Killing It With Kindness

Glenn Stearns thinks he can return to the highest ranks of the mortgage business with a new focus on kindness with Kind Lending.

Keith Griffin
Glenn Stearns, CEO of Kind Lending, standing joyously above a lake.

For a guy whose smile exudes an almost “gee, shucks” easy going demeanor, Glenn Stearns seems to know a lot about getting kicked in the teeth.

Sure, he’s the guy who founded Stearns Lending when he was only 25 years old. But he’s also the guy at the helm of Stearns when the subprime mortgage market implodes, and the company is slapped with reams of lawsuits and revenue does a cliff dive.

He’s the guy who this year bought prolific mystery author Dean Koontz’s nearly 30,000-square-foot mansion in Orange County, California for a reported $50 million. But he’s also the guy who, at age 14, got his 17-year old girlfriend pregnant and had to work a hardscrabble existence while completing high school.

He’s the guy who righted the ship at Stearns Lending after the Great Recession nearly did it in, and the guy who sold the company to private equity firm Blackstone Group in 2015 for a reported personal net of $380 million. But he’s also the guy who watched Blackstone file for bankruptcy reorganization a couple of years later, wiping out millions of dollars still owed to him.

Glenn Stearns’ history is made for a guy who’s always got something to prove. What’s ironic is that what he’s trying to prove now is that kindness matters.

Mortgage Destiny

Maybe it’s for the best that Stearns knows a thing or two about beating the odds. Because this year he decided to get back into the mortgage industry by launching a new company: Santa Ana, Calif.-based Kind Lending LLC, a wholesale lending and mortgage banking venture, a new approach to wholesale lending, he asserts. But just two weeks after Kind Lending made its formal debut, the country would be walloped full-force by the onslaught of the COVID-19 pandemic. It’s a narrative no one would wish on his worst enemy.

In 2019, Stearns was the star of “Undercover Billionaire,” a reality TV show on the Discovery channel where he took $100 and launched a business in 90 days that would be worth a million bucks. The jury’s still out if Underdog BBQ in Erie Pennsylvania is a $1 million company but it’s still open through the coronavirus.

Yet, knowing Stearns’ background, could it be a sign that he’s going to succeed yet again? He just might if his streak holds.

Stearns wasn’t looking to get back into the mortgage business necessarily. The serial entrepreneur has his hands in lots of other business. Then, on the day “Undercover Billionaire” was announced, big news dropped. Stearns Lending, which he no longer controlled, declared bankruptcy.

Stearns acts like he was to the manor born. He doesn’t discuss his worth. But the Stearns Lending bankruptcy had to hurt.

“I had owned 30% of the company and I had a lot of money that was due to me and they wiped it all out in their reorganization and they came out of it with no debt,” Stearns said during a Zoom interview with NMP from his Jackson Hole, Wyoming home. But the news also brought freedom. “It didn’t take me 5 minutes to realize I can compete now.”

Stearns said he could have focused on the wrong thing: losing the money owed him. “I could be upset,” he recalls thinking at the time, “or I could be very, very excited about the future. I think it’s a choice. It’s always a choice. That’s to me one of my better examples to being very excited about getting back into the mortgage business.”

He claims to hold no animosity to the current owners of Stearns Lending. “I wish them well. They’ve got my name on the door, so I hope they do well.”

He just wants to do better.

Starting New

This time around he only has a small partnership with New American Funding, headed by the well-known husband-and-wife team of Rick and Patty Arvielo. There are no other investors.

“What I have done is a little different than anyone I’ve ever known. The idea was maybe some of these back-office expenses like accounting, human resources, IT and even capitals markets can be joined together and share in those expenses.”

“The idea was, ‘Why not Incubate under [New American] while they have all their licenses? I’ll go get mine. We can start that process and see if it will work.’” Stearns said it’s a partnership that may continue – or may not. “I ended up giving them a small percentage just to try it out and see if works,” he said.

“I’m not scared to push my loans through the same back engine. We don’t look at each other’s loans. That stuff doesn’t happen. Everything is separate,” Stearns said. “Most companies, they don’t take their allies and try to work together. We might talk about loan programs or best practices. Why not get more efficient? This business is already tough enough.”

