Startup
In July of 1993, mortgage broker Christopher M. George founded CMG Mortgage, initially basing it in his garage in Pleasanton, California with 7 employees. With these modest beginnings, the company and its initial team focused on speed of execution and superior service. Low overheads enabled very competitive pricing, which also contributed to the Company’s initial success. The company quickly outgrew the initial space and relocated to a small office in San Ramon, California, in 1994.
The Early Years
The company's early success attracted a cadre of solid loan agents, and the team spent the 1994-1995 period focusing on the very active refinance market of that time. During this period, the management team overcame a significant challenge when the founder was required to attend to his 4-year old son, who needed and successfully received a liver transplant from his mother. The company also overcame various structural challenges typical to growing enterprises, adding an Information Technology group and initial network architecture.
Diversification into Wholesale Lending
In 1995, the Company opened a wholesale lending division, initially focusing on correspondent lending to achieve better pricing at retail. Initially managed by Chris George, the division added staff rapidly. As this fueled growth, the Company secured various warehouse lines of credit, enabling even more significant expansion of the business. In effect, this enabled CMG to fund loans without being solely dependent on the brokerage business.
CMG also partnered with Calyx Software which produces Point®, the number-one loan origination software platform, and became integrated into the software application as one of the select few Lenders In Point. This enabled true end-to-end integration and gave CMG’s wholesale division a high level of visibility among the large number of brokers using Point.
Continued growth in the retail business plus creation of the wholesale lending division resulted in the need for additional office space, and soon the company had expanded into a large portion of the offices in the San Ramon building.
Expansion
From 1996 through the end of the decade, CMG expanded successfully on the retail and wholesale foundations it had built. The company purchased The Mortgage Line and Bay Pacific Mortgage, consolidating a large number of loan officers into a new CMG retail branch in Walnut Creek. In 1999, the company surpassed $1 billion in origination volume for the first time. In 2003, the company was awarded the prestigious Broker of the Year award by the California Association of Mortgage Brokers (CAMB).
CMG's success in blending superior service with competitive pricing led to further expansion of the wholesale lending division as well. As the company became licensed to lend on a wholesale basis in more and more states, the company opened two new wholesale lending offices in Concord (Northwest region), and in San Diego (Southwest region). This led to another stage of growth for the company, as it was able to penetrate existing markets more thoroughly and expand lending into 38 states. Overall, the company's growth led it to be named one of the San Francisco Bay Area's 100 fastest-growing companies by the San Francisco Business Times in 2003.
Pacific Guarantee Mortgage
In 2003, CMG purchased the assets of Pacific Guarantee Mortgage (PGM), the nation's leading branch networking organization, from the Royal Bank of Canada. This included 32 branches in 7 states. The PGM Retail Branch Network both brokers and banks loans with CMG, providing a significant source of wholesale lending business and fee income. In exchange, CMG handles key back office functions such as human resources, compliance, accounting, marketing, and benefits. The arrangement frees the branch managers up to focus on growing their loan business. PGM continues to secure new net branches regularly, as independent mortgage brokers see the advantages of charting their own course while being part of a world-class organization.
An Integrated Financial Services Company
In 2003, CMG created CMG Financial Services, a holding company which now includes the core business units of Retail (CMG Mortgage Services), Wholesale (CMG Mortgage, Inc.) and net branching (Pacific Guarantee Mortgage). The company has taken initial steps to add a fourth major business unit, CMG Bank, and in 2003 secured approval to establish a Federal Savings Bank charter with the federal Office of Thrift Supervision. The project was put on hold pending the launch and development of the innovative Home Ownership Accelerator loan, which required substantial company focus. In the future, however, CMG Bank will enable the company to further diversify, serve and retain its retail clients, gain new clients, as well as serve as a source of funds for the wholesale lending business.
Launches Most Innovative Loan in U.S. Mortgage History
In 2005, after several years of development, CMG Mortgage launched the revolutionary Home Ownership Accelerator loan, the first all-in-one loan in America. Based loosely on a concept popular in Australia called an offset loan, the HOA takes the idea a step further, integrating a full-featured checking account with a line of credit, creating the most powerful home finance tool available to homeowners. The borrower deposits their paychecks directly into the HOA account, where it immediately reduces the loan principal balance. Interest is calculated on a daily basis, so the borrower begins to save interest immediately. The money stays in the account, keeping the loan balance lower, until it is needed for regular living expenses. At that time, the HOA works just like a regular checking account (unlimited checks, ATM/Visa, online bill-pay, etc.). The substantial interest savings generated by this process means that a typical borrower with positive cash flow can often pay off in around half the time, and save tens or hundreds of thousands in interest, with no change to their spending habits. From an investor standpoint, the nearly $2.5B in HOA’s in portfolio outperform any mortgage asset in existence.
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