Stan Middleman on Freedom Mortgage, Buying the Phillies & Real Estate Market

In this powerful episode of Uncorked, we sit down with Stan Middleman, the visionary Found and CEO behind Freedom Mortgage, to talk about his incredible journey building one of the largest mortgage lenders in the world. Stan opens up about his business philosophy, the keys to scaling a company during turbulent markets, and what’s next for the housing industry.

We also dive into his predictions for the real estate market, his take on interest rates and inflation, and how Freedom Mortgage is preparing for the future. But that’s not all — Stan shares the fascinating story behind his investment in the Philadelphia Phillies and what it means to be part of an iconic MLB franchise.

If you're an entrepreneur, real estate investor, or just someone who loves an inspiring success story, this episode is packed with value you won't want to miss.

Also, be sure to purchase Stan Middleman's book here: https://www.amazon.com/Seeing-Around-Corners-Achieving-Business/dp/B0D5PTSJVC

Introduction: Meeting Stan Middleman

Welcome to Uncorked Wine, Business and Life with Bill Green. I'm Gerald Colton. Bill, we always have great guests on Uncorked, but this one is really personal to you. I'll let you introduce today's special guest.

I’m so excited about having my good friend Stan Middleman here for a number of reasons. Stan and I are both basketball junkies. Stan is an every-sport junkie; I'm probably basketball and football. In 1990, we both would go to the Sixers games and didn't know each other. The stadium the Sixers played in at the time was the Spectrum, and Stan and I were regulars. After the games or before the games, we were in the Ovations Club. Jay and Marsha introduced us. Jay was one of Stan's neighbors and someone I was friends with. I knew Jay from high school. Before we get to where Stan Middleman was in 1990, I am so proud of him in so many ways. Stan owns Freedom Mortgage, the largest privately held mortgage company in the country and in the world. That's not a small line. He built the largest in the world in Cherry Hill, New Jersey. He just came out with a new book. I read it and everybody is going to love it. Stan is one of these guys that also gives back. We are so proud to have you on our show, Stan.

Happy to be here.

In 1990, you're running Freedom Mortgage. You started this thing way before that, basically out of the trunk of your car. You were just a scrappy kid from Northeast Philly.

Early Career and the Value of Hard Work

I needed to make a living. My parents had a pool business, and that was my fallback idea. I knew I could go clean a pool. When we say pool business, we don't mean building pools; we mean the guy who comes out cleaning the pool. You knew hard work.

Try cleaning a pool in Florida in the summer when I was off from school. It was no picnic. Now you've returned to this beautiful book where you're an owner, but there was a long time in between with my own pool and pool guys. I'm not fixing them anymore.

The Philosophy of Mortgages and Success

At the end of the day, when you're young and you have to feed a family and have responsibilities, you get up and go to work every day. You're not thinking about doing this or that. You're thinking, "I'm going to do this and I'm going to try and get better and grow it and be more successful." If you want to be successful in anything, you have to be pragmatic. You have to be methodical and do what you're doing, then build on that so you grow things step by step and level by level. That's how it worked out.

Originally, I was working for somebody, hustling mortgages. I was self-employed. In the 80s, it was a different era. Unemployment was higher and it was harder to get a good job. It really felt like the world was pretty closed off to me. When you can't get a job, you go to work for yourself. I had experience working in an insurance company as an agent. I was selling annuities that were paying 15% interest. When interest rates started to come down in those early 80s, the reciprocal relationship to interest rates was lending money instead of investing money.

I found that it was easier to lend money than invest money. I went about the business of learning how to become a mortgage broker. I combined the two, actually. I did the math and I really like math-oriented things. The way the math played out, you could borrow money at a lower interest rate, owe the same amount on your house, and take a little bit extra out because the value of your house had gone up tremendously. You could take that money, put it into an annuity, and pay off your house way sooner. You would end up with $100,000 in cash at the end of 15 years, which was real money in the 80s. Your monthly payments didn't change, and in exchange, you ended up with a check for $100,000 and your house paid off. It was a pretty cool idea.

I walked up and down my street and shared the idea with about ten neighbors and everybody loved it. When I moved into my house in Alluvium in Cherry Hill, Wilbur Montgomery was my next-door neighbor. The interest rate on that house was 16.5%. When I was able to get into a 12.5% adjustable rate mortgage, I wanted to hold a parade. I was so happy. That’s where I came to the concept that the best mortgage was really no mortgage. I went about my career trying to encourage people not to overspend on their home. Buy a home within your means and don't be mortgaged to the hilt. Live within your means and get your house paid off. I have lots of employees who have worked for me for 30 years who took that advice. They live in paid-off homes and are now able to retire, which is a very gratifying thing to see.

For those who don't know, Wilbur Montgomery was a star running back on the 1980 Eagles NFC championship team that beat Dallas. It was one of the greatest wins in Philadelphia Eagles history at Veterans Stadium. It was really cold that day in January of 1981. Dallas couldn't take the cold, but Wilbur could.

