For his entire professional life, Bernard "Bud" Malone, co-founder of-based Malone Mortgage Co., has specialized in housing - first as a lawyer, then as the co-owner of a mortgage company. The inspiration came early. He grew up in tenement housing in Jersey City, N.J., and decided housing conditions could be much better than what he saw in his hometown.
After graduating from the University of Notre Dame law school, he worked as a lawyer for five years with the Federal Housing Authority (FHA), first in Washington, D.C., and then in Fort Worth, Texas. In 1969, he founded a private real estate practice in Dallas that focused on federal housing programs.
All of this experience prepared him well for the mortgage finance company he opened in 1989, which specializes in - no surprise - federal housing loans. He co-founded Malone Mortgage with Michael Levitt, who also has a background in law and real estate. Malone is the company's president, while Levitt is executive vice president and secretary treasurer. From its humble start as a three-employee operation, the company has grown into one of the nation's leading multifamily housing financiers, securing more than $250 million in multifamily loans per year. In recent years, the company has been securing an increasing number of loans for inner city housing projects.
Despite his status as a mover and shaker, there's nothing egotistical about Bud Malone. He hasn't forgotten his hometown roots or his Catholic upbringing. He's now studying to receive a Master's Degree in Pastoral Theology and plans to teach religious education classes.
MM: How did your background in law and FHA help you start your residential mortgage business?
Malone: It was slow-going at first, I have to say that. It was slow going to find real, feasiblethat should get committed upon, closed and funded. It was frustrating not only on my part, but also on developer-clients' part that had to be assured that FHA is a viable way to go and that it won't just bog you down forever. We wrestled with that for four or five years.
MM: Your company started with three people in 1989 and it has grown to 65. How were you able to expand the company and make it a success?
Malone: In 1991, we decided to add single-family residential lending activity... and added 203k loans (an FHA-insured residential loan program). As a result, we determined that if we're going to do the 203k loan - and we thought it needed to be done around the country - we were going to have to originate those in various sectors of the country rather than seek for correspondents to do that. So in that regard we acquired a mortgage company that existed in Carlsbad, Calif., which added probably 12 employees in one swoop to our operation.
We trimmed our residential operation somewhat by closing a few offices, and we're finding ourselves working more with non-profit groups around the country that are either religious-affiliated groups or human resources groups that are seeking to save or revitalize rundown areas of inner cities. In that regard, we go in and do large-scale acquisition of run-down housing. By large scale, I mean not just buying a house at a time, but buying 150 in a given area and seek to do the acquisition with the 203k loan and the rehab also out of the proceeds of the same loan. So we're originating in a more specialized way the past couple of years, working with non-profit groups under the 203k. We've been in the top production level of HUD on multifamily loan production for several years.
MM: What kind of role does commercial lending play at Malone Mortgage?
Malone: We don't do as much we'd like to. We have the talent on staff to analyze and literally underwrite almost any kind of income-producing property one could conceive of, and that would include industrial, office, retail, you name it, warehouse, etc. We have, to some extent, done some of those deals when the conduits have been active. Today there's not as much activity in the conduit phase of commercial property, and so we haven't been doing as much of them. We just recently financed some warehouses, but as I say, I'd like to do a lot more if the conduits would get active up there.
MM: What are some of the projects you're particularly pleased to have helped financed?
Malone: Two are in downtown Dallas; both are conversions of high-rise buildings to rental housing. One is the Santa Fe building, a high-rise warehouse that has been successfully converted to loft-style rental units. (Malone Mortgage secured a $13 million 221 d4 HUD loan for this 156-unit project.)
The other building is the Kirby Building which was an office building, one that was successfully converted to apartments right on Main Street. (Malone secured a $11.5 million loan for this 189-unit project.)
I am particularly proud of a project in Irvine, Texas, that was a new project, called the Grand Venetian. It was done using a Malone first lien HUD-insured loan under 221 d4. That was a $32 million loan, and the project is comprised of 514 apartment units. It's been 100% occupied since the day they had the first units available. It's a very beautiful project.
MM: What do you enjoy about being in the residential loaning business?
Malone: I find it invigorating. You don't get bored running a commercial mortgage company because of the wide range of problems that you're facing every day. And yet, the solutions for these problems can culminate into a well-financed project, leaving you with a sense of gratification and accomplishment. I get that feeling week-in and week-out at Malone Mortgage. All our employees, for the most part, are long-term. We have little turnover, and I think it's because we all enjoy what we're doing.
MM: What are your long-range plans for the company?
Malone: Eventually, I would like to see the company grow in terms of having a wider variety of loan products to offer. We're a Fannie Mae prior-approval lender, but have never opted to the Fannie Mae DUS lender category. That might be something to consider in the future.
Also, we are giving consideration to adding Freddie Mac capacity to our loan menu here at Malone. We are not standing still. Growth is in our long-range plans, in terms of size of the company, the kinds of loan products we deliver and in our servicing activity.
MM: I understand you're studying to receive a Master's Degree in Theology. Why did you decide to study the subject, and does it play any role in your professional life?
Malone: I'm a Catholic schooled guy all the way through, and in that regard I include both college and law school. The primary reason is I have six kids, most of whom have reached adulthood, only one of whom is married and has children so far. They were all asking me questions of a theological nature, particularly questions about the church.
Once I got into the [University of Dallas Pastoral Theology] program, I found it has its own momentum. It's fascinating study for me. I love it for itself. It teaches me what the important things in life are really about. And that has to impact the way you govern your daily life. If you know that none of the goods and services will accompany you into the next phase of life, then that puts into perspective the work that you are doing on a daily basis in a mortgage banking office.