Adventures of a Subprime Survivor
By Diane Brady
Way back in 2004, when subprime mortgages were a can't-miss proposition, Amy Brandt was a superstar. Her success in turning a struggling wholesale lender into a powerhouse that generated more than $1.5 billion in home loans a month caught the eye of executives at General Electric (GE ).
Wowed by the potential profits of loaning money to what it called "near-prime" customers, GE bought what became WMC Mortgage from private equity firm Apollo Management and asked Brandt, then 31, to stay on as CEO. The Arizona State University law graduate had started at WMC as a sales associate at 25 and rose to the title of president by being a chief architect of WMC Direct, one of the first services to offer Internet loan submissions and automated processing.
At GE, she was one of the company's highest-profile young women. "A big part of us doing the acquisition was Amy," said a GE exec at the time. After Brandt spoke about the business before GE's top 600 executives at the annual leadership gathering in Boca Raton, Fla., in January, 2005, Chairman Jeff Immelt high-fived her as she left the stage.
Today, Brandt is gone and GE is struggling to contain its mortgage mess. The company says the unit will likely lose $950 million this year. Since January, GE has sold off more than $4 billion of loans ($375 million is left) and closed down operations, taking a $1.4 billion charge in the third quarter for WMC and a discontinued Japanese loan business. A GE spokesman says the company doesn't want to comment because it's in the final stages of selling the business. But Guy Cecala, who publishes Inside Mortgage Finance, predicts that "they may just close it down and let it die."
While GE contemplates killing a bad business, Brandt is living it up. She left GE after her contract expired at the end of 2006. Then she used the gains from her days at WMC to start up an independent rock label called YMA Music Group. Its model is to outsource music production while focusing on building brands through merchandising, Web site design, and marketing. Her MySpace (NWS ) page promoting the label confronts visitors with thumping music and expletives that appear when you scroll over certain words. "The music industry is kind of a mess," Brandt contends.
Among the seven acts signed so far: Black Light Burns (featuring former Limp Bizkit lead guitar player Wes Borland) and Ashley Hartman, formerly of The O.C. TV show. "Amy brings a management wisdom to the business, and a real passion for music," says YMA Managing Partner Chris Woltman. "This is her vision of where she thinks the industry should be."
Brandt lives on a 30-acre ranch near Los Angeles where she owns 12 horses. Her husband, retired from the subprime industry at the age of 38, is the main caregiver to their two kids while she works on building a new career. As a hobby, she competes in dressage, where the rider puts the horse through various precision movements.
She's also putting her financial experience to use. Last month, Brandt became CEO of Vantium Capital, a private equity fund that will invest in undervalued mortgage assets. Ultimately, she argues, the overall lending business is going to bounce back because people will continue to need mortgages and "long-term players will have to provide solutions." She is reluctant to disclose the backers right now or give more details on her strategy, noting only that she's looking as far afield as Europe for possible investments, inspired in part by the international perspective she gained through GE. Overall, she looks back on her time there with mixed emotions. While she remains a huge fan of the "very charismatic" Immelt, she could have done without the PowerPoint presentations, meetings, and requisite courses at GE's leadership center. "I was the kid who didn't like to go to camp," says Brandt.
Still, she is sanguine about the prospects of the subprime industry. "The liquidity of the past few years had some good benefits," she says. "It allowed a lot of people to become homeowners."
In retrospect, Brandt says she wishes she had tried harder to diversify WMC's portfolio. "We were too aggressive in some areas," she says. "We had appreciating housing markets." A recovery, she predicts, will take time. "I think the greatest amount of pain hasn't been felt yet," says Brandt. "I hope we can find a way to bring more liquidity to the market."
Brady is a senior writer for BusinessWeek in New York