COLUMBUS, Ohio - When the mortgage refinancing boom ended last year, few competitors fell quite as hard as Huntington Mortgage Co.
The company's originations plunged 64% during the year, to $2.2 billion. Losses hit $10 million by yearend, compared with a profit of $15 million in 1993. And the company's executive lineup was completely revamped - not once but twice.
These days, the unit of Huntington Bancshares appears to have stabilized, and morale is clearly on the upswing.
"It is fun to be at Huntington Mortgage again," says R. Frederick Taylor, the unit's new president and chief executive.
The company, however, has greatly reduced its ambitions.
While Huntington Mortgage once aspired to join the ranks of nationwide mega-lenders, it now says it is content to be a niche player in the Midwest. Its staff, which peaked at 912 in 1992, is now down to about 400. The servicing portfolio has settled in at $5.4 billion, down from nearly $10 billion two years ago.
In short, the experience illustrates just how humbling the mortgage business can be. It also shows how the market tumult of the past two years has caused some major companies to fundamentally revamp their structures and strategies for the years ahead.
As in many financial debacles, the root of Huntington's problems was overzealous growth.
In the heat of the refinance mania that swept the nation in 1992 and 1993, Huntington expanded with abandon, increasing its head count 50% and opening its arms to an avalanche of loan applications.
"If I were sitting in that position today, we definitely would address it differently," said Zuheir Sofia, president and chief operating officer of Huntington Bancshares.
The problems with the expansion quickly became evident when interest rates shot up in early 1994 and loan demand slumped. Revenues quickly fell below costs.
Just before interest rates began climbing early last year, John T. Williams stepped down as the mortgage company's president and chief executive. At the time, he said he was "kind of bored" with the position.
As soon as rates began to rise, the next chief executive - Robert Lucas, a bank executive who had previously run Huntington National Bank's community banking department - was forced to start hacking away at the mortgage company's overhead.
With the stale, hot Columbus, Ohio, summer came more upheaval for the mortgage company. Huntington's loan production continued to fall and all the senior executives who had worked for Mr. Williams were replaced.
Plenty of rank-and-file mortgage bankers also were cut. Mr. Lucas axed 119 positions in June alone.
The downsizing continued throughout the year. The lender closed 20 retail branches by the end of 1994, leaving it with the current 10.
Meanwhile, the credit quality of loans made before the boom began to show some cracks. And morale throughout the company continued to deteriorate.
By January, when Mr. Taylor arrived from Atlanta's Liberty Mortgage Corp., employees had adopted an "us-and-them attitude" against bank officials and senior mortgage company managers, Mr. Taylor said.
"Besides the weather, it was cold in here," he said. "The staff had gone through an extremely difficult period of time. Everyone was concerned about their own future and the future of the company."
Mr. Taylor took to the task of turning Huntington Mortgage around. He "opened the door" to his office and encouraged people to come in and express their concerns about their jobs and the company's future. Throughout the company, he pulled people into conversations on how to rejuvenate Huntington Mortgage.
He said that being open with the staff and "keeping them informed of what exactly was going on" was the crucial first step in the turnaround he was attempting to orchestrate.
He then cleared house. By the end of this month, all the top mortgage executives will have been hired by Mr. Taylor.
Among the new recruits: H. Joseph Sando, former head of production at Household Mortgage Service and once a high school football coach. He has been charged with energizing Huntington's battle-scarred production unit.
The early results are encouraging. This month, Mr. Taylor expects Huntington Mortgage to originate more than $200 million of loans, in part with the help of lower interest rates. That's up sharply from the $65 million it originated last December.
The mortgage company has "turned the corner," said Mr. Sofia, the parent company's president.
The parent remains firmly committed to the mortgage company, Mr. Zuheir said - but the goals have clearly been scaled back.
"We can be a niche player, stay in the Midwest where we have a banking presence and name recognition, and can contribute to the bottom line" of Huntington Bancshares, he said.
Trying "to be the best is better than trying to be the biggest," Mr. Sofia added.
"If you truly keep your eye on the ball, keep focused on it, focused on the customer, and don't have too much vision of grandeur and size, I think you will be successful in" mortgage banking, he said.
Mr. Taylor and his team, meanwhile, are continually looking for ways to realize that vision.
A request for suggestions on how to cut costs resulted in 200 responses from staffers. The quality control department was expanded. The lender trained 180 bank branch officers to originate loans on a high-tech origination system.
Last month, Huntington Mortgage began a new reduced-documentation loan program to increase originations. Under the program, potential borrowers bring in one pay stub, two W2 forms, and three bank statements to get a loan approval within 72 hours.
The company is also exploring ways to join the revolution currently under way in mortgage technology. For example, it is getting ready to book loans on the Internet.
With any luck, Huntington's future should prove considerably brighter than its recent past.
