Daurio

Kondaur Capital Corp., an Orange company that trades in scratch and dent mortgages, is boosting its staff from the current 200 to 400 people by June 30. Jon Daurio, Kondaur’s chief executive, says he’s not looking for the type of employee who staffed the high-volume mortgage companies that went boom and bust earlier this decade. He used to work for Long Beach Mortgage Corp., the predecessor of Ameriquest Mortgage, and later Encore Credit Corp. in Irvine. Some excerpts from an interview (Daurio answered other questions HERE.):

Q. What’s the long-term vision?

A. My dream is for the next generation of employees to work here, like at GM where you have two, maybe even three generations, of workers at the company.

Q. But wouldn’t that be bad news for the economy — if a company like yours benefiting from the scratch & dent market is thriving?

A. No. I don’t anticipate the magnitude we’re seeing now, but there will always be scratch & dent loans. We’re in the process of trying to locate a bank to acquire for purchasing performing “scratch & dent” loans and to originate loans for later. I believe our system will go back to the days of “It’s a Wonderful Life.” George Bailey took in deposits and loaned out the money. The business of a bank is interest rate spreads. I believe that’s how it’s going to come back.

Q. We’re in an age of technology. What you’re talking about is a company that requires a lot of human input and a lot of high-touch. Will that work?

A. That’s how it’s going to be with banks. I think our society will go less transient. Borrowers will buy homes to live in them, not as an investment or as an ATM. I think that’ll keep Kondaur alive in banking. We’ll be the In-N-Out of banking with a very limited menu, 30-year and 15-year mortgages, not Alt-A, pay-option, neg-am stuff.

Q. What kind of people do you want to work at Kondaur?

A. The majority of our asset managers are out of consumer finance, from backgrounds in the consumer loan business, for example. They understand all consumer needs. They have a relationship with the consumer. The mentality we’ve had success with are the people who have the background, experience and sensitivity to understand the borrower.

Q. What kind of money do you pay?

A. We pay people what I believe they should get: Reasonable wages. It’s nothing like the days when account executives at companies like Ameriquest or Encore got $300,000 or $400,000 a month. Because this is a high-touch business, it’s not going to generate unreasonable profit spreads. I’m in it for the money, of course, but I don’t see people here making millions. If I’m making billions on people losing their homes, I personally couldn’t sleep at night.

Q. What kind of income do you expect to earn?

A. I’m going to be successful. I believe I’m going to be comfortable. But I’m only going to make a fraction of the guys who were CEOs of the companies on my resume. We tell people here, when we are successful, everyone will share. My share will be bigger. But it won’t be like the ratios of the companies on my resume.

Q. What’s your competition out there?

A. I’m concerned about other people coming into this business, but I don’t believe anyone else is prepared for the high-touch that you need and I don’t believe they have the team we have here. I’d love to have 5,000 people, but I’ve got to go step by step.

Q. Do you think that people who made a ton of money — what some call ill-gotten gains — should have to give back that money?

A. It depends on the circumstances. If they were a public company and they took cash out at a time they knew it was collapsing and the public did not, my answer is hell yes. Absolutely take away what those guys made. But that’s not how it all happened. I left Encore in October ‘04. I owned a lot of stock. It went public and I sold that stock and I got good returns. I took advantage of having the opportunity to get my investment back with a healthy profit. But I didn’t know in 2004 what was going to happen. Are there guys whose money should be disgorged? Absolutely. But it’s case by case.

Q. What shaped your financial philosophy?

A. I grew up in Brooklyn, the youngest of five children. I shared my bedroom with my two brothers. My grandparents lived with us. We didn’t have a sense of entitlement. I took my lunch to school in a paper bag and used it until it ripped. When I was a kid, I remember people wanted to pay off the house and then burn the note, a mortgage burning party. When my wife and I bought our house in Tustin Ranch in 1993, when my son was 11-months old. I remember vividly that the purchase price was $323,000 and we were making about $200,000 and we sweated the decision. My wife said: “What if something happens?” I still have the same house. I refinanced in 2003 with a better rate. I took from my Dad to not buy a car until you can afford it. And once you get a car, keep it. I’m a car guy, but I’ve never owned a car less than six years, unless I gave it to a family member.

Q. Is there anything good that has come out of the economic crisis?

A. I think part of the good is I found a way to make lemonade out of lemons. But the real good is there’s a cultural shift from the sense of entitlement. As a U.S. citizen and taxpayer, I’m worried. But as chairman of Kondaur, I think our company is going to weather it.

Q. How do you feel about the big picture of the economy?
A. I absolutely find myself waking up and thinking about things that can go wrong. As an entrepreneur, I worry about prices in Florida that drop 2 percent a month. We constantly tweak our models to predict how much to discount and how much I need to discount to carry the properties for 180 days.

More on Kondaur …

O.C. mortgage company hiring 200

And other banking/lending stories …