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American Mortgage Company Looks To Continue Market Share Growth in 2005
Franklin American Mortgage Company
501 Corporate Center Drive-Suite 400
Franklin, TN 37067
President and CEO
Interview conducted by:
Walter Banks, Publisher
March 10, 2005
Daniel G. Crockett has been President and Chief Executive Officer of Franklin American
Mortgage Company since he purchased the company in September 1994. Crockett was hired as
the first loan officer at the company, formerly known as Merchants Home Mortgage. In 1993,
he was promoted to Vice President of Production before acquiring the company 15 months
after being hired. He facilitated growth from a small 5-employee mortgage broker operation
to a 290-employee multi-faceted mortgage banker with three divisions. He created
relationships with the following and expanded them to their fullest potential: Department
of Housing and Urban Development; the Department of Veterans Affairs; Fannie Mae; Freddie
Mac; Ginnie Mae.
Major achievements of the company under the leadership of Dan Crockett include reversing
negative financial trends and turning the company into a profitable Inc. 500 Hall of Fame
institution. He originated Conventional, Jumbo, FHA, and VA residential mortgage loans and
initiated establishment of wholesale and correspondent funding divisions.
Before joining Franklin American Mortgage Company, Dan Crockett resided in Tokyo, Japan,
teaching English conversation and studying the Japanese language and business culture,
from May 1991 to July 1991. In 1992, he was a financial planner with J. H. SHOEMAKER &
CO., INC., and participated in their Mentor program working directly with their corporate
Dan Crockett received his Bachelors Degree in Business Administration, from LAMBUTH UNIVERSITY,
Jackson, Tenn. He is also a graduate of the Mortgage Banking Association School of
Mortgage Banking. His achievements include being All American in both College Football and
Baseball, becoming a Licensed Real Estate Agent in 1995, completing the Series 6 and 63
Securities Exams, and registration with the SEC and NASD. Affiliations achieved from 1995
to 2004 are Mortgage Bankers Association of America, National Association of Mortgage
Brokers, Tennessee Mortgage Bankers Association and Tennessee Association of Mortgage
Franklin American Mortgage Company (FAMC), a privately-held mortgage banking firm located
in Franklin, Tennessee, is a full-service professional mortgage banker licensed to provide
residential mortgages throughout the country. FAMC, which provides a host of diverse,
flexible mortgage packages for customers with a variety of backgrounds and needs, is
committed to helping families and individuals achieve the dream of home ownership though
its three divisions: retail, wholesale and correspondent.
An emerging leader in the mortgage industry, Franklin American Mortgage Company is fast
becoming a preferred lender for consumers and mortgage professionals across the country.
The Companys Correspondent Lending division was designed to service small to
mid-sized lenders across the nation. This division was created to harness
FAMCs growing national presence to provide high-quality services and products to
these institutions and their customers. This will help smaller lenders compete with larger
mega banks in an increasingly tight market.
The Companys Wholesale division funds and underwrites loans for mortgage brokers,
offering efficiency and scalability through superior technology. FAMCs Retail
division offers individuals throughout the country an opportunity to work directly with
Franklin American Mortgage to secure a home mortgage.
FAMC offers borrowers, brokers and lenders the strength and security of a forward-thinking
national mortgage company, dedicated to remaining an industry trendsetter. FAMC truly
values its relationship with each customer and mortgage professional they work with,
maintaining a company tradition of responsiveness and personalized service characteristic
of a much smaller organization. This philosophy has enabled FAMC to become one of the
fastest growing mortgage bankers in the nation.
Headquartered in Franklin, Tennessee, the company is FHA Direct Endorsed, VA Automatic, a
LAPP authority and a Fannie Mae, Freddie Mac and Ginnie Mae Approved seller/servicer.
Crockett, with the challenges that you faced in 2004, such as lower interest rates, as
well as volumes, how did you fare over 2004?
Mr. Crockett: The year of 2004 was a very challenging
year. The end of the refinance boom began to show itself in the end of the fourth quarter
of 2003, which was a record year for our industry. Moving into 2004, there was a lot of
excess supply in our industry. Supply was handsome in the marketplace and demand was
waning. We knew that margin compression would be prevalent and that trying to make a
dollar was going to be more difficult. We knew the success of 2003 could not last forever
and we figured the companies that put away for a rainy day would have balance sheets
strong enough to withstand 2004 and years to come. Moving into 2004, we were well informed
and we were not expecting anything different than what we actually got.
