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The Fairway WayBY WA R R E N L U T Z

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This independent mortgage company didn’tinvent the key to success—it just mastered itsexecution. A 24/7 focus on communication,company culture and customer service has putFairway Independent Mortgage on the map.

Way

P H OTO G R A P H Y BY A U S T I N A N D E R S O N

(Left to right) Dan Cutaia, president of capitalmarkets and risk management; Len Krupinski,chief financial officer; Steve Jacobson, chief executive officer; and Paul Walnick, president of mortgage operations, have made FairwayIndependent Mortgage one of the country’s top lenders.

For a company many employees liken to afamily, it ’s not surprising that SunPrairie, Wisconsin–based Fairway Inde-pendent Mortgage began with a familyevent. Soon after founding the companyin 1996, Chief Executive Officer SteveJacobson received a call that his fatherwas ill, and moved from Dallas back tohis home state while his brother-in-law,Dean Anderson, left Minneapolis tomove to Madison, Wisconsin, to help out.

After spending the past 12 years in the Southwest,Jacobson says, “I never thought I’d go back there.” He adds,“We had all these plans to start the company in Texas. Butonce you make those plans, the man upstairs, sometimeshe laughs at you.” To this day, Fairway Independent Mortgage has two

homes: Sun Prairie, where the company’s administrativeoffices are located; and Dallas, where its mortgage opera-tions are based. But while this arrangement may seem to pose a chal-

lenge, Fairway has suffered no ill effects from it—in fact,quite the opposite. Within five years of inception, this full-service mortgage banker produced more than $1 billion inclosed annual loans. Since then, Fairway has grown to 85branches serving markets in 42 states and now originatesmore than $3 billion in loans. The company is steadily ris-ing up the ranks of the nation’s top lenders in spite of thereal estate market’s recent struggles. And it has emergedrelatively unscathed from the mortgage market meltdown.Like most lenders, Fairway was forced to scale down itsjumbo loan activity due to a lack of available product. Butin 2005, Fairway’s origination volume was $1.47 billion,and that number has increased every year since. But for Jacobson, there’s no time to pat oneself on the

back. “In this business, you’re only as good as your lastperformance—it’s all about what you do today,” he says.“The big picture is we’ve been very fortunate and lucky inlots of ways.”

The thrill of competitionSome might argue Fairway’s recent success has been morethan just a matter of good luck. For those who know him,there’s little doubt Jacobson chose the right career path. After graduating from the University of

Wisconsin–Madison (UW–Madison), where he was on thebasketball team for four years on his way to earning amanagement degree, Jacobson moved to Arizona, where

his parents were living, and started weighing his options.A neighbor across the street—since-retired commercialmortgage banker Art Peil—encouraged him to look intothe industry. Jacobson followed Peil’s advice, and soon dis-covered a number of similarities between the business andthe game he loved. “To me, basketball is a sport where you can’t hide,” he

says. “There’s no helmet, everyone can see your emotionsand nobody cares what you did yesterday. The mortgagebusiness is also very transparent like that. And like basket-ball, it also takes teamwork. No basketball team is one per-son. Not everybody can shoot, but everybody has a role—and when everything is clicking, it’s a lot of fun.”Jacobson spent seven years in Arizona followed by five

years in Dallas working for Fort Wayne, Indiana–based

Waterfield Financial Corporation—first as a branch man-ager, then as senior vice president and, eventually, nationalsales director. But when the company moved toward cen-tralized processing, Jacobson decided it was time to startoff on his own. Using his own funds, he formed Fairway Independent

Mortgage in 1996 along with Anderson, also a UW–Madi-son alum and now Fairway’s vice president of warehouseaccounting. Since then, the company has crafted a uniquestrategy that doesn’t sound so unique on paper. In fact, itsounds almost too simple: Hire smart, experienced andsuccessful branch managers, give them the tools and free-dom to succeed, and watch the business grow.

