Calif. wholesalers closing offices as demand sags; the list includes Directors Mortgage, Independence One, and Crossland.

Courtesy Funding Corp., the wholesale lending division of Directors Mortgage Loan Corp., has closed three of its eight offices in response to much lower volume.

"If the production isn't coming in, you don't need the people in there," said Robert Garman, senior vice president.

Courtesy, based in Riverside, Calif., is not alone. Several lenders have closed wholesale branches recently. And many more are considering such a move.

San Diego has been particularly hard hit, with 24 lenders, including Courtesy, closing wholesale operations in the area. Others are Independence One, Crossland, and Imperial Credit.

Rate Hikes Blamed

Lenders said wholesale loan production has plunged as interest rates have climbed since February.

"Wholesale right now is not a real profitable business," Roxy L. Root, president, Union Security Mortgage Inc., Santa Ana, Calif.

At La Jolla, Calif.,-based American Residential Mortgage Corp., for example, wholesale loan production in the first six months of 1994 is roughly half what it was during the same period last year.

"If the market itself is off by 50%, so should our staff levels and our overall levels of volume," said Steve Attwood, American Residential senior vice president. "Anyone who has been in this business long enough should have known that."

American Residential has not closed any wholesale branches. But the lender cut 276 employees in May, a 12% reduction.

American Residential has also drastically scaled back its wholesale operation, closing 15 of 75 satelite processing centers since March.

By closing a satellite, "We don't have to exit a regional market," he said. "What we exit is the overhead to keep the peak refinance activity."

Mr. Attwood said soon after a recent executive meeting that American Residential has no plans to continue consolidating its wholesale operations.

"We feel we are at a very efficient size right now," he said.

Union Security, a small lender, consolidated three branches into its main office over the last several weeks. The consolidation cost more than a dozen jobs, according to Mr. Root, the president.

Mr. Root said Union Security has seen loan production fall off 25% this year through June.

He said cutting costs was one reason for the consolidation. But he also said Union Security can be more efficient with a centralized wholesale operation.

Union Security's consolidation has resulted in mortgage brokers doing more of the processing of the loan, he said. Union Security now supplies brokers with processing technology, education tools, and marketing materials.

Question of Existence

He said mortgage brokers are willing to take on more responsibilities "in order for them to exist."

Lenders say closings of wholesale branches are just beginning.

"There is no great surprise here," said Robert Allen, executive vice president, North American Mortgage Co., Santa Rosa, Calif. "I mean, this was predictable."

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