CMG opens Scottsdale office to offer new mortgage product
Run Date: April 16, 2010
by Chris Casacchia
Phoenix Business Journal
A Northern California mortgage firm is expanding into North Scottsdale, targeting high-end customers with a product developers say will significantly reduce mortgage payments and shorten the life of the loan.
San Ramon, Calif.-based CMG Mortgage opened a retail branch last month at 8510 E. Shea Blvd. to capitalize on the area’s affluent residential base and the site’s proximity to one of the largest Re/Max outfits in the Valley.
CMG offers conventional, jumbo and Federal Housing Authority loans, but makes money with its Home Ownership Accelerator, which essentially is a credit line combined with a traditional checking account through Ameriprise Bank FSB.
Home buyers need good credit, disposable income, a proven savings history and at least a 25 percent down payment. Refinancers need at least 25 percent equity in their home — a difficult requirement in Arizona, where home prices in many areas have been sliced in half since the foreclosure crisis
and recession.
“This loan is not the right loan for everyone,” said Christopher George, founder, president and CEO of CMG Mortgage. “If you have no real money at the end of the month, I’m not sure if this is the right loan for you.”
In a program modeled after others used in Australia and Great Britain, homeowners deposit paychecks directly into the loan account, reducing the principal instantly, and thus the interest.
In a traditional loan, the balance is constant all month, then decreases with the mortgage payment. Under this program, the money in the bank account drives the balance down daily, lowering the interest. The interest savings roll over into the next month, creating a lower principal balance. This compounds month after month, so borrowers can pay off the mortgage — or, in this case, the credit line — years earlier than a traditional loan.
“We’re able to expose a lot of high-end customers to a product that gives them a viable solution for loans up to $1 million to $1.5 million,” George said. “It’s a very flexible and efficient way to let your money work for you.”
The program was introduced in 2005. Within three years, more than 6,100 clients used it to fund a total of $2.5 billion in mortgages. Loans were made primarily in California, but Arizona was the second-largest market.
On Aug. 11, 2008, the product was pulled from CMG’s rate sheet when investor GMAC Financial Services ran into liquidity problems and couldn’t continue funding credit lines. George called it “a very dark day” for him and the company he had established in 1993 in his basement.
After months of soliciting financial firms, George inked a deal with Ameriprise Bank, a subsidiary of Minneapolis-based Ameriprise Financial Services Inc. Eric Harris, the bank’s chief credit officer and lending general manager, said the program helps clients reach their financial goals.
“It allows them to pay off their mortgages faster by more efficiently using their idle cash, which gives them more flexibility to build a comprehensive financial strategy,” he said.
Since it was reinstated in October, the product has found success reeling in high-net-worth athletes, authors and executives. CMG opened offices in Kirkland, Wash., and Denver in October, and in Minnesota in February. CMG also is expanding to San Diego as many competitors continue to struggle during the recession.
CMG opened its Scottsdale office with five loan officers and a few staffers. An average-size office employs 15 to 25 loan officers who can earn $125,000 to $175,000 a year, George said. CMG also operates a wholesale outfit in Arizona.
Big house and bold plan in Los Gatos’ historic Thrash House
Run Date: April 2, 2010
by Katherine Conrad
Silicon Valley / San Jose Business Journal
Fire, vandals and vagrants have almost destroyed Los Gatos’ historic Thrash House. Now Mark Robson plans to restore the stately mansion to its former glory.
The San Jose home builder estimates it will take a year and more than $1 million to repair the dilapidated house built on Los Gatos Boulevard in 1900. When it’s done, he will sell the 4,500-square-foot home for more than $3 million, and the other 18 homes he builds next door for between $1.7 million and more than $2 million each.
It’s a gutsy move, constructing high-end homes in a housing market in the fourth year of a historic downturn. But Robson, who bought the 2.6 acres in 2005, doesn’t see it that way.
“We don’t think the world is coming to an end,” said the 20-year building veteran, who just finished another Los Gatos project, Bella Vista. “People do want to buy a good home in a good location where they can enjoy the neighborhood and raise their children.”
Armed with a loan from Housing Capital Co. in San Mateo, Robson Homes started grading the site the last week of March. As construction ramps up on the site, Robson said several hundred construction workers will be on the job building the model homes that he expects to be finished in October.
He said the $30 million Los Gatos project is the second development he has worked on with Housing Capital in the past year.
Housing Capital is highly selective about which projects it agrees to fund, said Kris Lamson, vice president of the firm that was founded in 1994 and partners with US Bank.
“We’re a relationship lender,” she said. “We look to the builder first, his track record and financial statements. Robson has a strong background and has weathered the economic storm. The residential market is not dead, there are sales that are happening.”
In the past six months, Lamson said she has noticed a slight uptick in construction lending after a couple of years of very low activity. It took time, she added, for the housing industry to adjust to the new lower prices after hitting the peak in the third quarter of 2005.
“It’s a much tougher climate. Everybody has taken a lot of hits and everybody is nervous. We’re almost five years into this thing,” she said. “But I am optimistic, because land sales are happening. And when public builders are out there buying lots, they will start building houses, and that’s a good thing.”
Robson gets area’s support
The town of Los Gatos certainly thinks so.
A week ago, the ramshackle Emmanuel Convalescent Hospital, as well as three abandoned houses, were flattened by bulldozers to make way for the new as-yet-unnamed development. Neighbors voiced some concerns about traffic, but most supported the project, especially once the hospital was torn down.
“One of the nice things has been the reaction from the neighborhood, which has been very positive,” said Suzanne Davis, an associate planner for the town. “The hospital did not do a great job of maintaining their grounds or the historic Thrash House. It was an eyesore.”
Davis said the previous owners proposed demolishing the historic home but met with stern resistance from Los Gatos officials.
“The town didn’t want to lose the historic resource. It’s part of the town character,” she said.
Often cities offer developers permission to build if they agree to restore a historical building. But Robson said approval to build his project never hinged on his agreement to save the historic house.
“I never asked for that as a trade,” he said. “This house is an important part of a historic pattern, and we’re going to restore it. We never considered doing anything but restoring it.”
But it will take some work.
“We’re talking fire damage, graffiti — kids have been sneaking in and out of there for years,” he said.
Robson said he finds historical restoration professionally challenging. A veteran of such projects, Robson Homes turned the Old School in the Mission San Jose district of Fremont into 11 live/work lofts. It also restored the Mackintosh farmhouse and granary as well as the Mission Arroyo Farmhouse, all in Fremont.
“We like doing it. It’s time consuming, but we don’t mind doing it,” he said. “From a professional standpoint, it’s fun. When you have a chance to restore a building with so much character, it adds to the ambience and character.”
Robson Homes expects the entire project will be complete in the middle of 2011. The homes will range in size from 2,600 square feet to 2,900 square feet and will feature four bedrooms and three bathrooms. Some houses will even have basements.
Robson said the development offering bungalow and craftsman-style homes will be built to blend in with the
existing neighborhood.
“I think the high-end home market will get better as the valley’s job market continues to improve, as the stock market continues to improve,” Robson said. “I think we’ll do well there.”
