Every competitive line of business has a crowded state where individual firms play roles in a non-stop drama of profit and loss–a drama where the first law of the life is the law of surprise, where the problems of success can be as great as those of failure, and where it often takes the passing years to reveal what the days hide about the inherent strength or weakness of a firm.
On such a stage for mortgage banking, one firm– Utah Mortgage Loan Corporation– is now celebrating the anniversary of its birth 90 years ago in Logan, Utah. In age, it is the oldest mortgage banker in the broad region between Missouri and California, and the twelfth oldest nationally, an possibly the oldest that began solely as a Mortgage Banker. In size, by the end of 1982, it will rank in the top 40 of the largest mortgage bankers nationally– a rise of over 90 rungs since its 133rd place ranking in 1976. As to its earnings, it is enough to say that in 1981 when the frame of many companies in the real estate business seemed to creak like a body whose life is leaving Utah Mortgage enjoyed its fifth consecutive record-earning year, equivalent to a 24 percent return on equity–and 1982 earnings will be substantially ahead again.
I want to use this space to draw an anniversary sketch of Utah Mortgage. But in line with my own vocation as an economic historian, my reason goes beyond the mere facts of its age, size and profits. The larger reason is that the past of this one firm is uniquely representative of how American mortgage banking as a whole evolved. So a sketch of Utah Mortgage may help light up a stretch of the road that brought American mortgage banking to its present form and force.
In mid-summer of 1892 when a grim depression was closing in on the U.S. economy, George Herbert Champ and his wife Alla Dora – both Midwesterners and non-Mormons– showed up in Logan, Utah, a town of 2,20 and the main Mormon enclave within the Utah-Idaho reaches of Cache Valley. What brought them to Logan was simply a family visit with Alla Dora’s sister, a teacher in the local Episcopal missionary school. What kept them there was something else. George Champ, a battle-scarred veteran of Midwestern farm mortgage banking, looked at the financial and agricultural picture along the fifty-mile length of Cache Valley, and saw in it an opportunity for a new kind of mortgage company.
Everywhere around the nation at that time, mortgage lending was primarily local in scope, the main exception being the operations of the insurance companies. National banks were barred by federal law from making any kind of mortgage loans– a prohibition that would continue until 1916 when the law was changed. Where state chartered financial institutions were concerned, certain key states imposed absolute bans of their own on out of state lending by mutual savings banks. The consequent limitation on the mobility of mortgage funds limited the appeal of mortgages as investment instruments. Mortgage lenders differed widely in their appraisal methods and mortgage contracts, and state differed just as widely in their regulations of mortgage lenders. Mortgages were not standardized. They were, in effect, custom-built between virtually each lender and each borrower, and thus possessed little marketability. The local picture, however, now laid siege to George Champ’s thoughts. Local mortgage money was in such short supply that individual lenders charged what was then an astronomical 18 percent interest on their mortgage loans. He would form a new company to import comparatively low-cost mortgage money from individual investors he knew in or near his native Rockford, Illinois, and could then re-lend the funds in Logan and Cache Valley for at least six percent below the prevailing rate of 18 percent.
The pieces of the plan Champ had in mind fell in place in the fall of 1892 when he formed a single proprietor firm, the Utah Mortgage Loan Company, and invested it with a proud motto: “Importer of Capital.” While the name and the motto implied a spacious enterprise, the firm initially was so small that it operated out of one room on the second floor above a shoe store on Logan’s Main Street only one-half block from its current headquarters. The staff, besides Champ and a part-time clerk, consisted of Alvin Thompson a Rockford friend and tax accountant whom he had induced to come to Logan. The original capital of the firm could not have exceeded a few thousand dollars at the most, and the individual loans it made seldom topped a few hundred dollars.
The firm, however, quickly took root in Logan, moved to larger headquarters, and expanded the scope of its business activity throughout northern Utah and a substantial part of the southern Idaho. This was but a small down payment on its future growth where it would be active on many fronts of mortgage lending in at least twelve states. Yet even in microcosm, Utah Mortgage was among the early pioneers in the present “correspondent system” where surplus mortgage funds in one area are made available in those where they are in short supply. To that end, the firm spun a web of “finders” – real estate agents, insurance agents, brokers, lawyers – who located credit-worthy mortgage loan borrowers within a given area, and then brought Utah Mortgage into the picture to close the transaction. A fully developed network of “finders” continued to serve Utah Mortgage for some years after the mid-1940's, though by that time the firm had begun to establish its first full scale branch offices.
