For more than two years, Joseph Lenam, the owner of Fortune Financial, looked for ways to turn his San Francisco Bay area mortgage brokerage into a true lender.
"Relying on third parties for approval was becoming more cumbersome," Mr. Lenam explained.
He explored the possibilities of mergers, joint ventures, venture capital, and correspondent lending, but each had faults. He finally became a mortgage banker in 1992 when Fortune Financial was taken over.
The company's fate highlights the problems still faced by many large brokerages. They have intense competition from retail mortgage bankers, but lack the necessary weapons to fight successfully.
Around 1992, Comerica Mortgage Corp., based in Auburn hills, Mich., began combing the Bay Area for a local lender. Through Jeffrey M. Babcock, managing director of Stratmor Group, a small San Francisco-based investment banking concern, Comerica and Fortune came together.
Mr. Lenam was not pleased at the time. He wanted to form a joint venture with Comerica. "Comerica, as big as they are, said, "We don't joint-venture, we inquire,'" he says. Four months later, a deal was done.
Mr. Lenam was concerned about losing control and freedom to make decisions at the company he had built over 11 years. Now he says his concerns were unfounded.
"It has been excellent," he said. "Comerica have been very understanding of the California market and letting us practice what the California market dictates."
Mr. Lenam complains only about the "complex" integration process between his 35-employee firm and the unit of Detroit-based Comerica Inc.
Fortune, renamed Comerica, now processes a greater number of loans more quickly and efficiently. Mr. Lenam now has the in-house services that he felt were necessary to compete with mortgage bankers.
"I think you will always have the ma-and-pa mortgage broker, but for the good-size mortgage broker like myself, its going to be really tough to stay in the market," he said.
Mr. Babcock at Stratmor said them has been an increased interest by broke" companies in expansion. And mortgage bankers, looking for ways to capture as much market share as possible, are searching for brokers to take over, he said.
Like Fortune, Drake Financial, a two-branch brokerage concern in California's Marin County, was bought out. The buyer was Entron Mortgage, a lender based in El Monte, Calif. Entron vice president Tom Hardesty believes many more brokerages will be merging with mortgage banking companies.