For this reason, Jacobson is quick to give the credit forFairway’s success to the people around him. But those whoknow him say Jacobson’s ability to gauge people and theirpotential is truly unique. “[Jacobson] really deals with ‘A’players,” says Dennis Schwartz, a closing attorney andowner of Schwartz & Associates, McKinney, Texas, whorepresents Fairway. Schwartz, who has worked with Fair-way since its beginnings, says Jacobson “understands hisstrengths and his weaknesses, but his gut is incredible. Herarely makes people blunders.” Those inside and outside the company say Fairway’s

commitment to service is more than just talk. SaysSchwartz: “I remember asking [Jacobson] four or five yearsago, ‘Steve, you’re always growing while everyone is floun-dering. What’s your secret?’ And he says, ‘If it’s a Friday

closing, I try to get docs there by Tuesday.’ I was waitingfor the rest of the story, but that was it. Most mortgagecompanies are going to get docs to the closing company onFriday, and most of the time everything’s fine—but some-times it’s not. Suddenly Fairway is every title company’snew best friend, because they don’t have to go through thefire drill. They’re able to decentralize so many of thesepieces to the puzzle, so the loan officers and originatorswho really know their stuff can control their service levels.And it works,” Schwartz says. “It’s so quality-oriented.”Others who work with Fairway point to the strength

and experience of its team as a key asset, as well as thecompany’s focus on customer service.

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Jacobson (standing) speaks toemployees at Fairway’s annualcompany meeting

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In fact, the company’s culture itself is something Fair-way takes pride in. Though it has become something of acliché, the term “transparency” is often brought up. Forexample, Jacobson still holds weekly conference calls forthe entire organization—anywhere from 250 to 500employees will participate in the call, and everyone isinvited to speak up. Afterwards, the call is podcast andplaced on the company’s intranet. “We try to be real open about our communication,”

Jacobson says. “There’s no magic silver bullet. It’s just a con-sistency of communicating each week to people what you’regoing through. We don’t necessarily agree with each other . . .but it’s not a behind-closed-doors kind of thing. Hopefullyit’s a place where people are free to be themselves.”

An open atmospherePaul Walnick, Fairway’s president of mortgage operations,has never seen anything like the corporate culture they’vecreated at Fairway. Walnick was also at Waterfield andjoined up with Fairway nearly three years ago. “I heardabout it, I was told about how it would be. But until you’rein there, living it, it’s hard to describe,” he says. “Everything here starts with how we treat people—the

client, the originator and everybody else. You can use theword ‘relationship,’ but we take it to the nth degree. Weare as service-dominated a company as you’ve ever seen.Nobody has better service in the industry than we do—it’swhat we live by, and we attract quality people because ofhow we support them,” says Walnick.“It’s an inclusive culture,” explains Dan Cutaia, Fair-

way’s president of capital markets and risk management,who joined the company in 2008. “I think we’ve survived,grown and thrived because we have less bureaucracy.” Cutaia, also a Waterfield alum, says communication is

never short-changed at Fairway. “We feel that we need toover-communicate as opposed to under-communicate. Wehave more of a team environment and more sharing thatgoes on than companies half our size.” Adds Walnick, “As a management group, we listen to

our salespeople before we go forward with a critical stepor initiative. We also welcome ideas that the branchesbring to us. That generates a collaborative spirit by thesales force.”Schwartz, who works with “many” mortgage lenders,

says this is not typical. Usually, he says, “one of two thingshappens. Either you have unbelievable autonomy and it’sjust chaos, where they stumble from one crisis to anotherand usually fail. Or you have really strict limits. Fairwayhas always walked that line. The culture they have hasnever changed since day one,” Schwartz says. “It’s, ‘We’rethere to provide you with assistance.’ Instead of a top-down concept on how to do business, it’s always been abottom-up concept.” Schwartz cites Fairway’s biannual meetings as an exam-

ple. “The amazing thing that just stunned me was, youhave a room with 200 to 300 type-A personalities, andeverybody checks their ego at the door. There’s a tremen-dous amount of give-and-take at these meetings aboutwhat works and what doesn’t. But the most interestingthing is, after all the organized meetings, you have peopleeating dinner or sitting in the lobby, and you hear these

