening up corporate branches. Many states still allow loan officers to work out of their home, while others require brick and mortar locations. We are currently licensed in 18 states, and have our FHA and USDA [United States Department of Agriculture] approval.
We allow our loan officers to originate from their homes or from their brick and mortar offices, but we process and underwrite all of the loans in our Bohemia, N.Y. headquarters. I cannot allow off-site processing and underwriting. Everything has to flow through here, and now with technology, that goal is much simpler to accomplish. Currently, we have approximately 140 salespeople licensed in 18 states, but within just a few weeks from now, we will be licensed in 20 states. My goal by the end of the year is to be licensed in 35-30 states and not to expand without control. You have to be able to control the quality of the origination and maintain integrity of the files which is challenging with a 10 percent unemployment rate.
Our loan officers do a compilation of everything, including purchase money and refinances on a referral basis, or they do lead-based where they purchase their own leads, but we do not do any direct response marketing. Direct response marketing can create an underlying pressure from the loan officer through the underwriter to close loans, to meet the economies of scale and to meet the budgetary requirements of running a mortgage company. Let’s face it, if you are spending $300,000-$500,000 per month on advertising, you have to close a lot of loans. That means you are going to be putting a lot of pressure on salespeople and on management to essentially close loans without any regard for the willingness of the borrower to repay, and I think that philosophy has caused the demise of many of the larger mortgage companies.
What is Mortgage Concepts’ current minimum FICO score?
It’s 620 across the board, but it’s probably going to go to 640. I think that you are going to see that scores under 640 will have some very serious performance issues. There is a higher degree of a borrower’s unwillingness to pay, so we are probably going to have to migrate and have our own credit overlays and transition to scores of 640.
One of my objectives is to obtain Ginnie Mae approval by the end of the year. I’ve seen companies get Ginnie Mae approval and use it to their disadvantage. They adapted a sort of “kid in the candy store” type mentality. Certain companies take their Ginnie Mae approval and use it to do loans they know are not going to perform. It inevitably catches up with you when you approve loans that should not be approved.
Do you have any particular business philosophy you like to impart upon your salespeople?
I’ve always felt that the needs of the corporation exceed the needs of the individual. The needs and longevity of the corporation are more important than what a Realtor needs, a loan officer needs and what a borrower needs, because without the corporation, none of those aforementioned entities have anything. We do not need to sit here and talk about all the mortgage companies that are left with nothing but some desks and paperclips in their drawers. My objective has always been to stay in business, and that means that if we are going to stick around in the mortgage banking business, we have to make good loans. That is what we offer salespeople all over the country the fact that we will be in business. They have a future with us at Mortgage Concepts. We are not going to say “yes” to every loan, but you will make a good living.
What do you consider the next big thing for the mortgage industry as a whole that mortgage professionals will need to embrace?
Being an ex-educator, I have always been a proponent of education. I think it is imperative that any loan officer who speaks to a borrower must comply with state-specific registration, education and testing requirements. I think that is huge, and it says a lot to any future employer. When we get out of high school and we go to college, we pay to go to college and generally work harder while at college. There should be no difference when it comes to the mortgage business. If you are going to enter this profession, then you should know the profession. You have to be able to look somebody in the eye and deliver what you say you are going to deliver. I think this requires a change in attitude, and a change in behavior with respect to where business is coming from.
Over the last four or five years, I was never, quite frankly, a proponent of the consumer-direct model, because I felt there was a level of integrity missing. Loan officers have to get that back and have to re-establish that. I still feel that as values begin to stabilize, there will be tremendous opportunity for loan officers to obtain business the old-fashioned way of walking into the offices of Realtors, attorneys, financial planners and accountants, and be their purchase money source for their borrowers.
I think that the loan officer who is technologically advanced and educationally advanced will capture more business going forward and that goes with the infrastructure of mortgage companies as well.
On the origination side, Mortgage Concepts is 100 percent paperless. I think it really enhances our ability to be more efficient. I think loan officers need to do that. With education comes knowledge and confidence, and I think that is the primary focus I would like to see loan officers take. LOs cannot have this dumping ground mentality that they had years ago. If the borrower fogged a mirror, they got a mortgage. That no longer works and it is going to take some behavior modification over the next few years to change that mentality.
How do you use technology to make sure that process of vetting a loan does not slow down the process? What kind of technology does Mortgage Concepts have in place to make sure the process runs smoothly?
Your first step is to communicate and educate your loan officers on your philosophy of doing business, and that is where behavior modification comes into play. They have to understand that we are partners, and are all in this together. As a loan officer, you have a responsibility to listen and provide a service for your borrowers to the best of your ability.
Step two is from an internal infrastructure standpoint. We use many different layers of services that are provided to us on a technological basis regarding the integrity of the file … from evaluating different mortgage applications that a borrower has to avoid potential for simultaneous applications for evaluating if the borrower is paying their rent on time.. If the borrower goes from paying $1,000 per month in rent to $3,000 per month for a mortgage with almost an identical income, they experience sort of a payment shock, and this is the type of thing we train our salespeople to look for. We have always verified the authenticity of income through a 4506-T Form, even when it was not “trendy” to do so.
There is a lot of technology available, and you must be willing to spend the time, money and energy to implement these technologies into your systems so that you can ascertain any inconsistent information in the file. Very often, we find some inconsistencies perpetuated not by the loan officer, but by the borrower. Borrowers are becoming more sophisticated these days with technology in regards to bank statements, pay stubs and appraisals.
What is your opinion of the Home Valuation Code of Conduct (HVCC)?
