Innovation in all its forms — from incremental improvements to groundbreaking transformations — begins with an experiment gone right. As Amazon founder Jeff Bezos has said, “Our success is a function of how many experiments we do per year, per month, per week, per day.” It comes as no surprise then that Temple View Capital Funding, a Bethesda, Maryland-based specialized private-lending firm with innovation at its core, began with an experiment.
In the mid-aughts, the firm’s four founders — Michael Niccolini, Steven Trowern, Lara George and Gerardo Botello — were working together at MCM Capital, an $8 billion distressed asset management company they built from the ground up. They were buying mortgage debt from Fannie Mae, Freddie Mac and the Department of Housing and Urban Development to modify loans and help families stay in their homes. In the process, they ended up owning and selling thousands of real estate-owned properties out of the fund. They realized their REO property buyers needed more financing options, so they started to dabble in lending. When those early experiments worked, they doubled down and established Temple View Capital in 2007 as a platform to build and grow investor-focused loan programs.
Temple View Capital is one of three businesses in the MCM Capital family, which also includes Alta Realty, a full-service sales brokerage and REO management firm. However, Temple View is the fifth endeavor with MCM Capital DNA. “Since we started MCM Capital, the distressed debt fund, we have either reinvented or created new endeavors along the way four or five times. I think if you can characterize this company, it is a perpetual exercise in entrepreneurship,” said Steven Trowern, founder and principal of Temple View Capital.
Now five businesses and fourteen years later, the firm is well-capitalized and the team well-versed in the industry. It operates nationally and currently provides real estate investor financing in 46 states. It’s hardly a startup, yet Temple View Capital largely still operates in that entrepreneurial mindspace, prioritizing experimentation, iteration and evolution. This combination of expertise and experimentation is part of what makes Temple View Capital a force in the private real estate lending industry.
“We really think of ourselves as ‘by investors for investors,’” said Michael Niccolini, founder and principal of Temple View Capital. “Everything we’ve created is really designed to try to solve problems that we know intimately well from having been in the business for more than a decade.”
The Temple View Capital team is also conscious that they’re working in an industry that is itself a function of innovation, meaning experimentation is table stakes for participation. In contrast to the traditional real estate market, where Fannie Mae and Freddie Mac play an outsized role in setting rules and standards to make the market more efficient, the private lending industry was built from scratch. There’s no one playbook to follow and no off-the-shelf software tools to get started. That means its players need to replicate some of the technological and financial efficiencies found in the traditional market to be competitive.
“This business that we’re in — fix-and-flip lending, residential transition lending, investor finance — really the entire sector is an innovation because the role we’re playing is to fill a demand for credit that’s not being met by banks or the GSEs,” Trowern said. “We are constantly trying to evolve and find more flexible and less expensive capital that we can offer our clients to help them innovate with their business. So, like the sector itself, [Temple View Capital] is born of innovation, to try to fill a need that wasn’t being met before.”
The Spirit of Innovation
Temple View Capital focuses its innovation efforts in two areas: developing bespoke, competitive products that solve problems for the end customer and building a technology infrastructure that supports a seamless customer experience.
“One of the huge benefits we have at Temple View is that we are a balance sheet lender, and so we have flexibility in product innovation. We’re not just checking boxes because that’s what Fannie Mae tells you to do,” Niccolini said.
Temple View Capital’s leading-edge products are tailored to the niche needs of their clients. For example, they offer more experienced borrowers the option to take advanced rehab draws, so those borrowers can buy materials sooner and accelerate the timeline of their projects. Then for long-term investors, the firm offers interest only DSCR calculations, helping investors free up capital for their next project. They also specialize in single-asset lending, meaning one loan covers one house. For borrowers with many doors to manage, single-asset lending means they can avoid rent control agreements and lien release coordination.
“When they want to sell a property, it really allows them to stay in charge of their own business, instead of their lender controlling it, because they’re tied to some sort of blanket financing on the whole portfolio,” Trowern said.
On the technology side, Temple View Capital is 100% paperless. The firm has worked closely with respected law firms and compliance experts nationwide to integrate real-time instruments and create documents that are compliant and uniform from state to state. This means the Temple View Capital team can communicate better with clients, process documents more efficiently and release draws more quickly, no matter where borrowers are located around the country.
Lastly, the Temple View Capital team’s background in the world of distressed debt, combined with their experience purchasing $9 billion in assets and underwriting more than half a million loans, the firm also operates its own Home Price Index. “We maintain massive reams of borrower behavior and property data, and we run our own HPI, which we think is more accurate than Case-Schiller, particularly on the street-by-street, neighborhood-by-neighborhood basis,” Niccolini said. “We think that intelligence allows us to lend nationally in a business that historically has been very local and disaggregated.”
These are just a few of the ways Temple View Capital is working to optimize real estate lending. Talking to Niccolini and Trowern, it’s clear they’re only just getting started. “We think the last 13-14 years have put us in a great position for the next 13-14 years, to really be a dominant player in commercial financing for residential investors,” Niccolini said.