A number of other things, marking the life of the firm at birth, continued to do so for more than a half century afterward. Of these the so-called “two-note mortgage” was the first of its kind in the Intermountain West, if not the first nationally. One note among the two included the principal and interest on the mortgage that was actually sold to the far-off investor, the other note represented a “service fee” that was payable to Utah Mortgage directly.
Another long-lasting policy dating from the first years of the firm went to the effect that loans were not to exceed 50 percent of the appraised value of the property and were to be amortized in a ten year period. In line with another long-lasting policy, Utah Mortgage never participated as a guarantor of any loan it sold to an investor. This negative fact no doubt lost the firm some potential investors, but was the source of a long-run blessing in disguise–as noted in later years by a manager of Metropolitan Life Insurance Company. Many correspondents of Metropolitan Life who had guaranteed their mortgage loans when the sun was shining overhead, were fatally stricken during the Great Depression of the 1930's when they exhausted their means to make good on their guarantees.
In contrast, investors who bought mortgages from Utah Mortgage solely on the basis of their confidence in the firm, had no reason to regret doing so. In Rockford, these were known as “Champ mortgages” and were strongly recommended for trust accounts. They gained the summit of their prestige in the very depths of the Great Depression, and for a reason touched upon by Gene Abeg, president of the local Illinois National Bank. He recalled that every bank in Rockford failed, as did a number of local or out of state mortgage companies that were active in the Rockford market. “The Champ mortgages,” said Abeg, “turned out to be better than bank deposits because they held up.”
Diversification and incorporation
In the early years of Utah Mortgage history, most of its loans were made on farm lands, though apparently some were made on homes as well. That independent mortgage bankers nationally were also mainly concerned with farm mortgages accounted for the fact that when they formed their professional organization, they first named it the American Farm Mortgage Bankers Association. They continued under that name until 1914, when an expanded scope of mortgage operations induced the members to drop the limiting word “farm” from their title. Frederick Percival Champ, the only son and child of the founder of Utah Mortgage would serve as the president of the Mortgage Bankers Association of America in the critical year between October 1941 and October 1942.
But even in the seed-time years of Utah Mortgage, it began to diversify its activities by helping to organize and to finance through bond issues, a series of companies capable of mounting large scale irrigation projects. The time when it first began to do so was 1896, the year when Utah attained statehood and Frederick Percival Champ was born.
In a 1953 retrospect on the history of the Utah Mortgage, the Herald Journal newspaper of Logan noted that the firm was “responsible for financing more irrigation projects on a free enterprise, non-governmental basis than any institution in the inter-mountain West...before the government largely assumed this function.” The newspaper then listed all the companies that had been financed by Utah Mortgage. Taken together, the ten largest irrigation projects alone– “entailing a network of dams, reservoirs and canals–materially changed the face of agriculture in Northern Utah and Southern Idaho.”
Faint shadows of a bank holding company
There is space here to mention only one more detail, dating from the early years of Utah Mortgage. In 1903, Champ along with some of his closest associations in Utah Mortgage–with Thomas Oldham at their head–organized the Cache Valley Banking Company. Oldham, who had some previous experience in banking, served for a while as the president of the new bank. In due course, Champ took Oldham’s place as president of the bank while serving also as president of Utah Mortgage.
The chief actors in the two enterprises never thought of themselves as being part of a “holding company” set-up. In their relationship, however, they exhibited some of the features now associated with a holding company that includes a commercial bank and an affiliated mortgage banker. The two firms always shared the same physical quarters. Their decisions were made from behind the same desk, because the top managers of one were also the top managers of the other. From the standpoint of record keeping, it was in the interest of the bank to refer all its mortgage loan applications to Utah Mortgage – which was not subject to any legal limitations on the volume of loans it could make, but made its loans with an eye to whether they could be marketed nationally.
