Catching a break
Lenders looked like losers when former NFL tight end Casey Crawford got in the mortgage game.
By Lisa Davis
In 2009, when the economy was still reeling from the worst financial crisis since the Great Depression, Casey Crawford was trying to establish his fledgling mortgage bank by making pitches to real-estate companies. It so happened Hadi Atri, owner of Charlotte-based Re/Max Executive Realty, was looking for a lender who would devote more attention to the agents in his offices — one of the largest Re/Max franchises in the Carolinas. “We had no business calling on those guys,” Crawford says.
Movement Mortgage LLC now has 10 lenders and assistants based in Atri’s seven offices and captures about a fifth of the loans made to his agents’ clients, who bought more than $950 million of property last year. Federal law bars lenders from paying real-estate agents for referrals, but Movement rents the space it occupies in Atri’s offices, shares some of his marketing costs and helps train his agents. Being only steps away, Crawford’s people get first crack at many homebuyers. “I think their business model is quite effective at the moment,” says Roberto G. Quercia, director of the UNC Center for Community Capital in Chapel Hill, which studies mortgage finance. “They realize the key role that real-estate agents play in the whole thing.”
Despite starting his business after the housing bubble had burst and as the economy slowed, timing is now on Crawford’s side. Movement, which markets itself as the “No. 1 fastest growing mortgage bank,” is riding high on the industry’s recovery. Revenue totaled $155 million last year, up from only $5.4 million in 2009. Loan volume soared to $3.3 billion. It made Inc. magazine’s list of the 500 fastest-growing U.S. private companies in 2012 and 2013, and its staff, now about 1,300, is expanding as declining demand for refinancing homes is forcing many lenders to retrench. Its partnerships with real-estate companies give Movement a presence in 314 offices in 38 states. About a quarter of loan volume is in North Carolina, where Crawford lives, works and once played professional football.
About 18 miles from downtown Charlotte and the pink granite tower of One Wells Fargo Center — occupied by the nation’s largest mortgage lender — the former Carolina Panthers tight end strides past cubicles to his office in a suburban park. Wearing jeans and a baseball cap, he drops into a white upholstered chair that barely holds his 6-foot-6 frame. He talks animatedly, often punctuating his thoughts with a quick laugh. He opened what was then called New American Mortgage LLC in 2008 with Toby Harris, a former executive with National City Corp., an ailing Cleveland-based bank once among the 10 largest U.S. mortgage lenders. Even as they filed their paperwork the previous year, home prices were tumbling and defaults rising. As they put credit lines in place and rented space, they watched the financial markets freeze and the economy swoon. “I thought I had made the biggest mistake of my life,” he admits.
In January 2008, Charlotte-based Bank of America Corp. announced it was buying foundering Countrywide Financial Corp. for $4 billion — 80% less than the Calabasas, Calif.-based mortgage giant’s market value the year before. In March, the Federal Reserve engineered the emergency sale of The Bear Stearns Cos. to JPMorgan Chase and Co., both based in New York. In September — the same month New American opened — another Gotham giant, Lehman Brothers Holdings Inc., failed, followed a month later by San Francisco-based Wells Fargo & Co.’s fire-sale purchase of Charlotte-based Wachovia Corp. Amid the gloom, as Crawford signed personal guarantees on loans and sank a lot of his family’s wealth in the venture, business dwindled to a trickle.
Still, he kept the faith. “We think the United States is going to continue to value homeownership,” Crawford says. “That’s a core value, and someone’s going to have to provide those loans.” He and Harris hit the road, calling on real-estate agencies and striking deals in Metairie, La., Irvine, Calif., and elsewhere. It helped that commercial banks were busy working out bad loans and, as interest rates plummeted, meeting surging demand for refinancing. “Our competitors were going after refinances,” Harris says. “We went after the purchases.” In late 2008, the Federal Reserve announced it would buy $600 billion in mortgage-backed debt, its first stab at quantitative easing, a tool to motivate banks to make more loans and spur the economy through lower interest rates. “It gave us some oxygen,” Crawford says. “People started buying homes. A little bit of confidence came in, because you felt like the federal government was going to backstop this slide that was going on. Since then, we haven’t looked back.”
