Robbins' family reunion: John Robbins was a leader in the mortgage business long before he took the chairman's post for the Mortgage Bankers Association. His successful career has been noted for many things, but the loyalty of his senior management team is perhaps the most telling

Mortgage Banking, Oct, 2006 by Janet Reilley Hewitt

Part of a sick tree

Later, Robbins was summoned to a meeting in San Francisco. He knew he had delivered everything asked of his group, including the profitability.

At the meeting, Devine explained, "I have got a thrift institution, and it is the tree that we own. The trunk of the tree is sick. And I need all my management time and attention focused on how to make that healthy again. And so we can't afford to have ornaments hanging off of the tree, irrespective of whether they are profitable or not." Robbins was told they intended to shut his operation down.

He says it was "one of my more disappointing moments."

But all it took was a few days for him to bounce back. "Two days later, I flew back up and sat down with John Devine and said, 'Look, give me the football. Let me go out and find a buyer for the company instead of just closing [us down].'"

Conventional wisdom on Wall Street at the time was that mortgage companies were virtually impossible to sell. Fuller remembers the investment banking crew sent in by Ford to evaluate sale prospects for the company saying, "Well, listen guys. Obviously your company is not worth enough to even sell, so we're going to have to close it down."

Fuller says that was all Robbins had to hear. "You could see the anger and the fire in John that we had not all worked that hard to create this company to have somebody tell us it wasn't worth enough to do anything else but just blow it up."

They found a small boutique investment banking firm, Putnam Lovell, that specialized in buyouts but had no experience with mortgage companies. Then they hit the road for meetings with venture capitalists, funds, mezzanine investors and "anyone that would listen to us." Ultimately, a major New York venture capital (VC) firm, Welsh, Carson, Anderson & Stowe, bought the company from Ford Motor "for almost nothing," Robbins says. The sale was announced on May 7, 1990.

The new owners got about 45 branches, the payroll and roughly 900 employees, but virtually no servicing, for a price tag of roughly $1 million.

This was the birth of American Residential Mortgage Corporation. It would remain privately held for just a short while before going public and becoming a high-profile player in the industry.

Reporting to venture capitalists

Robbins and his team had won their freedom, but they were now working for a VC firm. And this time there was no channel conflict--it was all about the bottom line.

Initially, Welsh, Carson put about $24 million into the company. That was a big initial investment by VC standards, and the first set of financials were eagerly awaited.

Unfortunately, the first two months of financial statements "were not what we expected," Robbins remembers.

"This was the first time that I ever got taken to the wood shed by a venture capitalist, which was a painful experience. Basically I was told that while they were empathetic that the market was difficult, they didn't care--that they bought the company and hired me to make money, and therefore we needed to figure out a way that we were going to do that, irrespective of market cycles."