to preserve an endangered species: midsize mortgage banks.
Steven C. Alonso and Jack Havens announced their venture this week. The firm, which will be based in Indianapolis, does not yet have a name. Its mission will be to take majority equity stakes in mortgage companies and, more importantly, to support them with capital and technology.
It would try to attract lenders that originate $15 million to $60 million of loans a month -- a breed that is rapidly disappearing as the consolidating mortgage industry is split between gigantic megaservicers and tiny mortgage bankers and brokers.
According to Mr. Alonso, the middle-tier lenders face a conundrum: Unlike the smallest originators, they have high expenses; unlike the giants, they lack the capital to build their businesses.
"Midsize players are getting squeezed," said Mr. Alonso, the 39-year-old former president of Bank One's consumer finance division, who left the Chicago banking company in July. Mr. Alonso said he and Mr. Havens are building "a vehicle to help them survive."
Mr. Havens was chairman of the old Banc One Corp. from 1980 to 1986. In recent years he has run a private investment firm, Havens, Hardymon & Nick, in Columbus, Ohio, where Banc One was headquartered.
The new company plans to start up or buy a federally chartered savings and loan. The thrift would be able to hold loans in its portfolio, which would give the mortgage banking affiliates the ability to originate loans that cannot be sold easily in the secondary market. "The S and L gives you the opportunity to either portfolio loans, securitize, or sell whole loans," Mr. Alonso said. "It gives you three legs, as opposed to being at the mercy of somebody you're selling to."
The firm also plans to found a new mortgage banking company that would be a kind of guinea pig for the other lending affiliates, experimenting with all the latest technologies.
"A lot of midsize players, and big players, have old technologies," Mr. Alonso explained. A brand new company would be "the only place" to try out new systems and software, he said, because otherwise "we'd have to go to one of our partners and say, 'Can you change to this so we can see how it works?' "
Mortgage bankers would benefit from cheaper warehouse funding through the new venture, Mr. Alonso said, because warehouse-lending banks give lower rates to originators that have more capital behind them.
But at the same time, the firm's mortgage banker affiliates would enjoy relative autonomy and keep their local brand names. "We're providing a different way to get the benefits of consolidation without giving up your identity," Mr. Alonso said.
Mr. Alonso and Mr. Havens have already lined up one "partnership investment," with Midwest National Mortgage Bank, based in Cincinnati, which originates $25 million of loans per month. "We're in discussions with others," Mr. Alonso said.