Industry upheaval created openings for new lenders or older companies that rebranded, says Paul Hindman, managing director of Management Advisors Executive Search LLC in Raleigh, who specializes in the mortgage industry. If lenders had good leadership and no legacy issues, the market was ready. “The stars were aligned for them to be successful.” Low interest rates, coupled with government programs encouraging mortgages for people with lower incomes or credit scores, benefited such companies as Dallas-based Everett Financial Inc., which does business as Supreme Lending, Houston-based Envoy Mortgage Ltd. and Newport, R.I.-based Embrace Home Loans Inc.
In the last year, however, the phone stopped ringing at many residential lenders as interest rates ticked up a percentage point, to about 4.5% for a 30-year mortgage. That’s low by historical standards but high enough to squelch refinancing applications, which plummeted 70% through March. The volume of home loans in the first three months of this year was less than in any quarter since 1997, according to Mortgage Bankers Association, a Washington, D.C.-based trade group. Movement dodged that bullet by avoiding refi mania, says David Lykken, managing partner of Austin, Texas-based Mortgage Banking Solutions, who has consulted for the company. “They really pushed their people: Don’t pick the low-lying fruit, because the low-lying fruit is going to be gone.”
Movement’s goal is to win 10% of the purchase market within its first 10 years. But with fewer mortgages being refinanced, the purchase market is becoming more competitive. Gaining market share might require offering lower interest rates or other incentives, usually an expensive, risky approach, Hindman says. “I don’t think you have to make concessions,” Harris responds. He later elaborates: “When you get up earlier and stay later, when you have the tenacity and persistence, then you can get business — even when there is not enough business to go around.”
Crawford, 36, grew up in Falls Church, Va., outside Washington. His father, who played football at UNC Chapel Hill, ran a hardware store, and his mother was a human-resources consultant. Drafted to play professional baseball, he opted to enroll at the University of Virginia, where he played baseball and football. In his third year, he quit baseball after breaking his ankle, but he was a first-team All-Atlantic Coast Conference tight end in 1998. “He was tough,” says Danny Wilmer, his position coach. “He would give you all he had. He was an emotional player.” But injuries plagued him. Also All-ACC academically, he earned a bachelor’s in sociology in 1999, and that fall, with a cracked pelvis and pulled groin, he limped to the end of his final year of football eligibility as a graduate student.
Sick of surgeries, he and a childhood friend started an Internet company, but the possibility of playing professional football tugged at him as his injuries healed. At an agent’s urging, he attended the NFL’s 2000 talent-evaluation combine, but his name was not called through all seven rounds of the draft. “It’s like you get all dressed up for the dance,” he says, “and nobody asks you to dance.” The Carolina Panthers offered a free-agent contract and a chance to compete for a spot on the roster. He broke his nose in his first preseason game but gritted through to the end. However, it was injuries to others as the season progressed that got him onto the field.
His first catch was for a 16-yard touchdown. “Steve Beuerlein,” he says, referring to the Panthers’ quarterback at the time. “I still thank him every time I see him in the Harris Teeter parking lot.” When the Panthers released him after two seasons, he signed with Tampa Bay for another. He played in 15 games and made five receptions during his three-year career. By his second year, his annual salary was about $304,000, part of which he used to buy rental properties. He started a private- equity company to lend money to others who were doing the same. It was the early 2000s. “The only way you could be wrong in real estate was not to buy something. So I was pretty sure I was the smartest guy to play in the NFL.”
By the time his pro career ended in 2003, Countrywide and other specialists were making mortgage lending look extremely lucrative. Seeking backing, he called National City and hooked up with Harris, who supervised the bank’s mortgage joint ventures from Virginia Beach, Va. Great, Harris responded, promising to have a pro forma and plane ticket to Virginia Beach on Crawford’s desk by 10 a.m. the next day.
They saw a lot they liked in each other. Harris taught scuba diving, competed in Ironman triathlons and did search-and-rescues as a volunteer deputy sheriff. And he understood mortgage banking. “I didn’t have a lot of business mentors,” Crawford says. “I just thought this would be a great guy to spend some time with.”
“He was very aggressive,” Harris, 64, says. “We were both a bit aggressive, you might say, and so we fit together well.” They negotiated a deal in which National City would provide funding, processing and underwriting. Crawford would attract business. “He walked into my office, and we became instant friends. We had tons in common. We knew that we were going to make a lot of money together.”
