CV3 Financial Services, a private lender providing financing for fix-and-flip and rental properties in more than 20 states, was recently launched and CEO William Tessar says they aim to be leaders in the business purpose loan industry.
Tessar, who is the former president of Civic Financial Services, has a team behind him that originated and funded more than $10 billion in private money loans over the last five years. That includes 150 originators, operations, and business support staff, according to a press release.
CV3 Financial Services is based in Los Angeles County. Using a digital lending platform, all processing, underwriting, and funding is completed under one roof.
Tessar recently sat down with Editor Kimberley Haas to talk about his career, how he began working with real estate investors, and the new company.
Haas: Tell us how you got into mortgages and then a little bit about your professional career prior to starting CV3 Financial Services.
Tessar: I got hit by a drunk driver when I was 16 years old. It was a really bad accident and it resulted in me getting a settlement while I was in high school.
That led me to buying my first house when I was 18 years old. And I literally sat across the table looking at this thing called a good faith estimate asking a thousand questions line by line. “What is this? What’s a credit report? Why does it cost $25? What’s a processing fee? What’s an underwriter and loan docs?”
Then at the very bottom of this good faith estimate was a loan origination thing. It was $1,000. It was more than almost all the other fees. And I was like, “What is that?”
And I remember the loan officer, he was like, “Oh, well, that’s because we collect the paperwork and we pull your credit and send it to the processors.”
And I go, “No, no, no. There’s credit, there’s processing, there’s the underwriting. What is this?”
And in about 10 minutes, he’s like, “Well, that’s what I make.”
I’m a freshman in college. I go, “Hold on. So, it’s my credit report, it’s my money buying the home. It’s all those people you pointed to in your office doing the work. You’re collecting my stuff and you’re giving it to them, and you get this fee?”
And he goes, “Yeah.”
And I go, “How do I do what you do?”
I came from a lower middle-class family. My mom was a stay-at-home mom. My dad was an appliance repairman. Three boys. We didn’t have much money.
I just remember seeing that big number going, “I can definitely do what that guy’s doing,” which is talk, collect, distribute, is kind of the way I looked at it.
I literally went and started working my freshman year in college and quickly became a top originator. It allowed me to do some things for my mom and dad and my brothers that my pops honestly just couldn’t do.
And I literally fell in love with the origination part. Because if you think about it, you’re providing financing for the most important – at the time I was on the conventional side – so it was the most important financial decision of that family’s life.
Whether it was the purchase or the refinance or the pulling cash out to send someone to college or whatever it was, I was the vehicle for that. And I was getting paid what I considered a ridiculous amount of money to help someone realize their American dream.
I’m 56, and I’ve never once thought about doing anything different ever.
Haas: How do you keep that passion going? I mean, as you know, the industry hits some really incredible highs, some really deep lows. You’ve lived through quite a number of cycles. How do you keep that passion alive? And what do you suggest to other loan originators who may be going through a little bit of a slump?
Tessar: Yeah, so I said my dad was an appliance repairman. That’s not a really sexy profession for most, but what was awesome about it for my dad was he loved what he did.
Until the day he died, he was a six, seven day a week guy. And he did tell me early on that whatever it is I do, you have got to love it.
I think what I love about this is you are problem solving for people every single day. If you’re good at it, you bring value to that person you’re providing that service for, and that it is equally as fulfilling as getting paid.
The most important relationships of my life were created in the lending industry. And yeah, it’s had challenges. I’ve been through some wars and the financial crisis and earthquakes and tornadoes and all that stuff, and right now the massive rises in interest rates in a short period of time. But my pops was right when he said, “There’s always a need for money.”
If you’re really servicing your client’s needs, no matter what’s going on in the marketplace, you feel like you have a purpose.
The one thing I try to teach some of the younger originators now who are motivated and coming out of college to make a buck is that the bucks will come to you, but you have to take care of the people.
Haas: Tell us a little bit about CV3 and how that concept came about. What motivated you to branch out and do something different?
Tessar: I ran conventional businesses up until 2017, the last of which was a company called Skyline Home Loans. At the time I left Skyline, we had 650 employees. We built that from 55 or 60, and we were doing north of $4 billion a year, which was actually a large number back then.
What happened is I sat on an advisory committee of a company called Wedgewood and Wedgewood claims to be the largest independently owned fix-and-flip company in the nation.
We bought one of their conventional companies and that put me on their advisory board. And when we did that, they pivoted out of conventional and started a business purpose lending company called Civic.
I got the watch from afar while I was running Skyline. They built that company up. Then they approached me to see if I’d be open to transitioning out of the company that I was with and scale Civic.
And to make a really long story short, because I want to be mindful of your time, that went back and forth for six months.
I took the meetings and had the conversations and did some diligence. Here’s what I quickly realized. I was in the conventional world for 30 years. And I felt like it was really becoming commoditized. Margins were shrinking. Competition was rampant nationwide. It was very capital intensive. The government was now your partner with all the regulations. And it always felt to me like we were flying a 747 30 feet above street level.
There was no margin of error. On the good side, you become an unbelievable operator. You had your eye on every little detail because a little detail could wreck the company.
The bad thing is if you missed a little detail, you could crash.
What I realized when I did my diligence was this space had significantly greater margins because they weren’t consumer loans. They were business purpose loans. They were regulated differently.
It felt like it was a undeveloped part of finance. And I felt like if I could bring some of the discipline of running a large conventional company to what I considered at the time a new space, maybe we could do something unbelievable.