Changing of the guard
Frederick Percival Champ had entered Harvard College in 1915 to prepare himself for a career as a landscape architect. He had completed two years at Cambridge when his education was cut short by America’s entry into the First World War. The youth, not being eligible for combat duty because of certain physical disabilities, was employed in war-time Washington by Herbert Hoover’s Food Administration, followed by work overseas on relief missions. He never returned to Harvard after that, but in mid-1919 was called back to Logan, where, in response to a death bed request by his father, he agreed to go to work in the family enterprises.
It had been arranged that Alvin Thompson would assume the presidency of Utah Mortgage, but young Champ would come in as Vice President and Treasurer. Where the bank was concerned, he would also come in at a level junior to the aging new president of the Bank–with the understanding that he would succeed to the top post when the latter retired in the impending future. Within a few years, Frederick P. Champ was the President of Cache Valley Banking Company, while being at the same time in effective command of policies and operations at Utah Mortgage Loan Corporation.
At an early hour also, “Fritz,”– the name by which Champ was known to his intimates – made personal additions of his own to the mortgage loan concepts and arrangement he inherited from his father. Where farm loans were concerned, he stressed the importance of being able to function under both favorable and adverse condition– to make satisfactory loans “with caution when land values are high and with courage when land values were low.” Because demand and need were relatively continuous, it was always necessary to be in the market with funds to serve the agricultural borrower. An “in-and-out” policy could be successful in the urban field, but it had less chance for significant success in the agricultural field, where farm customers need uninterrupted services.
All the while, Champ knew that the future of Utah Mortgage and of the bank depended in the final analysis , on the future of their service area, from the standpoint of its economic development and quality of life. His conviction accounted for the immense efforts he invested in his public service work as a Trustee at 29 years of age, and eventually as President of the Board of Trustees of the Logan-based Utah State University. It accounted for the fact that whenever the life of his service area was threatened by a disaster of nature –a drought, for example– he and Utah Mortgage took the local lead in meeting that threat. Above all, during the Great Depression and the early years of the New Deal, his convictions about the extent to which the survival of his private enterprises depended on the survival and recovery of a free competitive economy, accounted for the major role he played in Utah in overseeing the local applications of the New Deal’s early recovery and reform programs.
The Great Change
The coming of the New Deal with its new public works and its new system of governmental credits in fields that had previously been the preserve of private interest, profoundly altered the nature of the business Utah Mortgage– or any other mortgage banker– transacted. As Champ himself remarked at the time, because of the government’s new programs, he had to “revise fully seven-eights of all the mortgages Utah Mortgage had on its books.” On the other hand, the introduction of the federally assured FHA mortgage– and the development of the government organized national mortgage market in the form of “Fanny Mae”– Federal National Mortgage Association, for the first time ever provided companies in the mortgage loan business with a standard mortgage loan instrument that gave national fluidity to mortgage loan funds. The federally guaranteed VA mortgage of a later date, added its potent force to the changed nature of the mortgage loan business.
Utah Mortgage continued to be very active in the field of long-term agricultural credits, but now, after a period of hesitation common to other mortgage loan companies, it entered deeply into the world of urban mortgages which turned on FHA mortgages for private homes and residential apartments. It began to negotiate such mortgages within its service area for resale to investors elsewhere. But as the recovery program moved forward, and as larger and different kinds of mortgage loans were in demand, Utah Mortgage’s traditional individual investors seldom had the means to buy the larger and more varied mortgages borrowers needed. Institutional investors must be looked to, and were found at the end of the 1930's when Utah Mortgage and Oregon Mutual Life Insurance Company– later renamed Standard Insurance Company– formed a correspondent relationship, the first for each. In later years, Utah Mortgage’s list of regular institutional investors grew to over 100, including mutual savings banks, pension funds, major insurance companies, FNMA and GNMA mortgage-backed securities. At the same time, the mortgage loans Utah Mortgage sold to these investors on one of another basis, covered the full gamut of mortgage lending.
The third generation
Frederick Champ, while serving as President of the Cache Valley Banking Company, had become the President of Utah Mortgage– in name as well as in fact – back in 1934, the preparation of his eventual successor as president of the firm, dates from 1949. That was when the oldest of his two sons, George Herbert Champ– better known as “Herb” –a veteran of the Second World War and a recent graduate of Utah State University, began work in the Boise office of Utah Mortgage, the first full branch the firm ever had.
