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Friday, Apr 19, 2024

Glenn Stearns Returns to Mortgages

Glenn Stearns is back in the mortgage business.

The founder of Stearns Lending LLC has started a new mortgage company, Kind Lending LLC, which currently has 40 employees with plans to expand to 500 in a year.

He’s set up Kind Lending in his old South Coast Metro office that still sports the name of his prior company.

“I never understood how great we had it” at Stearns Lending, he told the Business Journal.

“I didn’t realize we had lightning in a bottle where people loved to come to work and stayed late and worked on weekends.”

The entrepreneur is best known for building Stearns Lending into one of the nation’s biggest mortgage brokers. He sold 70% of the company in 2015 for an undisclosed price to Blackstone Group Inc. (NYSE: BX) while retaining 29%. At that time, Stearns Lending was handling about $26 billion in mortgages annually, he said.

“I think there is a much bigger market—If I’m not doing $26 billion in a couple years, I’m doing something wrong,” Stearns said.

“We’re excited to be back in Orange County. I want to grow a campus here and make it home.”

A Life Well Lived

Stearns’ life story, which has been featured on the Oprah Winfrey show, includes being born to alcoholic parents, fathering a child at age 14 and being the first in his family to attend and graduate from college.

At 25, after working as a loan officer for 10 months, Stearns in 1989 formed his own mortgage company.

He spotted early the subprime mortgage crisis and pulled out of that business, which helped him survive the 2008 financial crisis. By 2013, Inside Mortgage Finance ranked Stearns Lending as the biggest in the category of wholesale residential lender.

After he sold his company, he bought a yacht (the nearly 190-foot Minderella) and traveled around the world with his family. He also survived cancer and was the star of a reality television show, “Undercover Billionaire” (see story, this page).

He remained a board member of Stearns Lending. From that vantage, he said he saw the company making “a lot of mistakes” such as moving employees to Texas. Stearns Lending’s Orange County office headcount has decreased from 583 in 2017 to 48 as of last June.

About three years ago, Stearns wanted to become CEO of his old company again. However, the company sought a “Wall Street kind of guy,” he said.

“I thought, ‘Holy crap—I’m boxed out, I cannot compete. I cannot go back into my own company,’” he said. “I literally watched them run up debt and do the things that they did, which was crazy.”

Chapter 11

Last July, Stearns Lending declared Chapter 11 bankruptcy, setting off a battle between Blackstone and Newport Beach’s Pacific Investment Management Co., which owned about $120 million in Stearns debt. Last September, the two firms reached an agreement, which avoided the liquidation of the company that had 2,700 employees.

It also cost Stearns his 29% stake and millions of dollars that he had loaned the company. Even though the bankruptcy was painful, he eventually agreed with it to save jobs.

“When they filed, I became a free agent because I didn’t have any more ownership. I spent 15 minutes being upset about it and then became excited.”

He could start a company in states with lower taxes, such as Texas. However, he said California is worth it, even if he must pay the California state income tax that reaches 13.3%.

“This is where the great people are,” he said. “I had 1,000 people in Southern California, and they are excellent. They are the best. This business is all about the people.”

The New Model

He’s developed “a little bit different model” with Kind Lending than Stearns, such as limiting offices to maybe three, far lower than the 100 branch offices that Stearns Lending reported last year.

Software is “10 times better” than when he ran his prior company, enabling him to reduce paperwork, Stearns said.

“We can scale very fast,” he said. “It’s more about the software right now and making sure we’re integrated. I don’t see us having any issue with volume.”

Stearns has hired some of his old employees such as President Yvonne Ketchum, who was with Stearns Lending from 2004 through 2019.

He’s still in the hiring process and expects next month to begin processing mortgages. He’s starting in the wholesale sector where loans are offered through third parties like brokers, credit unions and banks. He’s also planning joint ventures where he’ll provide brokers with back-office functions like legal paperwork.

Kind Lending is utilizing the back offices of Tustin’s New American Funding, which is the largest woman-owned mortgage company in the U.S. with Patty Arvielo as co-owner along with her husband, Rick Arvielo. Stearns said the two companies will be working together in the future.

He’s friends with many mortgage lenders in Orange County, which has had four of the 25 biggest non-bank mortgage lenders in the U.S.

“I embrace the competition because we’re in this together,” he said.

He’s re-leased space in the same building in Santa Ana’s Hutton Centre, where he’ll soon be taking down the Stearns Lending sign that overlooks the (55) Freeway.

“I’m going back to my old office,” he said.

“If it seems like it’s in their face, that might have been done on purpose.”

The Reality of a Reality TV Star

Glenn Stearns traveled to Pennsylvania to prove the American dream is still alive.

He was the star of “Undercover Billionaire,” an eight-episode series that ran last year on the Discovery Channel.

The premise was that Stearns would need only $100, a cellphone and a truck to build a business valued at $1 million within 90 days.

At the risk of spoilers, let’s just say that Stearns is now the owner of Underdog BBQ (which gets above-average marks on Yelp) in Erie, Pa.

As is typical of Hollywood, artistic license was taken. The show didn’t reveal that Stearns, a cancer survivor, was on a feeding tube during the taping. It filmed him sleeping a few nights in his truck during freezing temperatures. He became so sick that he had to go to a hospital.

“They showed I was out three hours and I was (actually) out 4 days” in a hospital, Stearns revealed.

The program also had Stearns getting off a private jet with the amount $2.2 billion on a subtitle.

When asked if he’s worth that amount, Stearns said it was less, but declined to provide an estimate.

Forbes last year estimated Stearns’ worth at $500 million, the minimum amount needed to be on last year’s Business Journal list of OC’s wealthiest people.

Nowadays, he lives in Newport Beach’s Pelican Hill with his wife, Mindy, and is building a new mortgage company, Kind Lending LLC (see story, page 1). He chose that name to emphasize a culture that is “edgy” yet fun.

“I don’t need to look at a balance sheet or income statement to know whether a company is doing well. You walk in and see the people.”

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Peter J. Brennan
Peter J. Brennan
Peter J. Brennan has been a journalist for 40 years. He spent a decade in Latin America covering wars, narcotic traffickers, earthquakes, and business. His resume includes 15 years at Bloomberg News where his headlines and articles sometimes moved the market caps of companies he covered by hundreds of millions of dollars. His articles have been published worldwide, including the New York Times and the Washington Post; he's appeared on CNN, CBC, BBC, and Bloomberg TV. He was awarded a Kiplinger Fellowship at The Ohio State University.

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