SUCCESS IN THE mortgage brokerage industry means beating out the competition by getting the best rates to potential customers.
And First Franklin Financial Corp. of San Jose, Calif., thinks it has the answer for getting the information to its brokers faster then any of its competitors.
The firm is on the verge of implementing a system -- currently being tested -- that gets interest rate information disseminated very quickly.
The mortgage company has started to roll out a wireless communication network to its brokers, which allows them to receive interest rates and transmit loan information through a network of personal computers.
The system is expected not only to offer increased functionality, thus increasing the organization's competitive advantage, but also to save the company money.
"We realized the important role wireless communications can play in getting lenders up-to-date interest rate and loan production information and see it as giving us a competitive advantage," said Marc Geredes, a regional president for the $130 million-asset organization. "By having the system in place, we are able to get the information directly into the hands of the brokers faster and more efficiently than simply faxing the data to them daily and waiting for them to fax us the loan information."
First Franklin Financial Corp., one of the largest privately held mortgage banks in the United States, is currently in the process of being purchased by the investment arm of DLJ Merchant Banking Partners, a subsidiary of New York-based Donaldson, Lufkin & Jenrette Inc.
The deal, which is scheduled to be completed at the end of this month, is estimated by industry sources to be valued at $40 million -- or about 1% of First Franklin's $4 billion servicing portfolio.
Industry sources say that once the sale goes through, DLJ will consolidate First Franklin with another mortgage unit it owns: Franklin Mortgage Capital Corp. of Virginia -- creating a mortgage banking operation spreading through California, Washington, Texas, Oregon, and the mid-Atlantic and southwestern states.
First Franklin currently originates approximately $300 million in mortgages a month, and that number is expected to increase substantially once the organizations are merged.
Franklin Mortgage originated approximately $4 billion of loans last year and had a servicing portfolio of $1.6 billion.
Thompson Dean, managing director of DLJ Merchant Banking Partners, said the purchase and merger of the companies will allow the firm to create a national mortgage banking operation with product diversity, geographic diversity, and national servicing.
The new entity's servicing portfolio will be approximately $8 billion, with more than $6 billion in annual mortgage originations. Once the merger of First Franklin and Franklin Mortgage is completed, all servicing functions will be handled at a central location in Jacksonville, Fla.
Mr. Dean said DLJ Merchant Banking Partners is an equity fund of approximately $1 billion that purchases private equities through leveraged transactions.
Independently of the pending merger, First Franklin plans on rolling out the wireless communication links to transmit rate and loan information with an eye toward increasing efficiency and saving money.
Currently, on a daily basis, the firm sets its lending rates and faxes the rate sheets to its brokers. The brokers are then forced to enter the data into their computers before quoting rates to potential customers. In some cases there is a potential risk that a broker is quoting the wrong rate.
Through the use of wireless communication links, the rates can be transmitted directly into the brokers' PCs.
"Once the data is transmitted, all the lender has to do is go out and write the loans," said Richard Cirigliano, a vice president of First Franklin's information technology division.
In order to transmit the data, the company is using a personal computer software system--called Ubiquitous-- from Boulder, Colo.-based Ethos Corp. The system operates in conjunction with Claris Corp.'s File Maker Pro software.
The rate and loan information is transmitted over Motorola's wireless communications network, known as Embrac.
File Maker Pro provides the data base for Ubiquitous, which allows the brokers to see the rates and fees in an easy-to-read format.
Upon rollout of the system, each broker will get a bundle of software that will include Ubiquitous, File Maker Pro, and the hardware to link to Embrac.
First Franklin has been testing the system for over a month and plans an operationwide rollout early this fall.
One of the first benefits the firm expects to realize is a substantial cost savings.
On average, First Franklin was spending approximately $25,000 month on faxing rates to, and receiving information from, its brokers. Mr. Geredes said management believes the new system will reduce costs dramatically. "There will be some additional costs associated with bringing the system up, but the savings will outweigh our average yearly costs," he said.
"Basically, there will be an up-front cost on the software and the Embrac system and then a recurring cost of pennies on the dollar," he continued. "Where we get hit now is the recurring cost of using an outside service to fax all of the data to our brokers, and that will end."
Mr. Geredes said First Franklin estimates the cost of getting information to and from the brokers will be reduced to approximately $300 to $400 a month.
One question that management is still wrestling with is which brokers will get the new system.
"Our top-producing customers, who do between 25% to 30% of our volume, will most certainly be given the technology," said Mr. Geredes. "The big question is do we want to go out and spend the nonrecurring cost of $1,000 to install it with all 1,500 of our brokers."