The demanding apprenticeship he served in Boise, ran concurrently with a management need in the Logan headquarters of the firm that also engrossed his attention. In 1958, he returned to Logan as the Executive Vice President and General Manager of Utah Mortgage, and as such, ran the firm. His father retained the title of President until 1965, when he officially relinquished it to Herb. With the latter change, Herb’s younger brother, Frederick Winton (“Wint”), who had been the manager of the Boise office since 1958, moved up to become Executive Vice President of the firm.
Aside from the generation strains that often mark any father-son relationship, Herb and his father saw the future of Utah Mortgage in a different light. The elder Champ, who by now was getting along in years, and was less inclined to take risks, wanted to confine the future operations of the firm to its traditional Utah-Idaho service are. Herb, for his part, believed this would be a “no-win” freeze, especially after many major institutional investors indicated that they were cutting their servicing fee on new mortgage business from ½ of 1 percent to 3/8's of 1 percent– or a twenty-five percent reduction. It was obvious to him that the firm had to grow in order to take advantage of the factor of size. This meant that it had to buy another mortgage banker, or be bought by one.
The negotiations to that end with existing independent mortgage loan companies proved unpromising, but a new set of negotiations were entered into with the First Security Corporation, a pioneering multi-bank holding company that had been formed in the late 1920's by Mariner and George Eccles, and their business associations the Browning family. First Security was a dominant financial institution in both Utah and Idaho, and the Eccles, originally of Logan, were well known to the Champs. In the end, after months of talk back and forth, First Security acquired Utah Mortgage in June 1967, – making the latter, one of the first if not the first, independent mortgage banker to be acquired by a bank holding company. Herb Champ remained as Chief Executive Officer of Utah Mortgage Loan Corporation, and his brother Wint became President of the First Security State Bank in Salt Lake City, while remaining a director of Utah Mortgage.
Utah Mortgage at 90
Utah Mortgage continues to function as a virtually independent enterprise within First Security Corporation, which is guided by Spencer F. Eccles, nephew of the founders, as President, Chairman & Chief Executive Officer. George Herbert Champ is Chairman and CEO of Utah Mortgage, and Edward E. Radford is President. Radford began his career with the First Security Bank of Utah in 1965 after obtaining an MBA degree from the University of Utah. He joined Utah Mortgage in 1977. Other key executives combine a senior management mix of 30-years-plus veterans and relatively newcomers–Senior Vice Presidents: Edward A. Ferguson (Operations, Systems and Personnel), Eugene A. Anderson (Loan Administration), Leo B. Mihas (Income Property), Richard D. O’Connor (Residential), I. Ron Pedersen (Finance), and Stephen R. Hamman (Corporate Development). The senior management is supplemented by strong middle management in the Logan General Office and the various regions and branches. Yet, led by the current management team, the great growth of the firm since 1967 owes much to the financial resources of the holding company.
By the fall of 1982, Utah Mortgage had full scale branch offices in nine western states and a substantial number of mortgage loans which it services in those and several more states. The servicing portfolio of the firm which stood at $102 million in 1967, will have grown to $1.8 billion by the end of 1982, and the few thousand dollars initial capital has now grown to almost $20 million through retained earnings.
The home base of Utah Mortgage is an alpine setting in the northernmost valley of Utah only a few miles from the Idaho border. The valley’s name, Cache, is derived from the storing or “caching” of furs and pelts by the early mountain like Jim Bridger– who found the cool summers to be ideal for such storage. The city of Logan, the county seat of Cache County, is smaller than any of the cities in which the branches of Utah Mortgage are now located. This fact led one investor a few years ago to remark that it was like the tail “wagging the dog.”
