• Where: Santa Ana
• 12-month sales: $168.4 million
• Two-year growth: 374%
• OC workers: 314
• Business: Mortgage lending
Santa Ana-based Stearns Lending Inc. went from being an afterthought in Orange County’s hyper-competitive mortgage lending industry to one of its survivors. By catching wind of the housing downturn before things got too bad, the 20-year-old company was able to dodge the fate of other local lenders during the industry’s crash a few years ago.
It wasn’t easy. But now Stearns Lending is thriving again, both here and across the country.
Founded by Chief Executive Glenn Stearns, the company has funded some $1.8 billion in mortgages in the third quarter, up 140% from a year earlier, according to trade industry figures.
The company’s now the fastest-growing lender in America, according to a recent profile in mortgage trade publication Origination News.
It’s also the 13th largest wholesale mortgage lender in the country and fourth-largest in California, according to the most recent industry rankings.
Stearns Lending ranked No.6 on the Business Journal’s 2010 list of fast-growing private companies with sales growth of 374% for the two years through June 30.
The company had revenue of $168.4 million for the 12 months through June, up from $35.6 million for the same period in 2008.
Like other lenders, Stearns Lending is seeing a wave of mortgages and refinancing spurred by low interest rates. But gone are the days of risky, exotic mortgages.
About a third of Stearns Lending’s loans are made under a Federal Housing Authority mortgage insurance program for marginal borrowers. It is one of the larger lenders of FHA loans in the country.
Stearns Lending also makes loans that meet guidelines set by federally backed mortgage buyers Fannie Mae and Freddie Mac.
Rebuilding the business after the mortgage collapse of 2007 is behind Stearns Lending’s recent growth.
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 risky subprime and Alt-A loans to borrowers with imperfect credit.
Stearns Lending began making cuts in staff and office space in 2006 and stopped making option adjustable-rate mortgages, which allowed borrowers to make credit card-style minimum payments on loans that went from an initial low rate to a higher one.
The cuts got more severe in 2007 as the slowdown started claiming big-time competitors, including Irvine-based New Century Financial Corp. which filed for bankruptcy that year.
Monthly loans at Stearns Lending fell from $140 million to a low of $14 million in 2007. Nearly three-quarters of the company’s workers were laid off.
Stearns Lending was close to shutting down in the summer of 2007.
At one point, founder Stearns, Chief Financial Officer Bob Telles and President Katherine Le made the decision to default on $60 million of loan commitments to Alt-A loan applicants.
The decision enraged mortgage brokers and salespeople who lost commissions. But with few Wall Street investors looking to buy Alt-A loans packaged as bonds, the move kept potentially bad mortgages off the books at Stearns Lending.
In 2007, the company lost about $6 million as some 2% of its loans went bad.
Others weren’t as lucky. Rivals SCME Mortgage Bankers Inc. of San Diego, First Magnus Financial Corp. in Arizona and Secured Bankers Mortgage Co. in Los Angeles went out of business. Workers from some of those companies eventually were picked up by Stearns Lending.
“When bigger companies retrenched and left the industry, we just took over their production teams,” founder Stearns said in a recent profile. “We just hired the people and took over their leases. I think that’s a pretty good business model.”
Eventually, investors started buying stronger pools of loans from the company again. Mortgage brokers began bringing more business.
The company reported a 2008 profit of about $15 million.
Since then, growth has been rapid. Stearns Lending employs more than 1,000 people nationally, up by several hundred in the last year. More than 300 are in OC.
The company’s comeback is one more chapter in the offbeat life story of Stearns, a teenage father and self-described mediocre student who moved from the East Coast to California in 1988. He worked as a waiter before getting his lending license.
Wife Mindy Burbano Stearns became famous after doing birdcalls on “Oprah” and went on to do entertainment reporting for KTLA.
The couple gained some fame in 2004 for their stint on the reality show “The Real Gilligan’s Island.” Glenn Stearns played the part of the millionaire and ended up winning $250,000, which he gave to charity.