conversations: ‘Let me tell you what I did’ or ‘I did allthese things, but they didn’t work a flip.’ There’s this inter-change, this smorgasbord of things you can take home tomake you more successful, but at the same time, nothing isshoved down anybody’s throat.”Joe Theisen, Fairway’s Sun Prairie, Wisconsin, branch

manager, says the environment Fairway has created allowseveryone in the organization to thrive. “It’s a very open,honest, here’s-what-we’re-doing type of atmosphere,” saysTheisen, who has been with the company for 12 years. “We just came off our annual meeting, where we sat in

groups and [Jacobson] asked everyone, ‘What do you thinkof this or that?’ Most other companies don’t do that; they’remore of a top-down management. Here, it’s more horizon-tal. As a manager, I try to get right in there with my loanofficers, too. Everybody has their issues, but it’s how you getthrough them that counts. And when it’s out there in frontof people and not done in some secretive way, it makes for a

very fun environment—and anenvironment people can trust.” It’s also an environment that

has allowed Fairway to attract tal-ented originators. But at the sametime, the company takes hiringvery, very seriously. There isn’t justone or even two interviews, butentire two-day sessions that takeplace after a screening and the ini-tial interview process. “All recruitsmeet with each department duringtheir two-day visits,” says Walnick.“We are very upfront with them. Ifthey feel the experience isn’t a ‘10,’we suggest this may not be theplace for them.” “For every person we hire, we

turn away three,” Cutaia adds. That’s no small number, con-sidering the number of originators Fairway has actuallyhired over the past year and a half. In 2009, the companyhired 185 originators; so far in 2010, the number is 131. So who’s a good fit? “We’re obviously looking for peo-

ple that produce quality loans, and somebody who will fitinto our culture,” he says. “We’re not looking for a rogue,an independent cowboy type. We want people who areteam players, people who want to be involved in theprocess. When you look at our most successful managers,they’re the ones who take an extra hour or two to beinvolved in corporate decision-making,” Cutaia says.People like Amy Tierce, manager of the company’s

Needham, Massachusetts, branch, which finished 2009with a record $226 million in mortgages originated.“From the very beginning, it was clear to me that the com-pany [was designed to] treat its managers and salespeopleas though they were the clients—that was the belief sys-tem,” Tierce says. “My philosophy as a manager is that I’m nothing with-

out my loan officers. [Jacobson’s] philosophy is the same.It’s grown out of a deep passion to do it right, and to pro-vide a superlative level of service. The ‘customer’ is notonly the borrower, but is also the loan officer who origi-nates the loan and the manager who hires the loan officer.

“Nobody has bet-

ter service in the

industry than we

do—it’s what we

live by, and we

attract quality

people because

of how we

support them,”

says Walnick.

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That belief system is carried through every imaginablecorner of the organization,” she says.

FHA fanaticsA perfect example of this sort of open-source strategy ses-sion took place in August 2007, which, in retrospect, becamea pivotal moment in the company’s history. A meeting tookplace in which managers discussed whether or not to pursuedirect endorsement authority for Federal Housing Adminis-tration (FHA) loans. FHA was already an important part of Fairway’s product

mix, accounting for 10 percent of total volume in 2007, ac-cording to the company. However, the consensus at thatmeeting was that the current business approach was workingfine and there was no need to take on additional risk. Shortlyafterward, however, the industry was hit hard by the subprimemortgage crisis, and Fairway decided to move toward direct-endorsed FHA production and quick-ly hired a team of underwriters. Its early approval for FHA lend-

ing put Fairway months ahead ofits competition. Such is anotherFairway trait—speed. Today, FHAloans represent about 50 percentof Fairway’s total volume.“Because we have a horizontal or-

ganization and because managementis very flat, we’re able to move veryfast,” says Fairway Chief FinancialOfficer (CFO) Len Krupinski, a formerInternal Revenue Service (IRS) au-ditor who came to Fairway 12 yearsago. “The market is always moving,but we’re able to just roll with it,”he adds.When government lending became almost the only

