JOHN T. FRENCH : Chairman and Chief Executive, Plaza Home Mortgage Corp.

John T. French has built Plaza Home Mortgage Bank, a savings and loan in Santa Ana, into a powerhouse lender statewide that has earned kudos for providing mortgages in low- and middle-income areas. It opened in late 1985 as Plaza Savings & Loan, and by last year was one of the state’s top 10 residential lenders. Using deposits and borrowings, it makes loans and sells them to investors, using the proceeds for more loans. French, a mortgage banker for more than 30 years, spoke recently with Times staff writer James S. Granelli.

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Plaza has been very successful. What are you doing right?

The mortgage banking industry has been doing very well because of the huge amount of refinancings that started in 1990. Plaza started out as a savings and loan for the sole purpose of doing mortgage banking activities. I think because we’ve focused on it exclusively, we have been successful. The key element is our associates, the people who make it work, the people we are able to attract to the company and keep. They built the company. They make it happen.

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You prefer to call Plaza’s employees “associates.” Why?

I think the word “employee” is archaic. Everybody, whether it’s Toyota, Ford Motor or General Electric, has adopted a flat organization chart as opposed to the old pyramid. It is important that the people who actually manufacture the product participate in the company. They’re really associates. We’re all associated, one with the other, for the common good.

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With an S&L;, you can play in bigger leagues than a company your size otherwise could.

That’s true because we were able to build our deposit base for the purpose of funding loans faster than maybe commercial banks could have funded us. We grew very rapidly. We now have 26 offices across the country. We’re about to open in Chicago. We’re the third largest residential lender in the metropolitan Portland, Ore., area right now, and we’ve been there just a year. We’re very volume oriented. I think that as a regulated institution, we can go into states and open up quickly and avoid a lot of the licensing requirements because the governmental agencies know that we’re highly regulated. And if we’re a well-capitalized savings and loan, and we are, they know that we know what we’re doing and that we’re running a legitimate business. So it enables us to get in and get going faster.

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Plaza has been rated highly for being able to get loans to lower-income borrowers and into poorer neighborhoods. How do you get in there when so many institutions don’t even seem to bother?

I don’t know about other institutions, but I can speak to us. We go out of our way to hire people who have worked well and relate to those neighborhoods and those environments. We go out of our way, for example, here in Orange County, to hire people who are bilingual. We have a huge Hispanic population throughout California, so we go out of our way to hire people who are bilingual. We have a large number of Asians. In this company, there is almost not a language that we can’t speak. We have people from India. We have Vietnamese. We have Chinese, we can speak about four different dialects of Chinese--from Mandarin to Taiwanese. We have, obviously, Spanish speakers. We have a lot of African-Americans in the company. We have German. We have French. We have Italian. So we have a real reflection of the state of California.

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So you designed the company that way?

No. I think we recognized the need to get business out of all areas of the state of California, which is where we were born and grew initially. And as we go across the country, we’ll hire people who know those markets. For example, we just opened in Texas. Even though we like to promote from within, there was no way we were going to take someone from California and open an office in Texas. You open with a Texan in Texas or it’s going to be a long time coming before you do any amount of business. You look at the markets you want to penetrate and say, “What do I need to do to penetrate that market?” Well, you don’t take a person who hardly speaks Spanish and send him out soliciting loans among the Hispanic real estate community in Orange County.

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There are a lot of people who believe they could never qualify for a home loan. Should lenders try to reach out to them? And if so, how?

Yes. We advertise in various areas of the state and we will out of state. We advertise in areas where we feel people need to be educated. And we invite them to meetings in our offices or in other areas, wherever it’s convenient. We explain to them not only what it takes to qualify for a home loan, but also the responsibilities that go along with home ownership and a mortgage obligation. A lot of people don’t understand. They figure it’s like rent. I pay my rent, fine. I don’t pay my rent, I have to move. They really don’t understand that they’re borrowing a huge sum of money. It’s in our own enlightened self-interest to educate first-time borrowers, because as those people move into housing, other people move into housing, and it has a ripple effect.

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How does what you’re doing fit in with what you expect Housing and Urban Development Secretary Henry G. Cisneros will be doing?

I believe that we will be very active in the financing of moderate- and low-income buyers. It isn’t going to happen necessarily in Orange County. I’m talking about areas where the land prices and the labor costs and so on are more amenable to entry-level housing. On the other hand, there is an area I think he will focus on (that will help Orange County) where they will rehabilitate existing houses, and that’s going to take financing.

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Is financing low-income housing profitable?

Absolutely. We just formed a new company, Option One Mortgage. It’s specifically designed to work with people who, for one reason or another, don’t qualify for the traditional loans. We take people who have had some other problems in the past but have demonstrated that they now have their act together.

On federal housing plans. . . “There’s still a lot of people who do not have housing in this country, and I believe that the new HUD secretary, Henry Cisneros, has got some right-on plans to encourage housing.”

On reaching out to low-income borrowers. . . “We can be flexible with them as long as we do a really careful underwriting job and don’t bury them. Generally, we can save them literally hundreds of dollars a month in mortgage payments.”

On possible interest rate hikes. . . “I don’t see any inflation pressures on the horizon. There’s no justification right now for interest rates to go up.”

On the economy. . . “The simple truth is we’ve suffered because of a very happy circumstance: the Soviet Union went away as a threat. But that cost us a lot of defense work. It cost us aerospace work.”