Mountain States Mortgage Centers, Inc.

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Mountain States Mortgage Centers, Inc.

1333 East 9400 South
Sandy, Utah 84093
U.S.A.
(801) 576-1000
Fax: (801) 572-8431
Web site: http://www.mortgagespan.com

Private Company
Incorporated: 1983
Employees: 120
Sales: $540 million (1998)
NAIC: 522292 Real Estate Credit; 52239 Other Activities Related to Credit Intermediation

Mountain States Mortgage Centers is a large mortgage banking firm that originates and services residential mortgage loans for new homes, refinancings, debt consolidation, construction, home improvement, and home equity. Registered to operate in most states and the District of Columbia, Mountain States has over 100 different programs to help its customers. The company also administers the MortgageSpan division that allows individuals to work out of their homes as self-employed loan originators and recruit others to do the same, thus qualifying as a multilevel marketing (MLM) means of direct sales.

1980s Origins

Jerilyn R. (J. R.) Bills, the founder of Mountain States Mortgage, was born in San Diego and moved with her family to Salt Lake City. She first worked in the mortgage industry while attending college in pursuit of an art degree. “After about six months, I came to the stunning realization that I loved this business, and I wanted to make a career out of it,” said Bills in the Broker Agent Magazine. So in 1972 Bills left college. Over the next decade she worked for several companies, learning what she could to eventually start her own firm.

Bills started Mountain States for two reasons. “I was disappointed with the [existing] service. It was taking from six to eight weeks to get a loan approved, and I found it difficult to make changes from within the industry.” Moreover, Bills remarked, “It had always been my goal to become self-employed and financially secure, so I decided to strike out on my own.”

Mountain States Mortgage Centers, Inc. was incorporated on January 26, 1983, with total authorized capital of $50,000. The company’s incorporators and initial board of directors were comprised of J.R. Bills, based in Salt Lake City, her friend and associate Joseph C. Knudson, and his mother Dorothy R. Knudson, the latter two hailing from Hildale, Utah, a small town on the Utah-Arizona border. When the company was started, Bills had already built relationships with some realtors; her connections in the field helped her gain $2 million in mortgage applications in the first two weeks of business. The company began in a small office in Salt Lake City. By 1989 the firm was employing a work force of 60, and it moved to a 25,000-square-foot building in the Salt Lake City suburb of Sandy.

In December 1989 Mountain States Mortgage directors Dorothy R. Knudson and Joseph Knudson, joined by Joseph’s brother Alan E. Knudson, incorporated their own Utah firm called West Star Financial Corporation, thus laying the foundation for an eventual split from J. R. Bills and Mountain States. Alan Knudson, a University of Utah grad, had begun at Mountain States in 1984 as a loan officer and manager of the Sandy branch and had risen to become vice-president. In the early 1990s, J.R. Bills bought out the Knudsons’ shares of Mountain States, becoming the company’s sole stockholder. Still, Mountain States and West Star reportedly worked out of the same building in Sandy, before West Star eventually left to merge with the VanderFord Company, another Nevada corporation headed by the Knudson family.

Expansion under Bills in the 1990s

The split between the original directors of Mountain States Mortgage Centers occurred during a period of general expansion at Mountain States. To help manage the business, Bills hired Larry Jentzsch, formerly the senior vice-president of finance and administration at Utah’s Megahertz Corporation. A notice in the November/December 1993 issue of Utah Business listed Mountain States as “one of the nation’s largest GNMA loan producers,” referring to federally guaranteed loans, either FHA or VA loans, through the Government National Mortgage Association (Ginnie Mae). Mountain States’ net income increased 125 percent from 1992 to 1993, when it reportedly closed 14,000 loans worth over $822 million.

Bills’ management style was distinguished by her commitment to good customer service and fair treatment in the work place, including efforts to incorporate nonsexist language in all business dealings. In a brief profile in the Deseret News on November 14, 1993, Bills described her business methodology as one of “timeline management and motivational goal setting.” Though it was processing loans in more than 40 U.S. States, the company also opted to stick close to its roots in Utah. One attempt to expand with facilities across state borders, specifically an office in Phoenix, was described by Bills as “a miserable failure and a good lesson.” She affirmed that “Now everything originates and is managed from Utah.”