game in town following the mortgage meltdown, Fair-way’s volume exploded. It originated nearly $2 billion inloans in 2008 and a record $3.4 billion last year. As of thefourth quarter of 2009, the last quarter that figures wereavailable, Fairway ranked 37th among the top U.S. mort-gage originators, according to National Mortgage News’MortgageStats survey. Through May 2010, Fairway’s loan volume was $1.2 bil-

lion—about 15 percent behind its record 2009 pace, yetstill very respectable considering the industry average hasseen a drop of more than 25 percent this year. Maintaining that volume depends heavily on Fairway’s

relationships with its warehouse-line providers, which hasbecome a larger focus for CFO Krupinski. “When I first started, it was really about managing the

branches, and making sure they were closing enough volumeand managing their own expenses,” Krupinski says. “Today, Ispend a quarter of my time on our warehouse relationships.” One reason for this, he says, is that warehouse banks

and investors have become more attentive to loan filequality and the general performance of the lenders withwhom they work. But this also works in reverse. On therare occasion that a Fairway partner misses a funding—even once—that relationship is reconsidered. “It just leaves a bad taste,” Krupinski says. “You can

never be content, and just like everyone constantly evalu-ates us, we have to evaluate our partners to ensure thatevery transaction we do is perfect. I don’t get involveddirectly with the customer, but I can imagine how bad it iswhen a purchase loan isn’t funded. It’s all about puttingpeople in homes—that is the American dream. And if youfail at that, it’s not good.”Today, Fairway is leveraging some of its recent success

toward building a technological infrastructure that is strik-ingly progressive for an organization its size. Earlier thisyear, company officials deployed a new virtual data-storagesolution geared at saving Fairway hundreds of thousandsof dollars in costs over the coming years while providingunlimited storage capacity. The new solution uses a storage area network (SAN),

which allows data to be consolidated at a remote data cen-ter where it is accessed and managed virtually over theInternet. It replaces the company’s network of nearly 30physical on-site servers, which is similar to how most mid-sized mortgage lenders store their data. Since the switch,Fairway has seen a 50 percent savings across the organiza-tion in hardware, maintenance and administration costs. The second phase of its technology strategy is a total

overhaul of its loan origination system (LOS). At the time ofthis writing, Fairway was 90 percent complete with transfer-ring its LOS platform to Pleasanton, California–based EllieMae Inc.’s Encompass360™ Banker Edition system. “We try to balance technology with good people,” says

Cutaia, who oversees the company’s technology initiatives.“I wouldn’t call us a pure technology company, but you cer-tainly need a good technology platform and good technol-ogy operators. I just haven’t seen a computer system thatcan originate a loan without a person involved.”Future moves for the company include leveraging its sec-

ondary marketing department for more profitable trades,where technology again will play an important role. And thecompany is building a platform to enter the wholesale mar-ket, leveraging its expertise in FHA lending. “We have modest goals, but we feel we can bring the

same culture, the same service level, the same quickness tothat space and serve banks, credit unions and other origi-nators who are not experts in FHA,” says Cutaia. Jacobson doesn’t think the key to his company’s success

is any big secret. “The whole thing is consistency, and notlosing sight of the fact that all of us have our reputationsat stake every day. It’s about consistent marketing, con-stantly improving your systems and processes. That’s justbusiness basics,” he says. But when asked how he feels about his company’s

growth, the task is not so simple. “The whole thing can godown really quickly. I still think about the day-to-dayobjective, and making sure we help and support the net-work each day,” he says. “We’re originators. All we reallyhave going for us is what we do today.” MIB

Warren Lutz is a writer based in Concord, California, and senior account

manager with Strategic Vantage. He can be reached at warrenlutz@

strategicvantage.com.

The second

phase of Fairway’s

technology strat-

egy is a total

overhaul of its

loan origination

system.

REPRINTED WITH PERMISSION FROMTHE MORTGAGE BANKERS ASSOCIATION (MBA)

Fairway Independent Mortgage Corporation

771 Lois Drive

Sun Prairie, WI 53590

Toll Free #: (866) 912-4800

www.fairwayIndependentmc.com