Chandler, Arizona-based Geneva Financial announced the addition of a “sizable group” of loan officers and branch managers out of the St. Louis, Missouri, area and surrounding markets, formerly with USA Mortgage.
The group is led by Area Manager Justin Lynch, who was born and raised in St. Louis, and had been with USA Mortgage for nearly 14 years.
Lynch says the switch to Geneva is part of his team looking at things “a little different” in the aftermath of back-to-back, best-and-worst times for the mortgage industry ever. He says what Geneva offers is new and exciting, particularly how the company is organized and run.
“The way it's run is maybe polar opposite of how Aaron's mindset is to the team that runs USA,” Lynch says.
Aaron VanTrojen, founder and CEO of Geneva Financial, said the strategic expansion would add approximately $250 million in annual volume to the company’s already growing production, in addition to bolstering Geneva’s presence in the Midwest region.
“I’ve never really targeted big groups because they tend to be the least profitable, historically,” VanTrojen told NMP. He isn’t moved by production, but profitability, loan value not loan volume.
Making The Switch
Since volume began plummeting in mid-2022, VanTrojen continues, it has been difficult to find any teams – no matter the size – originating profitably. “Lynch’s group was an anomaly. It’s probably the biggest group we’ve brought on in company history.”
From a numbers perspective, making the move to Geneva was simple for Lynch – even if nothing else changed, they were far more profitable with Geneva than with USA Mortgage.
As of publication, USA Mortgage has not responded to a request for comment.
Last year was slower for his team, Lynch says, but not by much. They originated $200 million in total loan volume in 2023 against $215 million in 2022 and $330 million in 2021. Business will bounce, he says, whenever the Federal Reserve cuts interest rates, but recruiting is another way he hopes to grow his operations with Geneva.
Though his team has only been with Geneva for a month, “with the additions we've already seen,” he says, “we're definitely well on our way to growing bigger than we were for the last couple years.” On top of that, Geneva allows Lynch to pay his loan officers more, he says, and offer borrowers better rates.
“It's just a win-win for everybody all around the way it's structured over here,” he says.
Lynch says that he’s been able to manage a large team and produce at a profit because he “looks hard” at his team’s expenses. He’s not afraid to cut his losses. He also advocates “hoteling” as a branch strategy, instead of signing expensive, long-term leases.
A lot of mortgage companies and branches, he continues, get themselves in “sticky situations” by signing three- or five-year leases at a very high cost, “not knowing what the industry's going to do on a month-to-month basis, much less year-to-year basis.”
Hoteling, or having an open-office setting, allows the operations team to have an assigned work space, while salespeople, who are rarely in the office all at once, can work at any open desk. With a smaller footprint, the company does not burn money on unused space, Lynch says.
Lynch also doesn’t burn money on high salaries for managers when the business is performing poorly. Instead, he “bonuses out” when the business performs well, which lowers fixed expenses during more difficult markets. Paying bonuses, he says, often results in higher pay than if it was paid out in salaries.
The team understands this pragmatic approach, which differentiates their ability to be profitable as a larger team. “A lot of people out there,” he explains, “want that high salary no matter what's happening, so then they might run a negative P&L, which to me is a big no-no.”
A Sign Of The Times
Geneva’s strategic expansion through the addition of Lynch’s team is a sign of the times. Where a majority of mortgage lenders originated in the red in 2023, Geneva did not. The company places an emphasis on profitability and professionalism – not chasing rates to the bottom.
Now, in 2024, some may say it’s quite a coup for Geneva to pick the pocket of the larger and more widely known USA Mortgage. But, that’s VanTrojen’s growth mindset -- and business strategy -- at work. When markets turn, there’s often a flight to quality, and the same holds true in the mortgage business.
Lynch says that’s the biggest thing his team looks forward to in making this transition after a few years of stagnation at USA Mortgage – being able to grow.
In 2019, USA Mortgage was more than twice the size of Geneva Financial when looking at total production, according to Modex. In 2020, USA Mortgage originated $4.48 billion against Geneva’s $2.24 billion. In 2021, USA Mortgage originated $4.75 billion against Geneva’s $2.63 billion.
Both companies had a similar blend of purchases and refinances and both companies bank all or nearly all of their loans.
2023 was a year marked by the lowest home sales volume in 30 years. That year, last year, USA Mortgage originated $1.87 billion against Geneva’s $1.53 billion, representing a 13% drop from USA Mortgage’s 2019 production and a 35% increase from Geneva’s 2019 production.
“The attrition rate at USA Mortgage and most of the rest of our competition has not been what Geneva has experienced,” says VanTrojen, who says in 2022 and 2023 his company has focused on the same things it always has – low overhead and high profitability.
