The word "visionary" often gets tossed around loosely in the business world. But in the mortgage business, the label really does apply to Jim Cutillo. * While many, if not most, mortgage industry executives are still wrestling with legacy issues from bad loans written more than five years ago or today's relatively slow originations market, the founder and chief executive officer (CEO) of Stonegate Mortgage Corporation, Indianapolis, is already gearing up for the next stage of the industry's recovery--the re-emergence of the private secondary market. * But while nobody really knows when that will happen--even the most optimistic forecast sees it at least 18 months away--that hasn't stopped Cutillo and Stonegate from building the infrastructure to be a key player when it does come back. * In fact, Cutillo, a former director of GMAC Residential Funding, was several years ahead of the mortgage industry's nascent recovery when he started Stonegate as a mortgage brokerage in 2005. If anything, the market had yet to begin its epic collapse back then. But that wasn't necessarily bad timing on Cutillo's part. He saw the bubble about to burst and wanted to start building his firm so it would be ready to take full advantage when the market launched into its eventual recovery. * A look at Stonegate today provides evidence as to whether he was right or not.
After starting' out with two employees--Cutillo and his wife, Barb, who is the company's chief financial officer (CFO)--the company quickly established warehouse lines of credit and became a mortgage banker in 2006.
Growth since then has been phenomenal. Revenue growth is up 300 percent over 2011. By the end of last year Stonegate had nearly 200 employees, and the company expects to have more than 400 by the end of this year-60 percent more than originally expected.
More than half of them work out of the company's three-story office building in a commercial park in Indianapolis. That growth has earned the company's ranking as one of the fastest-growing companies in the United States two years running by Inc. magazine.
Stonegate expects to originate $3.3 billion of loans this year, according to Cutillo. The company currently originates loans through retail and third-party channels in more than 30 states. Three-quarters of the company's volume comes from third-party originators, including banks, brokers and financial institutions. The remaining 25 percent comes from its growing retail operation, which mostly covers the middle of the country.
The company expects to have more than 600 employees and be a national lender by the end of 2013.
That's pretty impressive growth, especially since it's occurred in the most depressed housing and mortgage environment in our lifetimes. But that growth is not an end in itself. If anything, the company believes this is really just the start, with its best days still ahead.
"Anybody can originate loans," Cutillo says. "The question is, what happens two or three years from now? All the work we're doing today is for two or three years from now."
The servicing acquisition
A key milestone in Stonegate's growth, and a big reason for applying the "visionary" tag to Cutillo, is the company's bold leap into servicing in 2009. That move might not appear to have been a smart one at the time, as the torrent of foreclosures and loan workouts was just gaining steam. But it's now the foundation that the company believes will enable it to move forward and prosper in the years ahead.
In May 2009, Stonegate acquired Mansfield, Ohio-based Swain Mortgage, a small, family-owned mortgage company that dates back to 1964. At the time, Swain had a tiny $175 million servicing portfolio with 2,000 customers, mostly in its home state.
Swain provided Stonegate with the basis of its servicing platform, but...