Out With The Old

Stearns says the world has gotten a little harsher. Mortgage lending competition has gotten more brutal. But he has faith that there’s a demand for a company that takes a more inclusive, kinder approach. He also believes that instituting a focus on kindness comes easier when starting from scratch.

He says his former company lost its way. While he says he doesn’t have any ill words for Stearns Lending, things changed after Blackstone took over. Under his ownership, the company had a more entrepreneurial spin. Big corporate investors changed the dynamic.

“For some kind of people that culture works. For me and for the people that did really well at growing the business, it doesn’t work. There was a difference of opinion on how to run things,” said Stearns.

“You’ve got legacy people and the way things were done. I’ve watched everything change and evolve at the last company. It takes years for that to happen.”

“If I can take everything I’ve learned in the mortgage business and compress it into a couple years. I think I can probably do better than I did last time.”

Right Time To Be Kind

The biggest thing he’s trying out is a focus on kindness in the wholesale process. “I didn’t want to have the same flat, boring old-style mortgage banking. I wanted people to have a good time and feel like their opinion had weight,” Stearns said.

When he announced his new venture, he said Kind Lending would be dedicated “to putting people before profit while maintaining transparency and integrity in lending standards … Kind Lending aims to break the industry standards and introduce a contemporary approach to mortgage banking.”

It sounds all sugar and spice, and everything’s nice. But can it work?

Roland T. Rust is one person who thinks it might. He is a professor and David Bruce Smith Chair in Marketing at the University of Maryland. He’s also executive director of UofM’s Center for Excellence in Service.

Rust says he doesn’t know Stearns and the specifics of his business model but the concept is solid. Kind Lending may have appeared to be at a disadvantage opening during the pandemic. However, the timing might be right for empathy.

“In theory, I think he’s right. I think that’s the direction we are going in. My own research suggests empathy, kindness and feeling intelligence will be more important,” said Rust in a phone interview with NMP, especially as artificial intelligence takes over more tasks. Humans, the professor argues, will need to pay more attention to the feeling and emotional aspects of business.

Rust said he has empirical proof that kindness is the future of business. He’s academically reviewed research on the role of artificial intelligence in loan reviews. The study shows the use of rational, objective algorithms does not get rid of discrimination in that process. “Even artificial intelligence needs to get better at considering some of these softer issues.”

Aggressive Yet Kind

Stearns during his interviews can come off as Pollyanish. He exudes optimism and is cheerful regardless of the topic. That doesn’t mean he’s not self-aware that everyday isn’t going to be sunshine and lollipops.

“It’s necessary to be somewhat aggressive in the world of sales, any kind of sales. I’ve always been more of a soft sell kind of guy. At the same time, you need people to stand up and speak for your loans,” he said.

“You have to have a strong voice. If you’re too weak, you’ll get run over. You can be nice about and kind about it, but you can also be assertive and make sure your stuff gets done. That’s how I think we’ll feel in the company when we’re selling loans.”

Stearns knows a balance needs struck between kindness and aggressiveness. He wants his employees to get home in time for their kids’ soccer games and recitals. But, and there’s always a but, he knows there are going to be times when it can’t happen.

“I hope we’re efficient and everybody gets to clock out at 5 p.m.,” he said, but sometimes important files will need completion for people who are in a rush. “It happens when you do volume,” he added.

Plus, for some people working late or coming in early is just something they like to do, Stearns says. “We’re all different in terms of where our work/life balances are. Sometimes you don’t have a lot going on and your work is your life.” He doesn’t encourage staying until 10 but if it makes them happy, more power to those employees.

How Does Kindness Get Customers?

When it comes to the more difficult loans, Stearns suggests, Kindness plays out for customers. He’ll go after the low-hanging fruit of loans with no issues just like other top wholesalers do. But, and this is where he says he gets value by investing more in account execs, he says he can get back on top by focusing on the more troubled loans, too.

“We’re going down both lanes. We are going to go after brokers that have great loans and maybe we don’t have enough coverage. We’ll take in-house people to be able to do that,” he said, acknowledging this strategy could add “4 or 5 basis points” to each loan. “If I can find efficiencies in the process, I might be at a breakeven point with everybody else,” he said, again citing the relationship with New American.

