Its catchy radio jingle will probably be lodged in New England’s collective temporal lobe for years to come, but 1-800 East-West Mortgage is no more.
Its parent company, Commerce Bank, announced it would close East-West last Tuesday, and before the ink was dry on the newsprint, eight staffers had been snapped up by Leader Bank, based in Arlington. Some others have been hired into Commerce.
Brian Thompson, Commerce’s president and CEO, told Banker & Tradesman that rising interest rates are sapping the refi business, and purchase mortgages are a sphere in which East-West didn’t have much of a presence.
The tale of East-West is definitely a best-of-times, worst-of-times saga. Founded in 1988 by high-flying serial entrepreneur John Gallagher, East-West rode the refi wave like a surfing hot-dogger. Gallagher, who has had both advocates – some of them boldface names – and aggrieved detractors, established himself as a marketer par excellence. He also knows a how to write good jingle. Yes, that’s his.
He sold East-West to Commerce Bank in 2000, with the support of then-president and CEO David “Duddie” Massad (himself a successful serial entrepreneur) and joined Commerce. But now, East-West was under FDIC supervision, and Commerce received cease-and-desist orders from the FDIC on compliance issues. Gallagher left the bank in 2004. In 2010, he would end up agreeing to pay a $150,000 civil penalty to the FDIC for alleged regulatory violations and unsound banking practices, though he was not required to admit wrongdoing and in fact, denied the FDIC’s allegations.
At the time the consent order was made public, he told a Telegram & Gazette reporter that he had never been responsible for compliance matters at the company and that 30 state audits had never resulted in a regulatory order.
There’s truthiness there. To the extent that there was little or no regulatory oversight of the nonbank mortgage industry, what he said is accurate, but it says more about the business climate of the time than about East-West. Gallagher ended up being barred from banking and today he is battling other legal problems, but if there was ever a company that seized the day, for good or ill, it was East-West.
Mortgage-market shares from The Warren Group, publisher of Banker & Tradesman, show that East-West had increased its sales volume from $98 million for the first half of 2012 to $117 million for the comparable period this year, and rose from 82nd-largest mortgage lender in the first half of last year to 63rd this year, up 18.8 percent, compared to 7.8 percent for all lenders statewide. To its very end, the company has demonstrated its skill in getting the last ride out of the wave.
The rapidity with which East-West staffers have been hired away is another testament to the good aspects of the House That Jack Built – it cultivated talent. Commerce’s Brian Thompson said last week that the bank felt that East-West “had run its course,” but that doesn’t take away the level of success the company achieved during its long run.
Now if only we could get that jingle out of our heads.
