Action Mortgage Co. the real estate lending subsidiary of Spokane-based Sterling Savings Bank, has ridden Sterlings rapid growthlast year making $1.16 billion in loansand now is looking to expand in areas its parent doesnt serve.


Launched in 1987, Action Mortgage does business in 27 locations, mostly in Sterling Savings facilities, in Washington, Oregon, Idaho, Montana, and Utah. It now employs 223 people, 80 of whom are based here, and in the words of company President Jim Kirschbaum, is growing outside the footprint of Sterling Savings Bank.


The mortgage company recently opened an office in Salt Lake City, plans to open two more in Utah by the end of the year, and is opening an office in Sacramento, Calif.,all in locations where Sterling Savings doesnt have branches, says Kirschbaum.


He foresees more growth in the next five years, including by entering new major markets in Phoenix, Reno, Las Vegas, and Southern California.


Business volume, he says, is high, and January was the biggest month ever for Action Mortgage, with 598 loan originations totaling $150 million.


While Action Mortgage concentrates on making residential loans, Sterling has another, larger subsidiary, Lake Oswego, Ore.-based Intervest Mortgage Investment Co., that focuses on commercial real estate loans, says Kirschbaum.


Action Mortgage operates two divisions, one that offers construction loans and the other that offers longer-term mortgages.


Up until now, Action Mortgage has opened all of its 27 locations in facilities owned or leased by Sterling, says Kirschbaum. It operates three offices in the Spokane area, including its downtown headquarters and loan center at 510 W. Riverside.


People shortage


The biggest hurdle I have to growth is people, says Kirschbaum. I find it very difficult to find the right people who are motivated and capable.


If I want to hire loan officers I either have to steal from someone else or hire people who have never been in the business and dont know if they are going to stay. Its costly to train them, he says. He adds that there is no substantive loan-officer training offered outside of the industry in the Spokane area.


In 2003, when the mortgage industry went crazy, it was real easy to be a loan officer, says a man with nearly 42 years of experience in the field. All you had to do was sit in your office and answer the phone. Its a little different now.


Interest rates were already falling and lending was increasing in 2001 before the terrorist attacks on the U.S. temporarily triggered a steeper interest-rate dip, fueling even more business, Kirschbaum says. He says lending slowed some in 2002, but 2003 was the biggest year in the industry for mortgages by a large margin. That year, 70 percent of all loans made by Action Mortgage were refinancings. By contrast, in the companys just-completed record month, only 50 percent of all loans were for refinancing.


Kirschbaum says 15-year mortgages now can go for 5.25 percent, about the same percentage they were nearly 42 years ago when he entered the trade, and just one tenth of a percentage point above the lowest rate in 2003.


Current lending volumes arent approaching those of 2003 is that because so many people and businesses refinanced or took out mortgages that year that it wouldnt make financial sense for them to refinance at basically the same rate now.


Those who didnt take out mortgages then could save big if they acted now, though, he asserts. For example, he says, if a homeowner has a 30-year, $100,000 loan at 7 percent interest, the monthly payment on that loan is about $665. By refinancing the loan at a 5.25 percent interest rate, the monthly payment would be just $552 a month, not including closing costs and the standard $375 fee Action Mortgage charges for refinancing a loan.


To make its loans, Action Mortgage borrows funds from Sterling, which then has first option to buy the mortgage. Action sells to other institutions any loans that Sterling doesnt buy, Kirschbaum says.


I have a list a mile long of other entities we sell loans to, he says. Included on that list are the Federal National Mortgage Association, the Federal Home Loan Marketing Corp., CitiCorp, Chase Bank, and others.


On about half the loans Action Mortgage sells, it retains the servicing rights, and thus collects loan payments from the borrowers and forwards them to the institutions that own the loans, which pay Action a fee for that service.


Action Mortgage also underwrites and closes loans referred to it by independent mortgage brokers, who often make the initial contacts with borrowers, do the loan paperwork, and then send the loan package to Action for funding.


A broker is licensed to make mortgage loans, but normally does not have the capability nor the desire to hold and collect loan payments, says Kirschbaum.


Unlike a true mortgage lender, brokers dont normally have the money to fund the loans, he says. Such operations, of which there are many in Spokane, are a frequent origination arm of the business for Action and a significant piece of the industry, Kirschbaum says.


Sterling Savings began operations in 1983 at 120 N. Wall, and shortly thereafter moved some of its operations into the Sherwood Building where Action began in 1987 and still is headquartered, says Dan Byrne, Sterling Savings chief financial officer. Sterling is now headquartered at 111 N. Wall.


Although a veteran of the mortgage industry, Kirschbaum joined Action Mortgage just four years ago, when Sterling Financial Corp. bought his previous employer, Spokane Valley-based Source Capital Corp. He worked for three different Spokane mortgage companies between 1963 and 1986, then worked for Seafirst Bank in Seattle until 1994 when he returned to Spokane to work for Source Capital.