Michigan Firm Sees Success

While most lenders are closing offices, eliminating staff, dropping subprime mortgages and ending wholesale operations, Gold Star Mortgage Financial Group has been opening new offices and adding staff. As for exiting subprime lending and wholesale operations, Gold Star never participated in these areas of the mortgage business.

Gold Star Chief Executive Officer Daniel Milstein attributes his company’s success to its otherwise extensive product offerings, its service, including fast approvals and closings when needed, and the quality, experience and dedication of its staff.

“At the close of 2006, we had 117 people and at the end of 2007 we had close to 200 employees,” he points out. “And right now we have 34 open positions in our Ann Arbor headquarters.”

He plans to hire six loan officers for every loan processor. “So far this year we’ve hired ten and our goal is to hire 50 people before the end of this year.”

With thousands of unemployed mortgage professionals looking for new jobs, there are many persons he says he could easily employ at the Ann Arbor, Mich.-based company, which functions as a mortgage broker and as a mortgage banker with correspondent relationships and lines-of-credit.

It also operates as a real estate brokerage.

“But we’re very careful about who we hire,” he stresses. “We don’t advertise for jobs. It’s always been by referral only. It’s always people with a proven track record and clean backgrounds.”

Gold Star has four offices in Michigan, including its headquarters, plus offices in Florida and Texas and will be opening an office in Denver office within 90 days, according to Milstein. And the company is licensed in 20 states, mostly in states on both coasts plus some states in mid-America — Kentucky, Tennessee, Missouri, Mississippi, Connecticut and Massachusetts. “We spend a lot of time in markets that are underserved,” he says.

Gold Star’s origination volume, which totaled $700 million in 2006, reached $1.1 billion last year, according to Milstein, a 32-year-old immigrant from Ukraine, who helped found the company in 1998.

Part of that success comes from its pricing, he says.

“We make three-fourths to one percent on every loan, while others want two percent,” he points out.

And another important factor is its reputation for getting deals done, Milstein continues.

“I can get a loan done from start to finish on the same day if I have to,” he explains. “I can take the application in the morning, have my appraiser at the house by 12 and can fund and deliver a closing package on the same day. As a result we have a lot of loyal clients, a lot of repeat business and a lot of referrals. And I can guarantee no surprises at closing. I’ll do everything to make my clients happy.”

He hesitates at this early date to make any predictions concerning this year’s origination volume. But with the current refi boom, he expects it to be at least as much as last year.

“And with the increase in conventional loan limits,” he adds, “the total [origination] volume will go up and we can take market share by doing more conventional loans because of the lessening competition, our more experienced personnel and the additional marketing dollars that we have this year versus last year.”

Milstein points out that Gold Star’s origination volume will at least stay the same while the overall industry is expected to close 16 percent fewer loans in 2008 than in 2007.

“The main factor in that decline is subprime, which used to be 40 percent of the business,” he explains, “but we never got into subprime although it was a very lucrative business. I never believed in it.”

The loan products it does offer, according to the company Web site, include, in addition to conventional, fixed-rate, adjustable tied to either LIBOR or COFI, graduated payment, interest only, balloon and reverse mortgages.

Gold Star’s headquarters had been located in a 3,000-square-foot building in Ann Arbor. But last August, it purchased for $1.3 million a recently vacated 12,000-square-foot building, also in Ann Arbor, spending roughly another $200,000 on improvements, according to Milstein. The move to the new facility was completed last Labor Day weekend and the company now has 65 staff persons working in the building, he says.

He says he meets with and teaches new employees in his office, molding them and then putting them on the sales floor.

“People who have worked for Gold Star in the corporate office for six months to a year and have built up a nice clientele and learned the way we do things here,” Milstein explains the advancement process, “we’ll let them relocate and open up offices. That’s the only way it works.”

Gold Star has stayed away from the wholesale end of the business mostly because he questions the ethics and risks of many of its players and activities.

“We don’t want to be in a position at this point in time to get into the wholesale end due to the decline in markets and [the problems with] appraisals and delinquencies. Third party originations right now are very risky due to the increased amount of fraud.

“Also, in wholesale, there’s no loyalty and desperate people do desperate things. And the margins are thin. But I just don’t believe in the [wholesale] business yet. That’s not to say we wouldn’t look at it a couple years down the road. But at this point in time we’re closing a lot of deals as a super broker or a correspondent lender. And we’re just not ready to take on the wholesale aspect of the business yet.“