We have never let our loan officers order appraisals. We have to ensure that there is no contact between the borrower and the appraiser, and the loan officer and the appraiser. When we open the loan in accordance with the MDIA [Mortgage Disclosure Improvement Act] and HVCC, we order the appraisal ourselves from our approved appraiser list internally or an appraisal management company..
When the appraisal comes in, it is immediately underwritten, but we view an automated valuation model [AVM] and we use what is called a LARA Report [LandSafe Appraisal Risk Analyzer] and use a company out of Pittsburg that does a reconciliation of values. We use all three on every single appraisal to ascertain not only the authenticity and the accuracy of the value, but the accuracy of the comparable sales as well.
By having these measures in place in our post-appraisal process, loan officers who work for Mortgage Concepts know we are going to use accurate appraisals.
How are you adapting to changes with the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act) and licensing requirements? How do you feel about the fact that depositories do not have to conform to SAFE Act requirements the way non-depository lenders have to?
I am in total disagreement with that. I think that loan officers, whether they work for depository lenders or non-depository lenders, should have the same responsibilities. They have to meet with the borrower, they have to conduct an interview with the borrower and they have to qualify the borrower the proper way. Whether you are in Mississippi, North Dakota or New York, they should be required to take the 20-hour SAFE Act course and the test. Additionally, they should meet all registration, testing, education and financial responsibilities that are state-specific … no different than any loan officer in a non-depository bank. They are performing the same tasks and responsibilities in originating loans.
I have taken the 20-hour SAFE Act course, and I work 18 hours a day. I have taken the test and got a 97 on the test, and I have taken every state education requirement for every state that Mortgage Concepts is licensed in. It is an arduous and long process, but you need to do it. I try to set the example for my employees, along with Lenny Ramirez, my vice president.
How have you managed with the lack of warehouse lines that exist right now?
My warehouse lines have a good understanding of how I operate, from the origination of the loan to the closing of the loan. I think the longest period of time I had a loan on the line was 32 days. I personally monitor my warehouse aging report every night. I go home with the report under my pillow basically and when it hits 12 days, it’s symptomatic of a problem in the back office. I question why a particular loan is on the line for 12, 14 or even 16 days. I think it is our whole operation that has created a comfort level for our warehouse lines. Not only did I obtain a new warehouse in 2009, but my existing line was increased. Mortgage Concepts is currently using approximately 70 percent of our warehouse capacity, so we are well positioned for growth.
What lies ahead for the independent mortgage banker?
I think that there are some challenges and hurdles that the independent mortgage banker will face in the future. Liquidity is a big issue with mortgage bankers. I think the independent mortgage bankers are going to potentially have a liquidity issue because investors are going to look for reimbursement from the independent mortgage banker. I think that’s a serious problem, and I think we are just starting to see the beginning of that now.
Mortgage insurance companies have sent out investigative teams in an attempt to avoid paying claims to an investor that an independent mortgage banker sold the loan to, and they are denying these claims. That is one issue with regard to push-backs.
Another issue regarding push-backs is with Fannie Mae and Freddie Mac. They are going to be pushing back over $21 million this year in buybacks for loans that closed three or four years ago due to their investigative reports. Many of those are being pushed back because borrowers have filed for bankruptcy and their tax returns are inaccurate. Yet, at the time, the loans were originated and closed, tax returns were not needed. If they were fraudulent acts, that’s one thing, but these push-backs are not due to fraud.
A majority of mortgage bankers have a tremendous amount of investment in their business … emotionally, financially … from an infrastructure standpoint, from a responsibility standpoint and they take that very seriously. A good, responsible mortgage banker does not think just about closing the loan. They think about what happens before the loan is closed and what happens after the loan is closed. I think those challenges and hurdles become more and more difficult to maintain because it is becoming increasingly costly to run a successful independent mortgage banking operation. I think that sometimes, in their zest and zeal to meet those requirements, they ultimately close loans with some disregard for the ability and willingness of the borrower to repay because it becomes a financial issue.
I am always looking to do things the right way, and sometimes, it’s at the expense of developing sales. There is always that balance of sales and operations, sales and operations … that constant balance that you look for and that’s the challenge a good independent mortgage banker has.
Any closing comments?
I think that there is still tremendous potential for independent mortgage bankers to stay in business and to do good business. I think that, with respect to Mortgage Concepts, we offer the ability to become valuable partners with us. We have a department that recruits teams of highly-qualified loan officers and mortgage brokers who are interested in partnering with us. We are very detailed-oriented about the entire hiring flow and educational flow that these partner branches or teams will have to follow in order to integrate into our system. We offer tremendous support. Our rates are extremely competitive, so we give them the tools and support to succeed.
We have zero tolerance for fraud … zero, and I stick to that like glue. That’s very important to us and they must understand that. One quote I often use, is “The future ain’t what it used to be.” I think Yogi Berra said that and people have to get out of that mentality. They have to know that we do things the right way and if they are willing to do that, then there is an opportunity for them at Mortgage Concepts.
From a partner branch standpoint, the industry needs to know that we have a very expeditious opening, underwriting and processing loan flow process. The loan is opened within 24 hours and is underwritten within 72 hours. Commitments go out immediately. Some lenders open the loan, the processor works on the file for 30 days and then the file is given to the underwriter for approval. We do it the other way around. We open, underwrite, give it back to the processor and they gather the conditions and then we clear the loan for closing. My staff at Mortgage Concepts is second to none. Most of my employees have been with me over 15 years, and they are very important to me. We are a growing company, but we operate as a family unit.
I look forward to the challenges and hurdles that lie ahead for Mortgage Concepts and the industry as a whole. This is a wonderful business and as I always say “Life is not about having what you want … it is about wanting what you have got.”
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
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