Our philosophy in growing the company is to increase market share. We wanted to out-pace
the drop-off in the industry. The industry is down about 35% and I think we were off about
20% year-over-year of 2003-2004. So, we feel like we gained market share in 2004, which
was our goal. Even though our margins were way off and our bottom line was not as handsome
in 2004 as it was in 2003, we had a good year and reached our goal if not exceeded our
goal for 2004 corporately. We enhanced our product mix a bit, which has to be done when
you get into a tighter market. The product that people demand begins to change. Even
though interest rates are still at record lows and people are still buying homes at record
paces, there are only so many people in the world that can refinance a mortgage. We did
heavy refinancing for two or three years and even though there is still a lot of refinance
business out there, it is just not running our industry like it was.
most of what you do now new loans?
Mr. Crockett: I think about 65% of our business
is purchase, which is why we want a purchase side for a complete purchase market. You are
always going to have twelve to fifteen percent refinance business in the marketplace for
reasons other than a rate and term reduction, debt consolidation, cash-out, tapping into
equity; those types of things.
your Correspondent division growing?
Mr. Crockett: Yes Correspondent is growing and doing
incredibly well. They did a good job in 2004 of continuing to add to their market presence
in only their third full year of operating. We are excited about where we are going. In
the last few weeks we have hired some really good people across the country. We are
continuing to expand our marketplace while creating new opportunities. Our correspondent
division is fairly new market-wise and business-wise, so its upside is still ahead. We are
very excited about that business and it has done very well. We love our strategy and I
look forward to its continued growth.
you had the success you have been looking for in reaching small and local banks?
Mr. Crockett: Yes, we have. Our forte is bringing some
added value to small and local banks. We enjoy being of service to them. Because they do
not do billions of dollars of volume like some other mortgage bankers and larger banks
tend to do, they may not want to be involved in some of the operational things. We have
some segmented units of our division here on the Correspondent side that provide added
value and service for them. Providing this service has given us an advantage in the
marketplace. We also provide some government lending and training, and government
underwriting. We also provide some underwriting on the conforming side, which is unique to
that business. We try to bring added value to our clients and that makes us more
attractive than our competitor.
CEOCFOinterviews: Is it
the responsibility of your reps to reach the small and local banks?
Mr. Crockett: That is correct. Our correspondent reps
will go out in the marketplace and handle anywhere from a two to six-state territory or
region. They are currently calling on prospective smaller mortgage bankers, although we
are developing a program, which will allow us to capture some of the larger banks and
larger mortgage banking operations business in the future. I think our overall client base
is going to continue to remain constant as it has in the past and I think we are going to
see some new opportunity in the future.
CEOCFOinterviews: On the
wholesale side, how has the search for new reps to cover new territories such as the far
west and California been going?
Mr. Crockett: Its gone very well. We now have two
or three reps in California. We have a rep in Utah and one in Tucson and Phoenix, Arizona.
We have had some great success out there. With the business being as tough as it was in
2004, and everyone operating under the survival of the fittest mentality, we saw a lot of
consolidation in the industry and we have seen a fair amount of people who decided to exit
the business. We found it to be a real opportunity for us. The market of 2004 was tough on
the bottom line and on revenue and equity return, but it did give some solid companies
with good balance sheets the opportunity to recruit. Recruiting in 2004 was positive and
we look for 2005 to be just as strong. We are going to do a good job of adding to our
staff and finding some quality talent. Acquiring solid people will give us more
opportunity to grow our market share.
CEOCFOinterviews: I see
you have hired some new regional vice presidents to take charge of your wholesale reps.
Mr. Crockett: Yes we have. We have had Doug Schorgel
and Brett Arsta, already covering a lot of the country on the wholesale side. We have
Brandon Bauch, who is based in Phoenix, Arizona, who is covering a lot of the west for us.
We kind of segmented the country and have a very good level of leadership at the VP level.
We also decided this year, to create new leadership positions on the production side,
which we call area managers or regional managers. An area manager could cover a state the
size of Florida, to a three, four or five-state territory that has the equivalent volume
potential as Florida. We created a model that shows the billions of dollars of purchase
business we want in each area. Our goal is 2% market share in each area. If we achieve
that it will put us in the top twelve in total lending in the country, which is ultimately
many reps do you have now?
Mr. Crockett: On the wholesale side, we have about 45
across the country. We have little to no presence at all in the northeast. We are however
starting to think about pursuing some acquisition work. If we can find a cultural fit and
a product fit, as well as a company that is a good value; we might consider doing some
acquisitions to help our market opportunity.
time we talked you were looking at expanding but not through acquisitions; it looks like
some things have changed.