Establishing an Independent Mortgage Bank

I hired people because it was residential and everybody was a customer. At that time, mortgages were done out of banks or savings and loans. They were focused on the guy buying his next home, but nobody really cared about his last home. When someone paid off their mortgage, the bank was delighted to get rid of that credit risk. That was the foundation I built my career on. I saw customers differently than banks did. I saw an opportunity to grow my business in the cavity created by the bank mentality. When I got into the business, there weren't a lot of independent mortgage banks. There were almost none. When I was able to sell some of the loans to a savings and loan, it gave me an opportunity to start to learn the system and how it works. I got the proper licenses and learned the infrastructure. The one person I got really friendly with was the field officer for the banking department of the state of New Jersey. He ushered me through what I had to do and called on me to say, "What are you doing?" He told me I had to take certain exams, and I became a mortgage banker.

By 1990, I was a mortgage banker, which required having lines. Today, the numbers are just really big. We're having an off year and we're doing $120 billion in new loans. That is very off compared to 2020, when we were at $350 billion in originations. We had about 15,000 employees in 2020. We're still between the US, India, and the Philippines, probably about 9,000. Since 1990, we've had about a 30% return on equity annually. It's been consistent.

Financial Crises and Market Securitization

In 2008, anybody that was holding mortgages was saying, "I'm screwed." It wasn't what I did in 2008 and 2009; it's what I did in 2006 and 2007. I had some difficulty understanding the subprime mortgage thing. For years prior to that term, they used to have credit grades. You had prime mortgages, which were A loans, and then you had your close-to-good loans, which were your Alt-A or B loans. Historically, those loans had been portfolioed.

The way banks or savings and loans did business was they took deposits in from the neighbors. They took deposits from the people in the neighborhood and then lent that money out to people who wanted to buy a home in that same neighborhood. It was portfolio lending. In the late 80s, Reagan brought in deregulation. Savings and loans said they could build their business as big as they wanted. They went out and made too many commercial loans that were not adequately collateralized. They were building into future demand. There was a picture in Time magazine with a dark outline of downtown Chicago at night with not a light on. That's because they built so much office space that it was completely unused. That happened everywhere. Offices led into a huge economic collapse. It ended the life of these savings and loans. That gave rise to the Resolution Trust Corporation that bought all these bad assets. But it didn't feel nearly as terrible as 2008 because the world we lived in then was more regionalized.

What happened on the East Coast with these savings and loans took three or four years to get to the West Coast. The one that got crushed was Citicorp because they were making mortgages to basically anybody breathing because the value of homes only went up. Sound familiar? That process repeated in 2008, except I knew it was going to repeat because the ability to securitize loans had changed. This started in 1972 with government loans and the Ginnie Mae, Fannie Mae, and Freddie Mac began securitizing. That meant it wasn't run by inventories.

The problem that savings and loans had was they borrowed short deposits and lent long. That is a bad recipe if interest rates change. That problem is the same one that occurred in 2008. It impacted the same type of loans—those that were portfolioed and not yet securitized. We just had it happen again in Silicon Valley and a couple other banks recently. It's a risk when you borrow short and lend long or, like what happened recently, invest long. They invested in treasury bills, which are safe, but the interest rate risk was so great that when rates changed, they got crushed.

Real Estate Cycles and Future Predictions

There is a really well-defined cycle. In 1988, the value of homes dropped by 30%. It took until 2001 to get that 30% back. Once you got back to that same level, the growth of property values went up another 30% by 2007. By 2009, values had fallen by 30%. Property values in 2009, after the correction, took until 2021 to get back to the same level of 2008. They have continued to go up. In 2027 or 2028, housing values and all assets will correct down, led by office space, in a massive asset correction. Everyone should sell their houses in 2026, go rent an apartment, and you'll buy back really cheap. You can buy your house back for 30% less. I made a fortune between 1998 and 2000 in investment properties. I sold everything off because it was on the way up.

My sister got involved in buying single-family residential and she's created enough wealth that she can retire comfortably. She borrowed a lot of money, paid it all back, and now owns a whole bunch of houses free and clear. She collects the rent and that pays for her existence.

When we invested in that place in Delray together, we made a lot of money. But when I was talking about that investment, I shared that we had to get through this cycle. We were getting close to the end of the cycle and needed to be out. It turned out to be a good deal and we got out while property values were rising.

Philanthropy and the Middleman Family Pavilion

I want to go back about seven or eight years ago. Amy and I were out to dinner with you and Roz at Tomatoes in Margate. We were sitting there talking about what a great experience it is to be grandparents. I shared with you that I was on the board of trustees at Children's Hospital and had given a seven-figure gift. You kind of looked at me with a pause and the first thing out of your mouth was, "Connect me." About five or six weeks later, you were at Children's Hospital with the CEO, Madeline Bell. She is an incredible person.

I am really proud that the Middleman family made a $50 million donation to Children's Hospital. The King of Prussia Children's Hospital is now the Middleman Family Pavilion. Having Children's Hospital in Philadelphia right nearby was a godsend. It may have saved one of my sons' lives.