In January 1994 Bills announced that Mountain States had paid $1.8 million cash for a building on seven acres of land in Sandy, Utah. Once the facility was remodeled, it would become the site for processing loan applications, and overseeing the transfer of investor money to contractors, while the company’s main office would continue to oversee the collection of loan payments.

Bills expected further growth in the mid-1990s. “Our servicing department is at $2 billion right now,” she remarked in an October 1994 profile in Deseret News, adding “but we expect it to be at $30 billion in about three years.” About 90 percent of Mountain States Mortgage’s business at the time came from loans on existing homes; national economic recovery would soon further stimulate Mountain States Mortgage’s expansion. In 1990-1991 mortgage rates ran about ten percent. By 1993, housing had become more affordable than it had been since the mid-1970s, with mortgage rates declining to below eight percent.

New Directions: The MortgageSpan Program

Geographic expansion continued to interest Mountain States. Moreover, Bills had observed how more people were working out of home offices, facilitated by the explosive growth of the Internet. “Who says loan originators have to come to the office?” questioned Bills in the Broker Agent Magazine. While Mountain State Mortgage Center’s business was throughout the United States, the public continued to perceive it as a lending company for the western United States. To correct this perception, and to take advantage of a growing home-based work force, in 1997 the company created MortgageSpan, which would, according to company literature “convey widespread lending abilities and assist the company in attaining its goals nationally.”

Specifically, MortgageSpan helped established real estate agents, or even anyone new to the business, become a self-employed independent loan originator (ILO). For $299, an ILO received a start-up kit with a reference manual, training workbook and video, a computerized mortgage data analyzer, and a diskette with ads and other resources. The ILO also paid $69 per month to have MortgageSpan staff process and underwrite loans, provide further training, and to gain support from the program’s national advertisements and a monthly newsletter on the mortgage industry. “The days of operating a mortgage business based solely on traditional practices are gone,” Bills observed in the October 1998 Salt Lake City Enterprise. “In order to stay competitive, mortgage companies must find new ways to cut costs and increase value for their customers. With our new division, we’ll be able to do both,” she stated.

Soon MortgageSpan was signing up about 100 new loan originators every month, with the goal of having about 1,000 ILOs after one year of operation. ILOs made money by networking with their family, friends, and acquaintances to offer them loans. If they closed six $150,000 loans a month, they received a 0.4 percent commission of $600 per loan. Moreover, ILOs also could receive volume bonuses on their own sales. If independent loan originators referred someone who also became a MortgageSpan ILO, they received $100 plus $5 for every month that the new recruit stayed in the program. In addition, ILOs who coached and managed their enrollees were paid a percentage on the loans they closed.

Although not all succeeded, some MortgageSpan ILO’s did quite well. The MortgageSpan program did compete with another multilevel marketing operation—Primerica Financial Services—that trained its representatives to offer term insurance, mutual funds, and consolidated loans available for refinancing mortgages. Like MortgageSpan, Primerica Financial Services paid its representatives a percentage for sales of those they recruited.

In November 1998 Utah Business magazine ranked Mountain States Mortgage as Utah’s largest company under female ownership, based on its gross revenues of $540 million. Utah was at the time one of the ten fastest-growing states for women-owned businesses, according to the National Foundation for Women Business Owners. Bills and Mountain States Mortgage had participated in a major trend for women in the 1980s and 1990s of starting their own companies, some small and some large. Such entrepreneurs decided to quit trying to break through the so-called “glass ceiling” in which male corporate executives prevented competent women from reaching the top. Instead, they were jumping ship and founding their own businesses at twice the rate of the general population.

In 1999 Mountain States Mortgage Centers continued to be led by President/CEO and sole owner J. R. Bills. Other officers included Vice-President and Chief Financial Officer Gene G. Jensen, as well as Vice-President Linda Malin. Bills’ daughters were also involved in the business, closing loans and managing the documents departments. As it headed into the next century, Mountain States Mortgage Centers looked to incorporate new technologies associated with data storage and the Internet, while also extending its geographic reach through its MortgageSpan program. Likely, the company would also adhere to its policy of inclusiveness, as stated by Bills in a real estate trade magazine: “We believe everyone should be able to own their own home, and we rarely decline a loan.”