Growth in a shrinking market

Since it was acquired by Generations Bancorp Inc. in January, American Foundations MortgageBanc Inc., a Brookfield-based mortgage banking and brokerage firm, has posted significant growth. Generations Bancorp is a financial holding company and corporate parent of Pewaukee-based Foundations Bank.

When it was acquired, the mortgage banker and lending company had about 60 workers, said Nicholas DelTorto, president and chief executive officer. American Foundations now has 86 employees. It will add another 10 to 12 employees in the next few weeks.

Because American Foundations is owned by a financial holding company and is both a mortgage banker and broker, it has been able to attract other independent mortgage brokers and bankers to join the company. Instead of acquiring independent companies, American Foundations has persuaded several independent operators to shut down their businesses and become employees of American Foundations, DelTorto said.

“We tell them that they don’t have to run their businesses independently any more, they can do what they do best which is be proactive in sales and marketing,” he said. “We have the platform they need, including sales and marketing support.”

On Friday, May 1, the owners and employees of a mortgage brokerage in St. Charles, Ill. will become employees of American Foundations. Several weeks prior, American Foundations hired several employees from another small office in the Chicago area.

The company is also in active negotiations with several other mortgage brokerages in the markets it has offices in. In addition to its Brookfield headquarters, American Foundations has three offices in the Chicago area and two in the Boston area.

“We’re looking for controlled growth, and we’re only going to be adding quality people,” DelTorto said. “We’re not on a recruiting binge to hire all of the people we can. But as good people become available, we want to talk to them.”

In the immediate future, American Foundations is looking to expand in the markets it does business in now. Over the next two years, it will begin looking for expansion into the Florida and Arizona markets.

“In the future, those will be great markets again,” DelTorto said. “They were hit the hardest (in the housing crisis), but there will be retirees from the Midwest and New England that want to have a second home in those markets in the next two years.”

While the slumping housing market and general fallout in the financial market has caused large-scale problems for many mortgage banking firms, American Foundations has been able to stay afloat because of its business model. The company started in 1997 as a mortgage banker, but has the flexibility of a broker, DelTorto said.

“The broker market exploded with the refinancing market in 2001 and 2002,” DelTorto said. “Now what has happened with the culling of the herd (in the mortgage industry) and the increased regulatory oversight is that more folks are finding it harder to remain as independent mortgage brokers.”

American Foundations is successfully recruiting experienced mortgage brokers now because of the difficult financial environment. Mortgage brokers do not involve their own finances in transactions, and need to find capital for each transaction. Because American Foundations is both a broker and mortgage banker, it is in a unique position, DelTorto said.

“We are still offering products from large national bank companies that are not necessarily reaching out to brokers and the public in general,” he said. “We can shop that product for them and help get those products for them.”

“The landscape and regulation front is changing,” said John Watry, chief operating officer of American Foundations. “Warehouse lending is getting smarter, and that’s who we borrow from to close loans. The industry is moving away from the independent-owned brokers and lenders and we view the market moving more towards a bank-centric model.”

American Foundations is seeing solid volume in the home mortgage market now, although much of it is refinancing work, Watry said.

“Our volumes (in the first quarter) are up this year over last,” he said.

The company believes there is a large pent-up demand for home mortgages, and a further rate decrease could trigger a “tidal wave” of activity.

“We think this is a great time of opportunity in the mortgage business,” DelTorto said. “Housing led us into this recession, and it will need to lead us out.”

American Foundations
MortgageBanc Inc.
165 Bishops Way, Brookfield
Employees: 86
Corporate parent: Generations Bancorp Inc.

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