Rene Salvatierra took the idea of creating
his own mortgage firm to the bank -- now he's cashing in with urbanFINANCIAL
Debra Beachy
Special to Houston Business Journal
Impressed by what was then a soaring number of mortgage loans,
Rene Salvatierra took a gamble six years ago by quitting his job
as assistant bank vice president and starting his own mortgage firm.
"I took a leap of faith," says Salvatierra, founder of
urbanFINANCIAL Mortgage Corp.
While working first at River Oaks Bank and then as an assistant
vice president at Citizens National Bank, Salvatierra took it upon
himself to start learning the ropes of the mortgage business. He
quickly realized that there were a lot of intricacies involved in
consumer and commercial lending.
Salvatierra also understood that mortgage lending was a very strong
and profitable line of business for the bank -- and that it could
be good for him as well.
Before launching his company, Salvatierra started calling brokers
to learn more about how the mortgage business worked.
Then he did the math.
Brokers tend to get a percentage of a loan, so, for Salvatierra,
1 percent on a $200,000 loan would mean $2,000 in his pocket.
"I said to myself, 'I could do this -- and if I made one loan
a month, I could make more than I'm making at the bank,'" he
says.
Mortgage banking firms typically borrow the money they lend out
on a short-term basis, while mortgage brokers originate loans for
funding by a lender. urbanFINANCIAL does both.
In addition to helping customers get commercial and residential
mortgage loans, urbanFINANCIAL also sells loans to banks, receiving
a 1 percent to 2 percent servicing rate fee.
urbanFINANCIAL, which has relationships with 115 banks, can facilitate
its own loans, lend in its own name and underwrite loans itself,
according to Salvatierra, whose gamble seems to be paying off. urbanFINANCIAL
pulled in $1.4 million in 2004, up from $1.3 million in 2003.
The company, which has grown to 24 employees, recently relocated
from Midtown to the Galleria area and plans to open offices in San
Antonio and Austin.
Salvatierra started the business in 1999 with just himself and
one employee. urbanFINANCIAL grew quickly, and the employee count
jumped to nine by 2000.
"It was good timing because of the mortgage refinancing craze,"
Salvatierra says of his decision to strike out on his own just as
mortgage rates were starting to drop.
Today, urbanFINANCIAL has a commercial lending division that focuses
on financing for commercial real estate deals, such as shopping
centers. As a result, some smaller shopping center developers have
become clients.
The company also has a Hispanic lending division that provides services
to Hispanic home buyers. That division may prove to be the linchpin
for future growth, considering that The Tomas Rivera Policy Institute,
which studies the habits of Latinos in the United States, estimates
that at least 1.5 million Latino households will purchase homes
by 2010.
Money man
As is the case with many entrepreneurs, Salvatierra raided his savings
account to come up with start-up capital for urbanFINANCIAL.
He started the company armed with $12,000 in savings, which he quickly
realized wasn't going to stretch very far.
Salvatierra rapidly spent the money on legal paperwork needed to
incorporate the mortgage banking and brokerage firm, as well as
to set up a Web site, print business cards, and pay for expenses
related to the approval process of setting up a mortgage business.
"The $12,000 was gone in two weeks," Salvatierra says.
"I used that money to create an identity."
Creating a corporate identity and gaining the necessary approvals
from financial accredidation agencies was crucial to starting in
business as a mortgage lender. Equally important, Salvatierra says,
was getting the word out about the new company.
"I sent letters to people I know. I called on clients I knew
from the time I worked in banking. I approached the top brokers
in the city to build a relationship," he says.
As Salvatierra networked, he approached Realtors, who then referred
him to home buyers. He also met regularly with commercial builders.
Salvatierra says his primary marketing tool was lower rates, which
he says he was able to offer based on urbanFINANCIAL's low overhead.
He also found a niche.
Salvatierra soon discovered that the new construction under way
in many of Houston's older, close-in neighborhoods provided a client
pool for his firm.
For example, urbanFINANCIAL found a gold mine of new business by
helping small home-building firms get loans for multiunit townhouse
development deals inside the Loop. After providing or originating
a construction loan for the builders, urbanFINANCIAL was being referred
to the buyers of the homes.
For example, Millennium Patio Homes, which builds patio homes in
in-town areas, was initially referred to urbanFINANCIAL by another
home builder and ended up becoming a regular client.
"He has strong relationships with a lot of different lenders,"
Steven Kleiman, Millennium's vice president of operations, says
of Salvatierra. "I've sent him countless deals over the past
five years."
While client retention and referrals are an everyday challenge,
Salvatierra says moving the company's office across town was one
of the toughest hurdles so far.
"Trying to maintain the standard of service while we were having
problems with the computer and the telephone lines and e-mail was
very tough," Salvatierra says. "Three weeks without the
Internet, and it was absolutely crazy. It took a month to come back."
Market share
The mortgage industry is extremely competitive, Salvatierra says,
making it hard for newcomers to enter -- and even harder to gain
a significant market share.
"If a company doesn't have the contacts to keep the company
afloat, it won't survive," he says. "It's such a small
circle. About 60 percent of loans are done by less than 15 percent
of loan officers."
Although the average loan urbanFINANCIAL handles is $220,000, Salvatierra
says he is determined not to lose out on $80,000 loans, which require
more volume but can still add significantly to the bottom line.
In order to do as much business as possible, Salvatierra has made
a sizable investment in software and information technology. For
example, urbanFINANCIAL has an in-house software interface with
Freddie Mac, the entity chartered by Congress to provide capital
to finance housing loans.
"We can get a loan approved there directly," Salvatierra
says.
Recently, Salvatierra won recognition from Freddie Mac for its use
of Freddie Mac's Loan Prospector software product.
Freddie Mac explains in a written statement that Salvatierra used
Loan Prospector to its full potential during a recent dealing with
a self-employed customer who was getting the run-around from his
lender, even after filling out countless pages of paperwork. Salvatierra
met with the borrower at Starbucks on a Friday night, entered the
customer's basic data on a laptop, sent it through Loan Prospector
and issued an on-site approval through Freddie Mac.
"Salvatierra saved the day with Loan Prospector, a latte and
a laptop," Freddie Mac says in the statement.
Salvatierra says he called the sales rep who referred the deal and
informed him that they were ready to select a closing date.
"He was so excited that he thought I was playing a joke,"
Salvatierra says. "He said there is no way that you can take
a loan application and close the next day. I proved him wrong."
Debra Beachy is a Houston-based freelance writer.
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