After beginning as a mobile home loan servicer, third-party loan servicer First Associates has grown into a leader in the fin-tech space, working with multiple asset classes.
As the company marks its 30th anniversary, CEO David Johnson shared some of the important events in the company’s evolution.
Mr. Johnson entered the industry by purchasing First Associates in 2008. As he was completing his pre-purchase due diligence, he admitted the state of the servicing industry “astonished” him.
Given the popularity of business process outsourcing, one would think most companies must have been happy with the service they were getting if they were trusting large portions of its delivery to these outside companies.
At least in loan servicing, that was hardly the case.
“Most providers were offering service at the lowest price possible,” Mr. Johnson recalled. “It was a race to the bottom in terms of effectiveness.”
Mr. Johnson said his clients essentially want two things. The first is for their borrowers to have a great experience. This is especially important given 97 percent of First Associates clients have a private label arrangement with the company.
“The customer needs to leave the interaction feeling better about the brand,” Mr. Johnson said. “It should have greater value.”
Their second desire is for their portfolio to generate good returns. That was where Mr. Johnson knew an opportunity when he saw it.
“The average age of software at the time?” Mr. Johnson asked. “Let’s say it was the best 1992 had to offer.”
CEO after CEO told Mr. Johnson industries were seeing a mass exodus of programmers to retirement. The subsequent knowledge gap impeded progress.
“I knew we could do better than that as a company,” he said.
“Looking back we decided we’d change out the software and the infrastructure associated with it at beginning of tech life cycle,” Mr. Johnson continued.
The advent of cloud-based software systems allowed First Associates to create a Software-as-a-Service model which Mr. Johnson described as very scalable, flexible and secure.
“If you bought a stack in 1992 you just don’t have that,” he explained.
That flexibility made it easier for First Associates to add asset classes such as solar, automotive, power sports, student loans, and small business financing.
“That was happy circumstance,” Mr. Johnson explained. “When I became CEO I had no loan servicing experience whatsoever.”
“We just built the company that way, with a platform that was flexible enough to handle all sorts of asset classes.”