The “SECRET” to Southeast Mortgage’s Success

The “SECRET” to Southeast Mortgage’s Success

Over the years, many have asked me why Southeast Mortgage of Georgia, Inc., SEM, continues to book one great year after another even during recessions.  The other question I am asked frequently is how SEM avoided many of the issues that closed the doors of larger and older companies.

My response - SEM had limited exposure to buy backs due to its practices and was prepared for downturns with a scalable structure.  Nobody can perfectly predict the amplitude of a cycle you can only prepare for a range.  As everyone knows, the past recession was unique and created significant dislocations in the Georgia Mortgage Industry. 

SEM’s foundation was developed from the ground up without input from other lenders within the mortgage industry.  SEM systems and sales strategies were derived from historic best practices based on proven sales methodology, acceptable credit practices, and treating every client the way we would want to be treated.

Me and my team are not anti-social we simply did not know anyone in the industry outside of the vendors we used to execute our model.  Most of our time during the long 20 hour days was  focused on perfecting product delivery and enhancing client experience with little fan fair from our two acre - 12,000 square foot complex at Club Drive in Atlanta, Georgia. 

While many companies advertised on the radio and TV with snappy promises and fancy jingles, SEM focused on how to consistently deliver a 7-Day close (8-Day now - Frank Dodd) and maintain fast competent service on a scalable basis.  Many mortgage companies boast about dollars originated while SEM focuses on the sales team’s competency, product fit based on client needs, and the client’s experience at the closing table.

Southeast Mortgage’s Core Strengths:

Ø  SEM has a great team of dedicated people who mutually respect each other’s skill sets and understands the company will keep its promise to provide a safe, non-threatening work environment, with the ability to grow their career and family’s security.  This Trust and Commitment to a common goal is why many at SEM have worked together for 20+ years.

Ø  SEM has significant depth and experience in its management ranks and production management team with a singular focus on creating great client experiences.

Ø  SEM monitors relevant economic and industry data 6 months out while adapting strategy and sequencing resources to maximize on projected market dislocations and opportunity.

Every employee deserves a good hire.  They rely on the company to determine the fit which is part science and part art.  SEM does not just fill open positions.  SEM views hiring differently.  We balance each employee’s strengths and weaknesses to mesh with the needs of production and the people around them.  A good mesh will create a team outcome better than the single employee’s input.

Executive and Senior Management at SEM has a vast experience in Banking and Mortgage origination with significant expertise in disciplines not found in most mortgage companies.  Over the past 25+ years, our proficiency in commercial & consumer underwriting, management engineering, and large group management has been invaluable.  This vast experience provides a unique view of the mortgage market and an accurate compass to steer SEM.  After you navigate a few economic cycles and pay attention, you can interpret market data into a map of sorts that will provide the timing and resource management needed.  SEM follows the map painted by the data.  Once the map is interpreted SEM sequences strategies to maximize market opportunity and profitability.

SEM Operations is scalable with significant redundancy within leadership and production employees.  Operation’s has a tertiary backup plan in place to create just in time capability.  SEM remains efficient if volumes slow by redirecting resources to other areas and great service by quickly increasing through put by bringing in contingent resources within SEM to maintain the 8-Day close.

Risk and Poor Mortgage Loan Originator practices are a Mortgage company’s Achilles heel.  Many think the more loans closed the better.  The reality is more production is not better unless it is created with practices that mitigate risk, complies with acceptable security creating practices, and meets the transactional opportunity cost set forth in your strategic plan.  Focusing on only closing more loans will expedite the end to most mortgage businesses over time.  Inefficiencies in business are always common sized with time.   If it costs $2.00 to produce a loan, selling it for $1.99 has an end over time based on the strength of the balance sheet.

Sales and Operations are viewed as equally important as SEM.  Mutual respect between the two functions is maintained by Executive Management at SEM.   Healthy discussion and problem solving is good; however, bullying or unreasonable pushing is unproductive and not tolerated at SEM.  Closing loans is important; however, harmony and respect within the company ensures the team stays together while improving efficiency and profitability.  If you have a Mortgage Loan Originator that argues about every transaction and draws 4-5 people into the issue, you just lost significant capacity and the time it takes your team to recover from the bullying.  The recent financial crisis removed most of the grey area in credit discussions; therefore, latitude is limited.

 Maintaining an “Arm’s Length” transaction is required to create a mortgage security with low risk.  Throughout SEM, sales and operations are separate with compliance monitoring the grey area.  This structure provides a very low loss ratio for SEM and great admiration from the GSEs, Banks, Investors, and our Shareholders.  Using an “Arm’s Length” model is standard in all financial service industries and why this key discipline has been ignored by some in the Mortgage industry baffles me.  If you can profit from the sale you should not have a hand in its underwriting, AU, or processing.  Fully evolved direct lenders are reminded of this fact at each annual review and audit by GSEs, Banks, and Investors.  SEM concluded centralized AU improves the (approval/total submission) ratio.  In addition, the practice lowers risk to pair outs - loan deficiencies and reduces cost per loan closed.

SEM believes a company is only as good as its employees mesh and interact as a team.  The compliment of strengths and weaknesses within the team while sharing a common goal allows everyone to achieve more together.  Supporting this belief system must be a company that cares about its employees and truly wants to see each of them exceed their career aspirations.  SEM takes a fiduciary approach to its team and has never laid off an employee in its history.  In the past recession, SEM maintained and even grew its team for the pending recovery while going beyond written employment agreements by “making it right for the employee”.  Making it right means we paid beyond what we were obligated to in order to ensure our team and their families were taken care of.

The key to Southeast Mortgage’s success?  We focus on business fundamentals, take care of our employees, and stay focused on core products that are sustainable throughout the cycles.  SEM does not chase “hot” products or products that help sell more mortgages.  SEM focuses on the right fit for the client based on thier needs.  Our client’s trust us to take care of their family thus they refer their friends and family to Southeast Mortgage creating sustained organic growth.

By: Cal Haupt

President and Chief Executive Officer
Southeast Mortgage of Georgia, Inc.

Background:  Cal Haupt Graduated in the top echelon of his Georgia Institute of Technology class and is a formally trained commercial underwriter, consumer underwriter, and management engineer.

Banking Career encompassed: Commercial Underwriting, Commercial Lending, Consumer Lending, Mortgage Lending, System Wide Bank Operations Management, Series 6 & 63 Securities Sales, Retail Banking, and Bank Management to 3.3 billion in assets.