Fiserv helps loan buyers manage risk

BOULDER – You could say James Smith had the right idea at the right time.

After working in the mortgage industry for 15 years, Smith saw an opportunity for a new company, one that would map out a plan to negotiate the risky playing field of buying nonconforming loans.

Smith presented the idea for his company to Fiserv Inc., a provider of information management systems and services to the financial industry. Fiserv loved it, Smith said, and the Boulder-based Portfolio Services division of Fiserv was born.

Portfolio Services is part of the lending solutions division of Fiserv Inc. (Nasdaq: FISV). Portfolio Services serves Wall Street companies that purchase nonconforming loans, those that are not Fannie Mae or Freddie Mac.

Portfolio Services helps these loan-buying companies perform their due diligence by identifying risks within their portfolios, providing solutions to mitigate the risks and helping them make informed decisions about their portfolios.

Firms typically purchase $40 million to $60 million of loans each year and are required to perform due diligence on all of those acquisitions, said Smith, executive vice president. Portfolio Services has a niche because other companies do not offer the personalized service or range of services that his company does, he said.

“Rather than focusing on one aspect, we truly assess and mitigate risk and create customized solutions for our clients,” Smith said. He describes his company as the only true one-stop shop for risk mitigation.

Smith’s strategy is to interview a Wall Street client to learn what types of loans it is buying, its exit strategy and its needs and time frame. He then creates a custom solution.

“A customized approach and solution is very fresh,” Smith said. “Wall Street clients love it.”

“We’ve been tremendously successful,” he said. “We surpassed our business plan by 30 percent in 2006. We are the new kids on the block on Wall Street, but we are making a major impact.”

According to Smith, Portfolio Services brought in $20 million in revenue in 2006 and expects to generate $35 million in 2007.

So far, the company is doing business with seven of the 14 Wall Street companies that purchase loans and are exclusive with three. Portfolio Service’s customers include Goldman Sachs, JP Morgan Chase, HSBC and SociÇtÇ GÇnÇrale, Nomura Securities and Merrill Lynch, among others.

Walter Morgan, executive vice president of Fiserv Lending Solutions, sees a growing demand for industry specialists like Portfolio Services. “Large banks and financial institutions are recognizing core competencies from focused providers instead of trying to do it all themselves,” he said.

“The Portfolio Services group under Jim Smith’s leadership represents a unique opportunity for Fiserv to expand into a highly visible adjacent niche in the financial services industry,” Morgan said. He believes Fiserv will benefit from the additional market penetration provided by Portfolio Services.

Portfolio Services employs about 20 people in the Boulder office with the rest of its 75 employees spread across the country. These 55 employees work out of their homes and perform appraisals or review appraisals as part of the due-diligence process. Smith said it is necessary to have people located throughout the country because they have market experience specific to their region.

Smith plans to bring more people into their Boulder office to support its operations. It also has a successful internship program with the University of Colorado. The interns provide knowledgeable help during busy times and when they graduate, they are potential hires for the company.

Portfolio Services does not have set hours of operation. They are available 24/7 to their clients. If a deal needs to get done, Smith and his employees will work through the night to make it happen.

Although the hours can be long at times, Smith puts a strong focus on his employees’ health and well-being. He describes their office as an athletic one, and says many employees will go to the gym downstairs during lunch to work out or they’ll go outside to hike. Healthy employees are more productive, he said. Smith himself is an avid runner and athlete, one of the reasons he established the company in Boulder two years ago.

Portfolio Services is the first organically grown company for Fiserv Inc., which has traditionally expanded through acquisitions. Fiserv, headquartered in Brookfield, Wis., reported sales of more than $4 billion in 2005 and employs 22,000 people around the world.

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