So how exactly has the Temple View team continued to foster innovation, big and small, for the better part of two decades? Here is a look at the key strategic elements that set Temple View Capital apart.
They start with a winning team.
The Temple View Capital team has truly become like a chosen family, according to Niccolini. The core team has been together since the start. They know the industry inside out and they’re in it together to work hard, solve problems and achieve common goals.
While this tight-knit environment could sound intimidating to newcomers, in effect it sets the tone for familiarity and support for everyone on the team. The culture Niccolini and Trowern describe is down to earth and approachable. The firm’s management structure is relatively flat and people are given the latitude to go after their ideas when they see a way to do something better.
“There’s not a lot of waiting to be told what to do, and I think, as a result, the culture isn’t very complacent,” Trowern said.
This year, the firm is seeking to grow. Keeping in line with the Temple View Capital culture, Trowern said the hiring process is all about finding problem solvers. Trowern invoked Steve Jobs’ hiring philosophy at Apple to describe the Temple View Capital approach: “It doesn’t make sense to hire smart people and then tell them what to do. We hire smart people so they can tell us what to do.”
They take nothing for granted.
Many great innovators are known for their “question everything” ethos. Take Salesforce’s Marc Benioff for example. He launched what is now a $17 billion business and changed the way we use software by asking the question: “Why are we still loading and upgrading software when we have the internet?” As Hal Gregersen detailed in Harvard Business Review in 2017, Benioff continued to foster this spirit throughout Salesforce by going on listening tours and creating a chat called “Airing of Grievances” for the team to discuss areas for improvement.
Temple View Capital is working from the same playbook as Benioff. Especially because private lending is still seen as a nascent industry, they know there are opportunities to improve. “Just because that’s the way we did it yesterday or that’s the way somebody else does it, does not mean that’s the best way to do it,” Niccolini said.
Team members are encouraged to challenge assumptions, and importantly, the firm creates a space where people can be comfortable knowing if they speak up, they will be heard.
“Innovation is driven by open dialogue, and it’s actually driven within companies by healthy conflict and debate,” Niccolini said. “We have a culture where raising your hand with an idea or voicing a concern or an issue or identifying something that’s not working and coming up with a solution, not just a criticism, but a solution, is really lauded and exalted.”
Lastly, they know who they are — and who they’re not.
Just because Temple View Capital is constantly evolving to meet the needs of its clients, doesn’t mean it lacks focus. Instead, its strong sense of identity and deep knowledge of its customer base are anchors that act as a springboard for creativity.
That’s why “Creativity Loves Constraints” was one of Google’s nine principles of innovation. As Marissa Mayer told Fast Company in 2008, when she was vice president of search products and user experience at Google, “People think of creativity as this sort of unbridled thing, but engineers thrive on constraints.”
For Temple View Capital creative constraints means knowing what’s in their wheelhouse and what’s not. They’re not chasing the fintech title because they know that’s not at the forefront of what they do. “Our business is about developing and expanding relationships by helping people grow their own businesses and kind of be there and anticipating some of the changes and challenges that they’re going to run into,” Trowern said.
And while there’s opportunity everywhere in the industry, from small business to commercial to multi-family properties, Temple View Capital has homed in on one specific segment of the market: lending for residential one-to-four-unit properties. “We stick to our knitting,” Niccolini said. “Within one-to-fours, if there’s something that we see a need in the investment community, and we think we can fulfill it, we look at it, consider it, and pursue it.”
They’ve spent 14 years in the one-to-four segment and underwritten half a million loans, and they know that’s a strong suit. “We want to be the best at what we do, and you’ve got to concentrate and focus,” Trowern added.
What’s up next for Temple View Capital?
opens in a new windowTemple View Capital’s singular ability to adapt while staying true to its fundamental purpose served it well throughout the tumult of 2020. Being founded just ahead of the Great Recession, the firm has been ready for anything from the start. They went into the pandemic with a strong balance sheet and strong ability to finance and operate amid uncertainty. They already had technology in place to work remotely. And while they had no way to know what was coming, their agility meant they were able to continue lending throughout the pandemic without pause.
“We’re proud of the platform and the team that we’ve built. We’re proud of the way our customers have been treated. We’re very proud of our track record. Navigating through COVID, honoring every commitment through the depths of the pandemic,” Niccolini said.
This agility has put Temple View Capital in the position to look ahead in 2021. So far, the future’s looking bright. For their next big experiment, they’re exploring the world of ground-up construction. Currently, the team is considering developing a true construction to permanent loan. The product doesn’t exist yet, “but that doesn’t mean it won’t,” Trowern said.
“The development and growth of the rest of the investor finance sector is not temporary. This is an important part of the overall housing lending business,” Trowern said. “I think this sector will be an order of magnitude greater than what it currently is in five years. We see an enormous amount of upside in this whole sector, for everyone.”