Harris, who had grown up on a farm in northwest Tennessee, majored in economics and military science at the University of Tennessee at Martin. After active duty in the Army Signal Corps, he moved to Richmond, Va., to manage a heavy-equipment leasing company, then sold real estate in Virginia Beach. A developer invited him to join a new mortgage company, and from there he went to work for a New Jersey-based lender. In the mid-’80s, he became president of Tidewater First Financial Group, a struggling mortgage company in Virginia Beach. “It had tremendous potential,” he says, “but not a lot of direction.” Its fortunes improved, and a series of acquisitions brought the company and Harris into National City. By 2008, when Pittsburgh-based PNC Financial Services Group scooped up the bank, he was gone. After working with Crawford in the joint venture, they had decided to start their own company.
Despite similarities, they have different mindsets, Crawford says. “He will start with everything that could possibly go wrong for our company and work on shoring up anything that can happen to prevent or mitigate things that could go wrong. I probably start from everything that we could ever possibly accomplish, shooting for goals that are so ridiculous it’s almost embarrassing saying it to our peers.” That’s what makes the company stand out, Hindman says. “Casey is an articulate, charismatic leader who has so much charm that everyone wants to quiet down and listen to him.” Harris “is the glue that holds things together. He brings operational soundness.”
They saw no reason to move to the same city, so the company operates from two bases. In Charlotte, President and CEO Crawford handles sales and financials, and Executive Vice President Harris runs operations from Virginia Beach. Movement processes loans in a 40,000-square-foot office there, as well as in smaller locations in Charlotte, Richmond and Phoenix.
One legacy of the housing meltdown is new regulation, the most extensive created since the 1930s. The Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted in 2010, unleashed a flurry of new rules. Mortgage lenders have regulators “looking over their back just like the big banks do,” says Tony Plath, an associate professor of finance at UNC Charlotte. “It makes it more difficult for smaller, independent underwriters, because they don’t have the size or compliance staff that the big banks do.” Maybe so, but more regulation also keeps out potential rivals. “It becomes a barrier to entry for the next competition,” Crawford says. “The capital and the infrastructure to get in this business now is so much greater than it was four or five years ago, and one of the big reasons is compliance.”
About a year ago, Crawford went to Erskine Bowles for advice. A former chief of staff in the Clinton administration and University of North Carolina system president, the Charlotte financier is lead director at New York-based Morgan Stanley & Co. “He said, you really need an outstanding CFO in your organization,” recalls Crawford, who had been filling that role. “I said, ‘Yeah, I agree. Do you know anyone?’” He did: his daughter-in-law. Laura Bowles was director and head of consumer and small-business lending products at Citibank in New York. Earlier, she had managed risk for $230 billion in annual mortgage originations at BofA and been CFO at Wachovia for consumer loans and other products. “She took a leap of faith to come join us and take us to the next level,” Crawford says.
Since arriving in March, she has worked with potential investors to add products, including jumbo loans that Movement plans to hold rather than sell to investors on the secondary market. She also is putting in controls to monitor the company’s growth. “My goal is both to be able to continue the high level of growth while also developing more of the processes and efficiencies that you have with more-established companies,” says Bowles, who had tired of commuting between Charlotte and Citibank’s New York offices, especially with a husband and small children in North Carolina.
While U.S. housing has stabilized, 2014 has been a slog for the industry. The total dollar amount of U.S. mortgage originations will be at its lowest level since 2000, the Mortgage Banking Association forecasts. Interest rates are expected to continue to rise, and how long the Fed will keep supporting mortgage markets is uncertain. It’s nail-biting time for many lenders, Plath says. “There is room in the market for companies that are coming into the business that are differentiating and doing things different from the big-bank model. The question is, can you sustain that particular niche-focused business model over different phases of the business cycle?”
Crawford and Harris take a long-term view. “This wasn’t an opportunistic play for us when we entered the market,” Crawford says. “We saw opportunity, but the opportunity was to build a platform that would last for generations. ... We said fundamentally we want to be working with people who are buying homes. That’s the biggest driver of the U.S. economy. We believe it’s the safest place to be.”