Bob Telles headed up the financial operations of a mortgage lender during industry’s collapse in 2007, when many lenders closed their doors forever.
He’s still around to tell about it.
“It was a back-alley street fight,” said Telles, secretary and chief financial officer of Santa Ana-based Stearns Cos. “Fortunately, I’m a really good scrapper.”
Telles is a Vietnam War veteran who holds the distinction of being the first member of his family to ever graduate from high school, let alone college.
Getting Stearns Cos. through the down times—and putting the privately held company on track to have its best-ever year in 2010—helped make Telles an honoree at the Jan. 27 CFO of the Year awards, presented by the Business Journal and the Orange County and Long Beach chapter of the California Society of Certified Public Accountants.
Telles received the Lifetime Achievement Award at the event. He counts more than 20 years of experience in the mortgage business, including 12 years as chief executive for Los Alamitos-based Unity Home Loans.
He joined Stearns Cos. in 2000. His first few years there were focused on getting the company’s financial operations up to snuff.
Telles oversaw a restructuring of the company’s general ledger, cash receipts, cash disbursement systems and loan level accounting systems, among other changes.
But surviving the past few years proved to be the most challenging feat of Telles’ career.
Telles and the rest of the company’s executive team—which includes founder and Chief Executive Glenn Stearns and President Katherine Le—weren’t caught by surprise when the market collapsed.
Company officials were on record in 2005 saying they expected a downturn in the housing market, when other mortgage industry executives still were looking to grow their subprime and Alt-A loans.
The company began making cuts in staff and office space in 2006 and shut down Stearns Cos.’ option arm division.
The cuts got more severe in 2007 as the market started eliminating big-time competitors, including Irvine-based New Century Financial Corp. which filed for bankruptcy in April of that year.
Monthly loans at Stearns Cos. fell from $140 million to a low of $14 million in 2007, and nearly three-quarters of the company was laid off.
“We cut every expense we could. I was doing the work of six people. My salary—and the salary of everyone in management—was cut,” Telles said.
Even with all of the cuts, the company was close to shutting down in the summer of 2007.
Glenn Stearns “is a risk taker. He wouldn’t quit,” Telles said.
To help save the company, Telles made the decision to default on $60 million of loan commitments to borrowers with Alt-A loans in process with the company.
The decision enraged mortgage brokers and sales staff who lost commissions, but with investors looking to purchase those types of loans in bulk at a minimum, the move kept, the Alt-A loans from going on Stearns Cos.’ books.
“We knew if we’d funded those (deals), no investors would pick them up,” Telles said.
A few months later, investors began buying strongly underwritten pools of loans from the company again, and mortgage brokers also started bringing more business to Stearns Cos.
“I stayed in close contact with the bankers. They, and all our key trade vendors, wanted us to survive,” he said.
After hitting bottom in 2007, Stearns Cos. started to show growth, although the company’s survival was still in doubt for much of the next year.
“In 2008, we knew we had to make a profit. We kept the expenses tight and tightened the quality of the loans,” Telles said.
2008 ended up being “the best year we ever had,” in terms of cash flow, according to Telles.
By 2009, the number of loans had grown more than 4,000% from its 2007 low, topping out at more than $500 million of deals per month.
Stearns Cos., which had shrunk to about 80 workers at the bottom of the market, now employs about 700 people.