“I still think the customer will pay 5 basis points more to have the attention and somebody who’s really going to be a voice for them,” Stearns added. “We definitely believe in the account executive and the value they can add.”

Bootstrapped Life

From anyone else, this is a tale that might draw a lot of skepticism. But Glenn Stearns is the epitome of the American success story -- over and over again.

As a child, he grew up poor in a housing project outside of Washington, D.C. Fast forward to taking his current daughters yachting in India and the Maldives; hopping between tropical islands in Raja Ampat, Indonesia; and feeding raw meat from their tender to dragons on Komodo island on his 193-foot yacht. (He now has six children and two grandchildren.)

When he first moved to California after graduating from Towson University with a degree in economics, he slept on a friend’s kitchen floor while launching his career. He now co-owns an island with billionaire Richard Branson in the British Virgin Islands. Necker Resort is considered one of the world’s most exclusive retreats.

He started Stearns Lending at age 25 in 1989. To expand his business, he became a HUD settlement contractor; eventually becoming the largest in the country. Then he sells an escrow business and puts the money in his mortgage business. Things go well until they don’t.

The subprime mortgage industry collapses. Stearn Lending is slapped with class action lawsuits. There’s a demand he re-audit 5,000 loans and he faced $100 million in buyback demands. Add to that a drop of 85% in revenue. As he said on NMP’s Mortgage Outlook Series, “Thing were dark, dark, dark.”

But this is Glenn Stearns. He slowly claws his way back through a heavy emphasis on face-to-face communications, including meeting with opposing counsel without his own attorneys. As he said in that interview, he slowly dug his way out of the hole. He used the analogy of eating an elephant. You do it one bite at a time.

Then, because he’s Glenn Stearns, he sees opportunity. He looked around a seriously imploded mortgage industry. Teams that had been together for 15 to 20 years were unemployed. In the midst of his fiscal struggles, he doubled down and hired 1000 employees between 2007 and 2009. That investment in human capital paid off.

In August 2015, he sold a majority stake to the Blackstone Group. Financial details weren’t released but at the time, his company employed over 1700 and “notched $521.7 million in revenue [in 2014], representing a 250% growth over three years that again landed the company on the Inc. 5000 list of the fastest-growing companies in the U.S.,” according to an Orange County Business Journal article. Forbes estimated the deal was worth about $380 million before tax.

“If I can take everything I’ve learned in the mortgage business and compress it into a couple years. I think I can probably do better than I did last time.”

Wants To Be On Top Again

Two months after starting Kind Lending, Stearns joked in May his company was 424 out of 425 wholesalers after its first seven loans. He said in an Instagram post,

“We’re on our way to number one.”

It doesn’t strike him as ambitious to shoot for that, he explains.

“When you think about who is number two right now, it’s Home Point. They became number two because they have gotten probably 75% of their top account execs who used to work with us. When you look at how this industry works, UWM took a different approach, a different model. They went after very clean loans and great pricing. That was the old Provident model. Don’t pay the expense of the AE.

“In my opinion, to pay the extra 4 or 5 basis points to go after the loans that need a voice and the broker that needs a voice are important. We will go after the AE that has the relationships and we’re going to be able to rebuild very quickly and get up there.”

He leans in: “We won’t be 425. Let’s put it that way. Once we get up there, that to me is a game. I want to have a very healthy, happy, bigger company. It’s a game to reel in 424 and 300 and 100 and get down to the Top 10. It’s just the way to measure it. It’s not about moving up the ladder. It’s all about having a goal.”

In an interview with the “Orange County Business Journal,” Stearns also made a bold prediction that Kind Lending will have a $26 billion portfolio in two years. He clarified to NMP that there is no real deadline associated with that number, but the figure wasn’t pulled from thin air. “I think that number came from when I left Stearns Lending, we were doing $26 billion. That took me 25 years. I think I can do it in two,” he said.

“If I can take everything I’ve learned in the mortgage business and compress it into a couple years. I think I can probably do better than I did last time,” Stearns proclaims.

This article was originally published in the NMP Magazine July 2020 issue.
Headshot of Keith Griffin, senior contributing editor at American Business Media
Keith Griffin,
National Mortgage Professional Contributing Editor
Published on
May 13, 2021
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