Investing in the Philadelphia Phillies

After a couple of attempts to get into the sports business, you got the amazing opportunity to become a major partner in the Philadelphia Phillies. You have to talk about that because that's just fun.

Managing Financial Risk and the COVID-19 Impact

Before you go, let's try my farm's wine. This is Vori's wine. These grapes are from our leased vineyard in Vineland. It was the home of Welch’s grape juice. Dr. Welch came over from England and settled in. Then he moved to Concord, Massachusetts. I started a mortgage business in 2015 strictly for the commercial market—fix and flip investors. I called Stan and he said, "It doesn't sound bad, but make sure you get out in time." He was a mentor of mine.

To get licensed to originate mortgages in the state of California takes six months. You can walk into a Walmart and buy a gun in 30 days. New York is even worse; it makes California look like a toy.

When there is an event, that's liquidity. The first things affected are the fringe mortgages because the first failure in our system is the securitization chain. When you face a challenge securitizing, you don't want to get stuck with a portfolio. One of the beautiful things about what you did was that you were lending short, which was extraordinarily advantageous. I think that really protected you from some of the vagrancies of our economy. Each of these dips can be existential if you're small and reliant on lines.

It was March of 2020 when COVID hit. I had no guaranteed takeouts for my loans and I had 30 million sitting on the books. My line said if I didn't get rid of those loans in 30 days, I’d lose the line. I was calling you in panic mode. "What the fuck do I do here?" If I didn't move those loans off my line, I’d be writing a check for 30 million. You gave me some advice and we took some haircuts. We managed it and got out of it, but it wasn't fun. It was really painful.

I knew interest rates were falling, so we invested heavily in 2018 and 2019 in building our portfolio and gearing up our workforce. We knew there was going to be a correction of interest rates down. Did I know there was going to be a pandemic? No. But I had a playbook from 2008. I knew in 2020 that the government would buy mortgage-backed securities. I didn't know they would buy everything. They didn't need to do that. Why do we have inflation now? Because the government overreacted during the pandemic and flooded the markets with cash without a GDP change. They bought everything. It worked and they stabilized the market, but they may have gone too far. That's the price we're paying today. But let’s pivot to MLB. People say $750 million for Juan Soto is too much money.

The Business and Economics of Baseball

If the Phillies had spent that money on Juan Soto, it would have cost us a billion and a half because we would have had to pay two dollars for every dollar. The major investment you made is analogous to my investment in Saddle Hill. We're doing this to have fun.

The Phillies have been a tightly closed group of different families for 45 years. At one point, there was the Carpenter family, then it became Bill Giles, who brought in the Buck family and the Middletons. The Phillies are Philadelphia people who care about Philadelphia. John Middleton has been the managing partner for a long time. He took Stan in as a partner. The business of baseball is very different than the business of mortgages.

There is no salary cap and you're competing with clubs that can outspend you. That's the Yankees effect or the Dodgers buying everybody. There are five teams that can spend a lot of money, driven by attendance. We bring in 3 million customers a year. It is the greatest experience to go to a Phillies game. The ballpark is sensational. John Middleton does a great job with that. He works really hard and has an attention to detail that is really important.

The stadium is nice and the revenue streams are good. We have a good TV deal. A lot of the regional television networks blew up last year, so a lot of teams don't have that revenue. Our TV and stadium revenue from ticket sales keeps us pretty close to break even. The unbundling of cable and the rise of streaming is changing the dynamics. We are in the middle of negotiations, but I think our TV contracts are going to continue to be strong. It's all about the eyes.

We get way more viewership locally than the Flyers and the Sixers put together. I watched almost every one of the 162 games plus playoffs. That says a lot about where you grew up because every place isn't like that.

Nostalgia and the Phillies Experience

When I was nine years old, my mom took me to a ball game at Connie Mack Stadium. We went from Northeast Philly on public transportation. We took a bus, the El, a trolley, and another bus. It took an hour and a half to get to the game. You walk through the tunnel and this bright green lawn jumps up, covered by blue skies. I still get goosebumps. That feeling you get when you walk through the tunnel and see that field open up before you—there is no feeling in the world like that.

I still get that feeling today. And now he owns it. I'm getting chills thinking about it. This summer, you invited me to a game and I got off the Pattison Avenue exit. It took me an hour and a half to get to the park. My next pitch for you and John is that you need to put a helicopter pad up there for your good friends. We need to get an on and off ramp. You might be able to call Cherelle Parker and see.

We’re working on ingress. Now that we have the Sixers and the Flyers and the Eagles all getting together on this, John Middleton is focused on all those fans. That little kid who walked through that tunnel in 1969 had the same experience. I was hooked for life. It was a drug that I never got from anything else. Every time I think about it, I get chills. It’s just a fabulous thing. And now you own that team. That is an incredible life well lived.

It’s a testament to your hard work, your dedication, and being a visionary. It’s about risk. You have to have a set of balls in business and Stan really wrote the book on it. Spending some time with you has been a pleasure. All the best for a great season. Go Phillies.