In early ‘17, I stepped down from my role at Skyline. I took the position of president at Civic. I took my head of operations with me, who had been with me for 10 years. And we spent the first 90 days observing.
Then we went to work. We brought in a whole digital branding and social media push, an entire LOS system, new pricing, new capital markets. We started bringing on people and started scaling Civic in a way that we had done on the conventional side so many years and so many times before.
The first year we did over $600 million. In 2020, we crossed a billion.
We managed through Covid better than any of our competitors in that we found outlets for our paper. One of those outlets was Pacific Western Bank, who we had sold loans to before.
We entered into a transaction to be acquired by the bank, which closed in February of ‘21. Pacific Western Bank bought Civic.
That takes us into ‘22. We did a little over $3 billion. And what happened is, as you’ve followed a lot of the regional bank stuff, Pacific Western fell victim to that. They had some balance sheet challenges, and they had to pivot out of some of their ancillary businesses, one of which was Civic.
The bank then proceeded to unwind over 500 people doing $3 billion a year over the next four months. I felt very protective of those people because we hired all of them.
As all of that materialized in the marketplace, and it was clear that Pacific Western was no longer going to operate Civic, that became the birth of CV3.
Our executive team, there’s 12 of us. Eleven of us came from the old company.
35 of our originators represented 92% of all of the volume we did in the old company. We have a sales force that is proven in the marketplace.
The operations folks are the best in class that we have extensive experience with.
It’s a lot different than a startup where you and I might have an idea and a business plan, and we go out there and we try to test it. It is a proven, tested team that is reemerging back in the marketplace with a stronger purpose than we’ve ever had.
Haas: What now? I understand that you’re providing financing for fix-and-flip and rental properties to real estate investors in more than 20 states.
Like you said, it is a little bit different than what a majority of originators do and probably a majority of our readers do. Tell us a little bit about some of the differences, some of the nuances, some of the challenges. I know you mentioned there’s some freedoms, so let’s explore that as well.
Tessar: When you think about conventional business, there’s the disciplines of underwriting credit. Income and the stickiness of that income and debt ratio, liquidity, and valuation of the property. There are some normalized disciplines all the conventional lenders look to to determine whether or not somebody’s credit qualified.
The number one most important thing on the BPL side is to get the valuation right, because it really is a form of equity lending. Yes, credit is important and it is an indicator but it isn’t an end all, be all.
Liquidity’s important because you want to make sure that they have the reserves. But the underwriting is a lot different than on the conventional side.
One of the things I’ve said in the past is you could get the liquidity a little wrong. You could get the credit a little wrong. Don’t get the value wrong because at the end of the day, if a good person runs into a bad string of luck and they end up not being able to make their payments, there has to be enough equity in the investment property.
Haas: Are there certain states that are busier than others with this kind of activity right now? Or is it pretty much even across the board?
Tessar: That’s a great question. Historically the busiest states have been California, Florida, and Texas. The Carolinas have been pretty busy as of late.
We’ve done 20,000 loans. I think 65 or 70% have fallen in those five states. And then the others have been spread out proportionately.
Haas: I know a lot of people are planning 2024 and 2025. What are some of the things that you would like to achieve with this new company that maybe you weren’t able to before?
Tessar: I think one of the things you’ll find about this group is we are a people-first group. The power of CV3 is our people. And we have been recognized over the last five or six years nationally in how we take care of our employees.
And so we want to continue that. We want to continue to serve our employees, our vendors, our investors, and our partners the way that we had in the past. We created a tremendous reputation and left a second-to-none legacy of that type of servitude attitude towards those folks.
Our culture is we don’t talk about culture. We don’t put signs throughout our company about culture. We invest real dollars in real people. We don’t have an HR department. We have a people and culture department.
For 33 years I believed that to run a company successfully, everyone needed to be shoulder to shoulder under one roof. Wearing in the same jerseys, marching to the same beat. Everyone’s got to come to the office, you got to get here. However you got to get here, get here.
And Covid hits. And I had a huge paradigm shift and an aha moment in my life.
I sat there at my desk, one of only two out of 500 people that were in the office. And I was sitting at my desk going, “This is going to be the death of our company. How can you manage a human being in their pajamas, in their kitchen, doing their job? There’s no way you can do it. We are going to collapse as a company. This is the end of our company.”
And here’s what happened. What happened is that kids were home from school. Elderly parents needed to be cared for, people had personal interests. We cut out all of the commuting back and forth. And what I learned is that people didn’t need to be managed. They managed themselves. And our output during that period of time, the first six to nine months of Covid, was off the charts.
And from that evolved a different way of thinking culturally. We just call that CV3 everywhere, CV3 anywhere. We have about a third of our people in the office. A third of our people are at home full-time, and a third are hybrid where they’ll come in a couple days.
I’ve seen and read a ton of articles from really important, smart CEOs that sit atop very big companies with their fingers wagging. Their people need to get back to the office. We’re done with that nonsense.
I love the fact that when we hire somebody, they get to choose the best version of themselves. And I’m not saying that some folks may not be able to take advantage of that. Maybe that happens, but, you know, those folks could take advantage working underneath the roof as well.
And then the second part of your question is, we want to be the number one choice in the BPL space. We want to be the number one originator in the BPL space. With that comes a tremendous amount of responsibility in the marketplace.
But like Conor McGregor once said, “We’re not just here to take part. We’re here to take over.”
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