Among the factors at work in the profits and growth of Utah Mortgage is a strategic concept of management underlying the geographical spread of the firm’s branch offices. They are located along lines which extend from energy rich regions of the West to the Sunbelt of the Southwest. All places do no thrive simultaneously. For example, Utah and Idaho may be slow, and New Mexico may be slowing down, but Arizona, Colorado and Texas may be in a boom phase in need of construction or other kinds of mortgage financing. The expansion of Utah Mortgage real estate financing activity in the later areas offsets the decline in the former, with an overall net gain in corporate growth and profits. However, it is of interest to note that although the population and real estate activity in Denver or Phoenix or Houston may exceed the entire states of Utah and Idaho, a large portion of Utah Mortgage business is still derived from its original two states.
The same sense of balance accounts for yet another distinctive trait of Utah Mortgage which has contributed to its growth and profitability. In contrast to the way many mortgage bankers during a recession may either close down their branches or even go out of business entirely, it has been a cardinal tenet of Utah Mortgage’s management to keep its branches open and offering the full range of real estate financial service – almost in defiance of a general slowdown in economic activity. Staff might be reduced, but as Ed Radford puts it, “We want our associates to be ‘out on the street’ so that people will know we are alive and always ready to do business. That way, from existing business and when there is an upturn in business, we are well-position to get a good share of it.”
Herb Champ preaches balance also in the various sources of income for a mortgage banker. “Some companies originate loans and sell their servicing, other companies close down their origination functions and buy servicing; there are income property mortgage bankers and others are strictly residential shops; and, some firms originate only term loans, while others are strictly construction lenders. At Utah Mortgage, our management philosophy of balance has enabled us to survive and prosper over 90 years through a changing nation, a changing economy, and a changing industry.”
The mangers of a firm such as Utah Mortgage which has functioned well amid ceaseless environmental changes in the last 90 years, do not claim that they can precisely lip read what the future will hold. But they continue to position themselves for a new world of real estate financing– a world where 30-year, fixed rate mortgages may disappear, where homes will be smaller, where firms such as retailers, securities dealers and credit card companies will be in the real estate financing field, and where most mortgage bankers may be part “of one big financial service organization.” But whatever else happens, 90 years of successful evolution indicate that in the future, Utah Mortgage Loan Corporation will continue to flourish and warrant the motto given it by its founder in 1892: “Importer of Capital.”
Book #1: Loan Memoranda from February 14, 1895 (Loan #125) to December 31, 1895 (Loan #280). Loose papers found on page 15 of the book have been placed into Box 1, folder 1.
Book #2: Loan Memoranda from February 19, 1896 (Loan #299) to December 9, 1896 (Loan #483). Binding of ledger is badly damaged and has been placed into Box 1, Fd 2.
Book #3: Day book from December 31, 1896 to April 30, 1989
Book #4: Daybook from May 1, 1898 to March 31, 1898
Book #5: Daybook from October 24, 1899 to April 1, 1900
Book #6: Daybook from December 1, 1900 to June 1, 1901
Book #7: General Journal 1: December 1896 to 1899
Book #8: General Journal 2: August 1899 to January 1901
Book #9: General Journal #3: February 1901 to November 1902
Book #10: General Journal #5: July 1904 to July 1906
Book #11: General Journal #12 [?]: March 1905 to March 1906
Book #12: General Journal #11: November 1914 to February 1916
Book #13: General Journal #[?]: July 1918 to February 1919
Book #14: Account Log 1894 to 1895, Placed into Box 1, folder 3
Book #15: Loan Register, August 31, 1896 to May 27, 1899
Book #16: Loan Register, January 2, 1902 to May 1, 1906
Book #17: George Champ personal Loan Register, 1917 to 1925 [Moved to Box 1, Fd 4]
Book #18: Defaulted Loan Collection Log, 1902–1911 [Moved to Box 1, Fd 5]
Book #19: Note Register, January 26, 1901 to July 9, 1907
Book #20: Note Register, July 26, 1907 to May 13, 1919
Book #21: General Ledger #1
Book #22: General Ledger #2
Book #23: General Ledger #3
Book #24: General Ledger #4
Book #25: General Ledger #6
Book #26: General Ledger #8
Book #27: General Ledger #10
Book #28: Water Rights Register
Book #29: Trial Balance Ledger, 1919
Book #30: Grimes-Utah Pump Company, Capital Stock Shares Book
Box 1: Ledgers and papers removed from the above series
Box 2: Loan Records, Checks, and Correspondence, 1909 to 1920