Rick and Patty Arvielo had a sense in February that the coronavirus would upend their mortgage company, Tustin-based New American Funding.
“When this started to heat up, we were watching what was going on in Italy and knew there was a chance this could happen here,” Rick Arvielo told the Business Journal in a recent interview.
The company had about two to three weeks to make sure its 4,000 employees were equipped with adequate computers and online access so they could work from their homes.
Then they anxiously awaited the results of their experiment.
“We’re super excited that our productivity went through the roof,” he said. “It makes sense in hindsight because there was nothing else to do.”
That preparation—as well as the Federal Reserve lowering interest rates—helped New American Funding turbo-boost its revenue to $823.7 million for the 12 months ended June 30, up nearly 70% from the same period two years earlier.
As a result, the company landed the No. 2 ranking on the Business Journal’s annual list of the fastest-growing companies in Orange County, among those reporting more than $100 million in annual sales (see list, page 26).
2003 Start
In 2003, Rick, who had already started two companies, launched New American Funding with his wife, Patty, who has been in the industry since she was 16 years old.
Rick, who became chief executive, is a fan of technology. He designed the company’s business model around time-saving software. Patty, who as president manages operations, has brought the entire loan process in-house—origination, processing, underwriting, funding and servicing.
The company was able to survive the 2008 financial crisis because Patty personally approved every loan and the couple made sacrifices such as not receiving a salary for a couple of years.
Over the years, they established retail lending, builder and loan servicing units. It prides itself on lending to minorities; Latinos make up about 38% of its workforce.
Nowadays, it employs 4,000 in 204 branches and services a portfolio of 141,000 loans worth about $34.7 billion.
It handles everything in-house—from marketing to selling bonds to in-house servicing. The couple is also providing some back-office services to their good friend, Glenn Stearns, the founder of Stearns Lending and who recently started a new company, Santa Ana-based Kind Lending.
The company has earned its share of recognition. Patty earned a nod as a 2018 Business Journal Women in Business award and the company this year won a Silver Stevie Award competition for Employer of the Year – Financial Services.
Floodgates
Last year, New American, like other mortgage firms, saw revenue stall as the Fed hiked interest rates. The industry “is all about the Fed,” Rick Arvielo said.
When COVID-19 initially struck here in March, interest rates started to spike and investors became skittish as both stocks and bonds got hammered, he said.
The Federal Reserve “has an endless check book” that it used to turn rates around, he said.
“When interest rates dropped, it was like the floodgates opened up,” Arvielo said.
The industry as a whole saw originations of $1.5 trillion in the first half of 2020, compared with $905 billion in same period of 2019, according to Inside Mortgage Finance, a newsletter that covers the industry.
New American Funding grew faster than the 70% industry growth, the newsletter said, ranking New American Funding as the 19th largest nationally in direct originations in the first half of 2020, versus 23rd in 2019.
“If you don’t include banks, we’re top 10 right now,” Arvielo said.
Who Needs Offices?
In the initial wave of the pandemic, about eight employees caught the virus. When the company reopened its offices in June, that number shot up to 90.
“We immediately shut back down again,” he said. “Whenever the state opens up, we’ll give it another 30 days before we open again.”
The coronavirus has also caused company executives to rethink its need for office space.
“Half of the staff likes working from home and we’re fine with it,” he said.
$11 Trillion Turnover
While some are predicting interest rates will stay low for a couple of years, Arvielo said the Fed is “telegraphing as long as five years.”
“If that’s the case, interest rates on $11 trillion in debt could be turned over,” he said.
The problem is that the industry’s capacity is for $3 trillion a year.
“You’ve got three to four years of people that will need service. I don’t see this slowing.”
He’s expecting New American’s loan originations to about double to $30 billion this year from $15.5 billion in 2019.
He’s hiring, with an emphasis on new graduates, veterans and minorities. The company typically hires 20 to 30 people a week.
“We’ve been breaching 100 several weeks in a row,” he said. “I can see us bring another 1,000 between now and the end of the year. I just don’t see it slowing.”
No Sale
The company doesn’t have outside backing, even though it gets offers “all the time,” Arvielo said, adding that they don’t plan to sell nor are they considering an initial public offering.
“People got tired of hearing we’re not interested in selling,” he said.
“Patty’s passion is serving the underserved. It’s the number one way that people create wealth in this country and she’s an ambassador for the industry.”
