The Mortgage King, Jason Rauschelbach: Lessons from the Edge of Financial Chaos

What happens when your worst fear becomes your reality? When I talked with Jason Rauschelbach, former CEO of The Mortgage Store, he walked me through exactly that nightmare. His company did a billion dollars in originations, employed 200 people across seven branches in five states, and got recognized multiple times as one of the Inc. 500 fastest growing companies.

Then 2008 hit, and everything changed.

The Warning Signs Nobody Wants to See

Jason was 31 when the cracks started showing. “We had a credit line with our warehouse lender, $10 million warehouse line with relatively small institution in Atlanta, Georgia who started telling us, well, all right, well, you can’t we’re not going to fund any more loans with IndyMac, for example,” he told me.

But here’s the thing about success when you’re young and everything’s been going your way. “I was also 31, 32, you know, I was in my early 30s and thought I was a lot smarter than I probably was and invincible. Invincible? Oh, of course, I was bullet proof and invisible in addition to invincible at that point, you know, based on nothing but success having been achieved.”

Jason pushed back against the warnings. Instead of seeing his warehouse lender as an advisor, he treated them like a vendor he could strong-arm. The spring of 2008, he went to the Kentucky Derby and for the first time ever thought maybe he shouldn’t be taking trips. His gut was telling him something, but he didn’t listen.

When Everything Falls Apart at Once

The mortgage industry didn’t just slow down in 2008. It died. “Lehman Brothers, Bear Stearns, these hundred year old companies that were my counterparties are closing and you’d just like, what, that’s not possible,” Jason said.

But the real nightmare started when their CFO called to say one of their accounts had been closed. The company had been writing checks between accounts, digging what Jason called “a big hole.” His instinct? Fix it. Close the Las Vegas branch, stop paying advertising bills, put dirt in the hole.

“What I should have done right then is just, okay, this is very, very serious. This is letter of the law. Get an attorney and, you know, turn your seat in half a win and you know, whistle blow on yourself, essentially. And I didn’t really figure out how to do that and had misplaced confidence in my own abilities to fix a problem that had already spiraled out of control.”

The pressure was crushing. Jason had 200 people on payroll, lives depending on him getting meetings right, clearing payroll each week. The legal fees became his biggest expense. The paperwork stacked higher every day.

Four Years of Thinking It Was Over

After The Mortgage Store failed, Jason rebuilt his career as an investment banker in Clayton. For four years, from 2008 to 2012, he lived his life. His attorney even called with good news at one point, saying the deal was over, no more attention, move on.

Then came the call that changed everything.

“I can remember where I was, who I was pitching, where I was driving back from when I got the call out of the blue, which, you know, when you see the number pop up, oh, you know, maybe I don’t want to give this guy’s name right now. Still a good friend of mine, actually, a very good counsel and a good friend, but why is he calling? You know, you’re not supposed to be calling. We don’t have anything to talk about, I thought. And that’s when he told me, oh no, you’re back. You’re all back up on the desk.”

For the next stretch, Jason lived a double life. Going to his Clayton office during the day, walking distance to his attorney’s office for meetings about his case. Nobody at work knew. He closed a deal the day before he went in to plea.

The Night Before and the Day Of

The night before Jason pled guilty, he slept great. “I slept great. And I hear these stories about fugitives on the run and that, oh, finally I’m caught.” But the night before prison was different. They drove from St. Louis to Kansas City, stayed at a nice hotel, went to a steakhouse. The next morning was his 10 a.m. surrender.

When Jason got to Leavenworth, he extended his hand to the officer and said he was surrendering. “There’s no, there is no hand shake. That was it. You leave your dad in the parking lot. After you find out you’re not bringing your gym bag in. You don’t need your shoes or your tennis. You don’t need anything. You don’t need anything. Because they’re going to take all of it anyway.”

The processing took five hours. Strip search, used clothes that weren’t new, little blue slippers. Jason met with a nurse and told her about his drinking problem. “I let them know that you know, which was probably a condition that many people are about to get incarcerated. They develop alcoholism. Yeah. And I let her know that I have been drinking heavily since my… You know, throughout the stress of the proceedings and up until my incarceration.”

That conversation saved him a year of his sentence. The medical treatment he received at Leavenworth qualified him for the RDAP program, which cut his 24-month sentence to 12 months.

What Prison Actually Looks Like

Prison isn’t what you think it is. The inmates run everything except count. They make the food, cut the grass, do maintenance. There’s no air conditioning. You bring your own plastic chair to movies and that becomes your seat forever.

The food culture is huge. “Food is like crack cocaine,” Jason said. Guys make pizzas in microwaves, run fryers in trash cans using stripped electrical cords called stingers. Things “fall off the truck” between the warehouse and cafeteria, creating a whole underground economy.

Jason found his people early and rode their coattails to good seats in the movie theater and cafeteria. Friday nights were like “the scene in Star Wars at that cantina” with guys cooking chicken in trash can fryers while others shaved in cold showers and people smoked by the urinals.

The Strange Thing About Prison Friendship

One thing Jason said stuck with me about prison relationships. When someone leaves, it messes with your routine in a way that’s hard to explain. “There’s nothing like prison where you if you’re somebody’s a friend of yours you see them every day they’re part of your routine you do things with them and you can’t leave so it’s not like hey I’ll see you tomorrow no I’m going to see you a lot.”

When you leave prison, “it’s almost like you’re leaving somebody on the field of battle because you know that you’re leaving them behind.”

Jason served 12 months at Leavenworth and got out. His story reminds me that sometimes our worst nightmares force us to confront problems we’ve been avoiding. In his case, getting treatment for alcoholism in prison was the first real help he’d ever received for that condition.

Not every nightmare ends in success, but every nightmare teaches something if you’re willing to learn from it.