Mr. Crockett: Yes, I think regionally speaking, if we
can find a quality cultural fit in the northeast, we would look at acquiring it. We are
also not opposed to acquiring a company somewhere else in the country as long as we can
provide them some added value and they can give us some added market presence. That
situation sounds very attractive.
owning a bank still something that you are considering or is it on the back burner?
Mr. Crockett: That is on the back burner. It is
something that I am always thinking about but I think we have more work to do yet on the
mortgage banking side. We have more challenges and opportunities ahead of us. We are
better positioned right now, opportunity wise, than we have ever been in twelve years of
being in business. I really think we have a chance to do some unique things. I want to
make sure that we continue to follow our mission and vision and stay on-course. We want to
be perfect, and when we achieve everything on our list for the mortgage banking side, then
we might look at diversifying ourselves by moving into the banking or insurance
have mortgage brokers, banks and builders out there, what do you do that gives you the
edge with these entities?
Mr. Crockett: I think generally speaking, macro-wise,
our service is very good. We get a loan, underwrite it and get it closed typically better
and more efficiently than our competitors. Underneath that, you have to have a competitive
price because people cant do business for free and they have to be able to make a
living at it. We have to make sure we give our customers a competitive price for their
product, which we do. We try to be consistent, and not in-and-out of the market based on
what our volume needs are. We try to always maintain a competitive price and stay in the
market because we are a growing company; we want all the business we can get.
We had an independent study done by a group out of New York that does operational
efficiency evaluations on mortgage banking operations and we are three times more
productive than the average mortgage banker, operationally speaking. This allows us to do
a lot more business with a lot less people, which equates to either higher margins or much
more competitive pricing on the street than our competitors can offer. That keeps us
competitive and that technology also makes our service better because we can choose to
keep the same number of people and do a whole lot more business because the technology
added benefit is there.
We can also provide a lot more quality and speed to our product and to our service,
because we are able to get through it so much faster because of the technology pieces that
we have. Our technology is not so much about direct-to-consumer as it is about
integration; it is about connectivity with our vendor base, about producing information
and producing value to each transaction without having much human interaction. That has
enabled us to be more efficient in productivity on the operation side, and it cuts down on
errors. The quality of our business has improved greatly through many different pieces of
you seen much expansion over your retail division over the last year?
Mr. Crockett: Yes, I think we are looking to do some
things and we are in the process now of trying to develop a presence in the Dallas area
because we have a big operating center there. All operations for the correspondent
division and our big operating center for wholesale are both headquartered in Dallas. We
decided we needed to get a retail presence there. Whether it is by acquisition or
organically, we have made a commitment this year to try to start building a retail
presence in that market.
CEOCFOinterviews: I see
you have been presented with awards over the last few years. You are obviously well-liked
in the industry and people appreciate what you are doing.
Mr. Crockett: Well I appreciate that. We have always
tried to do it right. We live by our mission, vision, and value system. We think they are
all very important. Our mission is much more than a statement; it is everything about who
we are. We want to bring a professional image, honor, integrity, and character to the
entire mortgage banking industry. Hopefully, we are doing our share in keeping it the
great business that it is.
you address potential reps out there that may be looking for a position and as you expand,
in which areas might you be looking for reps?
Mr. Crockett: We are looking for reps all over the
country. If you are really good, and you are looking for a place where you can have a
voice, Franklin American may be a perfect fit. Everyone at our company has a voice, you
are going to be heard and you are going to make an impact. The other thing is that we have
great pricing and great service. Above all that, we have a strong management team, a great
commitment to being the best. Our track record speaks for itself. I think the culture is
unique; it is a team-oriented, family environment. Everybody is pulling in the same
direction and there is a lot of upside opportunity. When you are involved with a company
like us that is growing like we have and is approaching the top-fifty in total lending in
the country; there is upside potential there.
We will need more leadership as time goes on. We have the areas positioned now in
wholesale; we are looking for managers or regionals on that side, and that is an advanced
opportunity for many people. Usually if people come and talk to us, they typically join
our company. Our conversion rate interview-to-hire is extremely high based on people that
we choose. We are excited for 2005 and we are looking forward to the next twenty years. I
think we have many good things coming and much work to do. We are excited about where we
closing, where do you see your growth coming from in 2005?
Mr. Crockett: I think it is going to be market share.
Comparing fourth quarter 2003-2004, we grew our market share about 40 plus percent. We are
well-positioned and look forward to whats to come in 2005.
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