Penn State walk-on walks away with B of A share

, Bloomberg

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Bill Emerson
Bill Emerson

Quicken Loans Inc. chief executive officer Bill Emerson went from a walk-on with Pennsylvania State University's football team to part of Coach Joe Paterno's 1982 championship squad, and then a captain two years later.

Emerson last year led Quicken, the mortgage lender owned by billionaire Dan Gilbert that was the 34th largest in 2006 as the U.S. housing boom ended, to near the very top of an industry that's reaping the rewards of a refinancing boom engineered by the Federal Reserve and President Barack Obama.

Quicken is taking advantage of the collapse of hundreds of rivals, retreats by some of the largest banks, and hurdles faced by new competitors. The Detroit-based company overtook Citigroup Inc. as the fifth-ranked originator in the third quarter, and then surpassed U.S. Bancorp and Bank of America Corp. After its lending jumped to $70 billion in 2012 from a previous record of $30 billion, it still has room to grow, according to Emerson.

"Our mission is to do as much or more than we did last year," Emerson, 50, said in an interview at Bloomberg News headquarters in New York. "There's a massive market out there, and 93 out of 100 people still wake up and go somewhere else."

The firm's rapid expansion reflects its opportunities and ambitions, with its staff growing to about 8,900 this month from 5,400 a year ago. About 7,000 are in Detroit, where founder and chairman Gilbert — also the majority owner of investment firm Rock Ventures and the Cleveland Cavaliers basketball team — moved the lender in 2010 and bought other properties in a long-term bet on that city's revitalization.

Reshaping Industry

The company is among firms reshaping a mortgage industry broken by the housing bust that drove values down by 35 percent across the country before a recovery that began last year. Causalities included IndyMac Bancorp, American Home Mortgage Investment Corp. and New Century Financial Corp.; Bank of America and Citigroup units that made loans through other firms; and almost all lending that doesn't qualify for government-backed programs.

For surviving lenders, business has been booming, with new loans rising 22 percent in 2012 to $1.8 trillion as the Fed drove 30-year mortgage rates to record lows below 3.4 percent and Obama expanded federal refinancing programs. Quicken joined lenders including U.S. Bancorp, Flagstar Bancorp Inc., Everbank Financial Corp. (EVER) and PennyMac Mortgage Investment Trust in growing even faster.

Lender Retreat

Retreats by large lenders such as Bank of America left a "tremendous amount of market share available," said John Robbins, the head of Bexil American Mortgage Inc., who founded two mortgage firms sold to banks that are now part of Wells Fargo & Co. and JPMorgan Chase & Co. "If you did a good job, it was there, and it's going to continue to be there for a while."

Quicken made about $25 billion of mortgages last quarter, exceeding the $22.1 billion of mortgage production reported by U.S. Bancorp. Bank of America, the second-largest U.S. bank by assets, said it funded $22.5 billion in residential mortgages and home-equity loans as it seeks to rebuild in the business, while Citigroup reported $16.8 billion in mortgage originations.

Those 2012 volumes would have earned Quicken more than $1 billion in profit, based on mortgage earnings data reported by Wells Fargo, the market leader with $524 billion of originations last year. JPMorgan, which last year licensed some Quicken technology, ranked second.

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