Atlanta Home Loan

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Atlanta Home Loan

Case Study

Atlanta Home Loan

Atlanta Home Loan (hereafter AHL) was a mortgage lending and financing company based in
Atlanta, Georgia. Al Fiorini founded the company in April 2002 with an initial investment of about
$40,000. He started operating the company from his home.
Al had many years of experience in the mortgage lending industry. He had worked for several different companies and had also served a year as president of the Orange County Chapter of the
California Association of Mortgage Brokers. Under his direction, AHL’s business grew rapidly in its first quarter of operation. By the summer of 2002, the company consisted of four telemarketers and eight loan officers, all of whom worked from their homes. “Telecommuting” was convenient for the employees because Atlanta was a large city with heavy traffic.

Al established banking relationships that allowed AHL clients to borrow money at wholesale rates. The actual loan terms varied depending on the clients’ FICO scores.1 In summer 2003, banks might offer an AHL client with a very high FICO score (over 620) a rate of 6.25–6.75% on a fixed
30-year mortgage. This rate provided the bank with an operating margin of 1.5–2.0%. AHL earned a fee of 1.50% of the loan amount for every loan funded. This provided AHL with an average revenue per loan of $3,200.
AHL bought leads from list brokers for $0.20 per name. These lists provided information as to whether the individuals owned their homes, and if so when they bought their homes and when, if ever, they had refinanced their mortgages.
The telemarketers called people on the lead lists to assess their interest in refinancing. Al knew from industry experience that telemarketers should generate a minimum of one lead per hour. They were paid a combination of an hourly…...

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