Tapping Tennessee Talent

The Impact of 21st Mortgage

When Tim Williams (HCB, ’93) and Rich Ray (HCB, ’61) founded 21st Mortgage in 1995, they were looking for talented young college graduates to add to their team. They found them at the University of Tennessee, Knoxville. A financial institution focused on providing manufactured home loans, 21st Mortgage has grown exponentially over the past two decades, servicing $7.5 billion in loans and more than 170,000 customers across the United States. Now owned by Berkshire Hathaway, the company is the largest inventory finance lender and the largest mortgage lender serving the manufactured housing industry, providing financing for more than 22 percent of all new manufactured homes built nationwide. In the past 10 years, 21st Mortgage has employed 488 UT grads, 135 of those from the Haslam College of Business.

Birth of a Company

Tim Williams had spent 21 years with Clayton Homes when Rich Ray, a former Clayton colleague who retired in 1993, approached him about creating a mortgage company. Williams said yes. He held an executive position at Clayton’s mortgage company, Vanderbilt Mortgage, and felt both excited and disappointed about leaving, but the prospect of becoming his own boss made the venture attractive.
The morning after his resignation, Williams received a phone call from Jim Clayton. “He asked what Rich and I were planning,” he says. “When I told him, he said, ‘Whatever you do, I want to be part of it.’”

Williams and Ray cut a piece of the deal and sold 25 percent of the business to Clayton Homes in exchange for an agreement that Clayton and Vanderbilt Mortgage would help them with asset-backed securities. “That supplied a piece of the puzzle,” Williams says. “Their support allowed us
to grow without as much risk.”

To get 21st Mortgage off the ground, Williams and Ray needed to start a team, but they had a problem: they needed people with manufactured housing lending experience, and the only place in town to find them was at Vanderbilt Mortgage. Determined to build an independent company, they decided to find smart young people and train them.
The pair made the move to actively recruit recent college graduates. “That was the best decision we ever made,” says Williams. “We hire from all universities in the area, but the University of Tennessee is, by far, our number one source of talent.”

Valuble Preparation

Ray and Williams were no strangers to the university. Both are graduates of Haslam’s accounting program and place a high value on the training they received as students. Ray took a position with Arthur Andersen in Chicago after he finished college in the early 1960s, and Williams entered the accounting program while working at Clayton Homes. “Jim Clayton was a strong mentoring influence for me,” Williams says. “He put an emphasis on education, and he said if I’d go and make a B or better, he’d pay for it.”
Williams threw his effort into college and his role at the mortgage company. By the time he graduated, he was president of Vanderbilt Mortgage. While he never became a CPA, his education provided an essential foundation for what lay ahead. “To run a business, you’ve got to understand debits, credits, value ratios, and other accounting principles,” Williams says.
“I continue to use my degree every day.”

Ray and Williams leveraged the full measure of their education, experience, and determination as they launched 21st Mortgage at a difficult moment in the financial sphere. What was once a competitive market began to show cracks during the mortgage meltdown in 1997. “The writing was on the wall that the ability to do asset backed securities was changing,” Williams says. “By 2000, the largest company in our industry was in serious trouble.”

Predictive modeling, which Williams first encountered in a Haslam statistics course, helped the company survive the downturn. By 1998, they were looking at the market from a different point of view based on data they had collected to predict loan performance. Relying on those insights, the company drastically downsized from $25 million of business per month to $7 million, but that $7 million was extremely profitable business. 21st Mortgage still relies heavily on predictive data to detect the pulse of the industry and plan accordingly.
When the economy stabilized, 21st Mortgage stood almost alone as a lender in the manufactured housing sector. “There were probably 50 active lenders prior to the meltdown, and they’re nearly all gone,” says Ray. “They couldn’t figure out how to be profitable at this business.”

Prioritizing Professional Development

Hiring sharp college graduates and utilizing predictive data modeling gave 21st Mortgage an early edge over competitors, but the founders say investing in people is key to their success. “In our hiring process, we look for candidates who are promotable,” says Ray. “With compliance and regulatory issues today, we have to have very formalized training, but we’ve made it a priority since day one.”
New hires at 21st Mortgage usually start out as financial counselors, the company’s entry-level position. They receive at least 30 days of training before talking to a customer, which includes role playing and reviewing procedures and guidelines. They also shadow team members for a few weeks.

Portfolio manager Eric Watts (HCB, ’03) joined 21st Mortgage as a financial counselor the year after he graduated from Haslam with a degree in finance. He rose quickly through the ranks and uncovered a passion for management. “Along the way, I’ve found outlets for things I love such as teaching, hiring, and mentoring,” he says. “Being able to help new team members find their footing keeps me engaged and excited about coming to work.”

The company also prioritizes follow up, says legal and bankruptcy department manager Troy Suggs (A&S, ’01). “One of our trainers will go sit with them a few times a week and ask questions like, ‘What are you struggling with? What are some positive things that have happened for you this week?’” The professional development continues for team members through-out their careers, with monthly meetings on trends and new key points to consider.

Volunteer Values

Since its early days, 21st Mortgage has remained connected to the university and to the Knoxville community. “Having a company with deep ties to UT definitely benefits the community,” says staff attorney and associate compliance officer Cara Howe (A&S, ’05 and ’07). “It allows graduates to build a career
at one company and stay here.”

Williams and Ray also made an early commitment to invest in downtown, long before it was a popular area. Today, more than 700 team members work at the company’s headquarters on Market Street.
A few years ago, 21st Mortgage began providing opportunities for employees to get out of the office to do volunteer work. “We encourage all our team members to stay involved in the community,” Williams explains. “Our work force is pretty young, but we love seeing them give back to the extent that they can.”

Ultimately, 21st Mortgage seeks to serve team members, whether or not they stay long-term. For many recruits, it’s their first job after college graduation, and some will ultimately choose a different career path. “Even if they only stay a year, they’ll receive a continuing education from us,” says Williams. “We believe they will benefit from the experience.”

Land home director Lindsay Moore (A&S, ’06), who studied international business and planned to leave Knoxville after graduation, says 21st Mortgage’s positive company culture has kept her in the area. “It’s the best company to work for,” she says. “They have always supported me, encouraged me, and given me new challenges and opportunities to grow.”