In the words of Jordan Pohn, the band is back together again.
After building the largest residential mortgage brokerage company in Louisville before selling it to Lending Tree LLC in 2011, Jordan and Saul Pohn are scratching that lending itch through a startup that focuses on short-term lending for house-flipping developers.
The new company is SurePoint Equity, and it is starting from the ground up. The company is leasing about 2,000 square feet of space at 9900 Corporate Campus Drive off Whipps Mill Road in Louisville's East End, and it has only three employees: the two brothers and longtime business partner Leigh Wise.
SurePoint Equity succeeds SurePoint Lending, the privately owned company that did business as First Residential Mortgage Network Inc., starting in 1995.
In November 2010, a subsidiary of Tree.com Inc.(Nasdaq: TREE) of Charlotte, N.C., agreed to buy First Residential's assets for $6 million in cash with the possibility of as much as $17 million more.
A LendingTree network lender for 11 years, First Residential had originated more than $10 billion in closed loans from its inception and was named the No. 1 refinance lender on the LendingTree network in 2009. It also was the largest residential mortgage broker in Louisville Business First's annual rankings, closing on about $1 billion in loans each year. Saul Pohn said the company's highest annual mark of closed loans was about $1.5 billion.
That success came as the company grew to 500 employees. At the time of the sale announcement, First Residential Mortgage had about 300 employees at its corporate headquarters at 9721 Ormsby Station Road. The company had another 200 employees at production hubs in Nashville, Tenn.; Tampa, Fla.; and Indianapolis, and it was licensed to offer loans in 45 states. The Pohns ultimately consolidated operations in Louisville before walking away, they said.
Jordan Pohn said that after the economic downturn they wanted to sell to "get some money off the table."
They remained involved in the business for a few years after the sale, when Jordan Pohn realized that his entrepreneurial spirit was not satisfied in such a corporate setting. The brothers then sought other business opportunities, opening two fitness centers in Bowling Green, Ky., before realizing they wanted to get back into lending.
The men briefly considered flipping houses because they knew profits could be made in that sector, but they also knew they were not experts in that field.
So they tried a new approach. Instead of residential mortgage loans, they decided to fill what they considered to be a vacuum in a space that was becoming very hot: real estate investors who need short-term loans to buy, renovate and sell properties.
As Jordan Pohn explained, those who wanted to flip houses and sell them quickly have had limited borrowing options. Banks typically want a 25 percent down payment and set strict income and credit score requirements. Banks also tend to take 30 to 45 days to close and limit the number of loans for a single investor.
Another option was what Jordan Pohn described as "hard money lenders" who set exorbitant interest rates with limited loan amounts. Those lenders tend to be overly involved in the process and are unpredictable in terms of having the money when needed, he said.
It is there that the Pohns believe they can fill a void. They refer to SurePoint Equity as a "common-sense lender" that recognizes a good loan when they see it and does not set minimum credit score requirements. The company asks for a 10 percent down payment and typically can close on a loan in five days or less. They said they can set their own standards because they are self-funded and don't have underwriters, banks or mortgage companies directing them.
Each of the company's loans are 12-month loans, with the partners shying away from long-term loans for larger developments, such as apartment sales.
"That's where you can get into trouble; it's a little risky," Jordan Pohn said.
The company underwent a test launch about nine months ago, working exclusively with two unidentified developers who are experienced at flipping homes. The company wanted to get feedback from those developers on what they needed and what improvements could be made before taking the concept to market.
To date, the company has closed on more than $2 million in loans and has started working with new investors as the loan applications start trickling in.
When choosing to work with a developer, they look at criteria such as the property's area of town, the quality of the property and the experience of the flipper.
"To be successful, you have to know what you're doing," said Saul Pohn, and the brothers said many want to flip houses simply because they see it done on television.
Jordan Pohn said most of the renovation projects are wrapped up in eight months, and developers are seeing profits no lower than $20,000 on projects.
They recognize that some areas, such as Germantown, St. Matthews and the Highlands, are hotter than others, but they said value can be found all over Louisville.
"We've lent all over the city, and we have no limitation," Jordan Pohn said. "There are good deals anywhere. You just have to find them."
The Pohns said they likely will need to bring on more employees once they reach $5 million in closed loans and that they might pursue an expansion into other cities at $10 million, noting that there are flippers everywhere.
"It's very scalable," Jordan Pohn said.
SurePoint Equity is hosting a private launch party Thursday at Captain's Quarter's Riverside Grille.