CEO credits staff with firm’s success




From the November 12, 2004 print edition of Business First Fast 50



     When Houston Rockets forward Scott Padgett needed mortgage financing, he sought a company that would accommodate his hectic schedule and guide him through the process quickly. He said he found that type of company in Louisville-based First Commonwealth Mortgage Corp., when he bought his Louisville home in the past year.
“They walked me through everything step-by-step,” said the former University of Kentucky basketball player.” They got me a great rate and introduced me to the right people at a good title company. So the whole process was very easy and convenient.”

CEO credits staff with firm’s success
     First Commonwealth CEO Jeff Houk said a key to the firm’s growth is training his employees to provide superior service to every client, NBA celebrity or not.
“Our success is a product of the quality of our employees,” he said. “This is a sales organization, and we have to keep people motivated. So we focus on our obligation to customers, and – through everything from golf outings to keeping a Ping-Pong table in the office – we make the workplace a fun environment so people want to come in and put in their hours everyday.”
Houk’s staff Garnerned praise from Joe Griffin, senior account executive with Ann Arbor,Mich-based InterFirst Wholesale Mortgage Lending, which funds some of First Commonwealth’s loans.
“First Commonwealth hires and trains and creates quality mortgage originators who, in turn, educate consumers about the best routes for them to go when they are buying a home,”Griffin said.

Sustaining growth in a changing market
     The commitment to customer service helped First Commonwealth achieve meteoric growth the past few years. The company was the No.1 fastest-growing firm in last year’s Fast 50 roundtrip, with more than 500 percent growth in revenue from 2000 to 2002.
In 2002, the company closed about 2,500 loans worth about $300 million, and in 2003, it closed 7,000 with a total volume of $800 million.
During 2004, it still has been growing at rates of 30 percent to 40 percent.
Houk said he’s proud of the current growth because First Commonwealth achieved it despite a rise in interest rates that resulted in a tougher market.
The company’s strategy for continued growth in the more challenging business climate, Houk said, is to expand it’s focus from refinancing existing mortgages to include home-purchase loans.
“The last couple of years have been fantastic for mortgage refinancings,and that has been about 97 percent of our business,” he said. “In the last year, after interest rates picked up a little, we’ve begun to focus more on purchase-loan transactions because it’s a market that’s less interest-rate sensitive. Moving forward, we anticipate purchase loans will be somewhere in the area of 35 (percent) to 45 percent of our business.”
He said the company will also continue to grow by focusing more on lending it’s own money and selling loans in the secondary market instead of just brokering them.

Ignoring conventional wisdom
     Houk, a Louisville native, attended UK on a football scholarship but left after injuring his shoulder in his freshman year. He graduated from the University of Louisville with a degree in finance.
He was a stockbroker for the investment firm Stifel, Nicholaus and Co. for three years and then founded his first mortgage company in 1995.
“I was interested at taking a risk at an early point in my career, before (family) commitments would hold me back, which is what led me to start my own company,” he said. “ I was inspired, when I was a stockbroker, by some of the CEOs I heard speak and the entrepreneurs I came across during IPO road shows. And I was familiar with selling financial ‘intangibles’ and helping clients with financial planning, which made the mortgage business an easy transition.”
He sold the mortgage company in 1999 and then decided to start another with John Shunnarah and Juan Montano, whom he has known since he attended St.Xavier High School, and Tim Poole a childhood friend.
Poole is First Commonwealth’s president; Shunnarah is chief operating officer.
“Each of my partners brought a particular strength to the table that has been vital to our success,” he said. “Tim handles the underwriting/lender relationships. John is our operations guy, and Juan, a CPA with several years in public accounting, acts as our CFO.”

Creating success online
     About 90 percent of First Commonwealth’s business is done via the Internet, and Houk said using an online business model has been another key to the company’s growth.
“The internet gives us the ability to compete with a lot of the larger financial institutions,” he said. “Because of advancements in technology, the process (of getting a mortgage online) has become much quicker and more efficient than it was four or five years ago. So we’re able to expedite the process.
“Another key to our success is people are becoming more and more comfortable with divulging personal information over the Internet because of some of the security enhancements” developed in recent years.
“So, because of the efficiencies built into the Internet,” Houk said, ”it allows us to be very competitive, to offer a variety of products and to give low-cost loans and great interest rates. That’s what people are looking for. They just want the best deal.”
Houk said First Commonwealth generates roughly 90 percent of it’s leads by marketing through other Web sites. He declined to name specific sites, but he said most of them are operated by third-party mortgage and real-estate companies.

Preparing for even more growth
     First Commonwealth has offices in Louisville, Lexington and Cincinnati and is licensed to do business in 14 states. Houk said he eventually plans to do business in every state that doesn’t require mortgage lender’s to have a physical presence – all but about seven to 10 states.
He plans to expand the company’s physical presence in Louisville soon. Last year, it received preliminary approval from the Kentucky Economic Development Finance Authority to receive up to $973,000 in tax incentives over 10 years. Houk said he will use the incentives during the next 12 to 18 months to lease an additional 10,000 square feet of office space to add to the current 17,000 square feet in it’s present location.
To make sure the company succeeds in the purchase-loan market, Houk created four new positions devoted to attracting that business and training other employees.
“The purchase transaction, while it’s still a mortgage and still a financing transaction, so it’s a little different than a refinance,” he said. “So we’ve placed people in positions where their responsibility is not only to guarantee we’re closing those deals, but also to provide both initial and ongoing training.
“We probably did not devote enough time, energy and resources to the purchase loan market in the past just because there was so much refinance business out there. But because the purchase market is less cyclical and could help us level out our earning stream, we felt it was something we needed to pursue.”

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