Not only does Geneva’s model shield the company from losses and promote growth, but attracts more talent.
Plug Lynch’s group into Geneva’s business model and they are “hugely profitable,” says VanTrojen. “They’re a good group and we can help them grow because they’re competent and we can do the things for them that USA Mortgage hasn’t been doing for them for 14 years.”
Lynch says he has received more recruiting insights and assistance in the last 30 days with Geneva than he received in his entire time with USA Mortgage. “There's no fences or parameters put up that I can't go in certain territories or parts of the country,” Lynch says. “I'm allowed to open an office wherever I want,” with some small nuances related to the proximity of Geneva’s other branches.
Other draws Geneva offered were simpler P&L statements, lower rates, better tech, a robust marketing team – and, the company’s hallmark, higher compensation. Most originators and branch managers at Geneva net between 175-250 basis points.
“I think anybody who gets in sales,” says Lynch, “you're driven to better your customer. On the other hand, if you can do everything great and there's more money to be made at the end, then great. I don't think there's a good salesperson that doesn’t want to make more money.”
At the same time, Geneva’s model allows Lynch to pay his people more. “It just changes their mindset and that's their excitement also, doing the same thing with some different tools in the belt, being paid more and being able to offer a better interest rate than what we could offer 30 days ago.”
A Fit For Company Culture
VanTrojen wasn’t only impressed by the competence and profitability of Lynch’s team, though.
A stickler for compliance, VanTrojen says he cannot name a single competitor that is “remotely compliant,” including USA Mortgage. The first thing VanTrojen tells new recruits, including Lynch’s team, is what they can and cannot do “because those things you’re doing are illegal.”
“One of the things that made such a difference with Justin’s team,” he explains, “especially for such a big team, was they wanted to do it the right way.”
Lynch acknowledges that nearly 14 years with USA Mortgage is a very long time to stay put in the mortgage industry. Making the switch to Geneva engenders a high degree of excitement, and though not everybody on Lynch’s team decided to make the switch, his core group of branch managers did.
“We've been together since mid-2017,” he says. “As far as running it, we were part of another branch before, so we've been ‘the powers that be’ making the decisions since 2017, as a group.”
Based in St. Louis, Missouri, himself, the 20-or-so people that Lynch has on board so far are sprinkled across the region, from St. Louis to Kansas City to the Dallas-Fort Worth area. In Lynch’s market, less competition, lower loan balances, and lower costs of living make finding business and closing loans easier.
The fact that most people born in the Midwest tend to stay in the Midwest means the relationships between referral partners and originators, as well as originators and clients, runs particularly deep.
“We do loans for the children of people that we did loans for 15 years ago, five years ago, 20 years ago. It’s a family aspect then,” Lynch explains. Lynch, in fact, lives just a few miles from where he grew up.
He says that when people from St. Louis are introduced to each other, more often than not the first question they ask is, “What high school did you go to?” When out-of-towners are asked, “they don't understand why the heck we ask that question.”
Though it’s an ongoing joke in the St. Louis area, the question is a reflection of the community’s desire to meet one another where they’re at – which is a great way to get a referral. Lynch is from that community, so he gets it.
“Everybody jokes about it, but it does give you a lot of insight into their background,” he says. “St. Louis is a pretty large city, obviously, but you know you're going to know somebody from that area.”
It’s that kind of customer-centric approach that made VanTrojen certain Lynch’s team matched Geneva’s company culture. After all, Geneva's company slogan is, “Home Loans Powered By Humans.”
Opportunities On The Horizon
The fact that nearly half of the loan officers who were in the industry in 2021 are no longer licensed and originating will be a boon to those who have stuck it out, like those at Geneva Financial and those on his team, Lynch believes.
“The longer you can stay in the industry and do well,” he explains, “you will get a larger portion of the pie. When things do turn, and people try to flood back in, there's a barrier of entry about having a license, you can't just be an LO tomorrow. Being able to have a larger piece of that pie will just help you grow and grow your brand, also.”
From a market perspective, though, Lynch’s biggest concerns looking toward the rest of 2024 are the timing of interest rate cuts, ever-rising home prices, the number of borrowers gravitating toward rentals (given a lack affordability), and investor purchases making it more difficult for first-time homebuyers.
Where he lives on the northwest side of St. Louis, there have been “so many” apartment complexes being built. That worries him.
“The American dream is to be a homeowner,” he explains. “A lot more people are having to gravitate toward rentals, but that's very expensive because those rents are going up. But, it's cheaper right now than buying a house depending on how you want to look at things and what the house value is.”
