The rapid consolidation in mortgage lending is shaking out of the industry lenders with giltedge credentials.

Steven Ashley, the former president of the Mortgage Bankers Association of America and chairman of Rochester, N.Y.-based Sibley Mortgage Corp., is negotiating to sell his mortgage bank to neighbor First Federal Savings and Loan Association.

And, further south, HomeBanc Mortgage Corp., the leading mortgage lender in the hot Atlanta market, is seeking to sell itself as well, sources said. Just months ago, HomeBanc was touting its fast growth and desire to expand out of its home market.

The marketing of the two companies clearly illustrates the depth of change now under way in mortgage lending. While the wave of bigger deals seems to have ended, the arena may have shifted to smaller and midsize companies.

Indeed, If Mr. Ashley sells, he will become the second recent MBA president to do so in recent months, following Herbert Tasker, who sold his All Pacific Mortgage, Concord, Calif., to Inland Financial, Indianapolis, in December.

The nascent deals also are further evidence of the difficulty of operating a small mortgage bank profitably now. "Nobody is making money these days. Nobody," said an industry veteran.

The negotiations between Sibley and First Federal, first reported in The Buffalo News, were initiated by the thrift, according to First Federal spokesman Robert Nolan. While negotiations were described as preliminary, he said the thrift was hopeful that an agreement could be reached sometime in early 1995.

If First Federal does buy Sibley, the expectation is that the company would operate as an autonomous unit and that Mr. Ashley would stay on. Mr. Ashley declined to comment.

Sibley Mortgage had a $1.7 billion portfolio of loan servicing rights at midyear. At that time, the company was on track to originate about $600 million in 1994, down from $800 million in 1993.

The company originates loans through its offices in New York State and Ohio.

That HomeBanc Mortgage should find itself on the block comes as something of a surprise to industry observers who have charted its rapid growth in recent years.

Though the company declined to comment, sources say that a sale effort is under way through the offices of T.J. Murray & Co., a consulting firm.

HomeBanc, with a servicing portfolio of about $1 billion, originates loans in the Atlanta market, where it is the largest home lender. This year it expects to originate about $600 million.

HomeBanc has been forced to seek a buyer despite having a business strategy that many consider to be ideal for this year's market.

In an interview with the American Banker earlier this year, Patrick S. Flood, the executive vice president in charge of day-to-day operations, said that the company had long concentrated on the purchase end of the business. In fact, last year, when refinancings were at a white-hot pace, the Atlanta lender did 75% of its lending for purchases.

But even a lender with the type of realty agent contacts that many would admire is not insulated from the punishing price competition that has plagued mortgage bankers for much of this year. Furthermore, companies like HomeBanc have faced a tougher time as the demand for adjustable-rate mortgages drives many borrowers into the arms of portfolio lenders.

Because such lenders hold loans for investment, they can price more aggressively than others to expand market share, and this kind of pricing has squeezed the profit out of originations.

For-Sale Signs

Sibley Mortgage Corp.

Rochester, N.Y.

* Servicing: $1.7 billion

* Originations: $172 million in first half of 1994

HomeBanc Mortgage


* Servicing: $1 billion

* Originations: $600 million expected for 1994

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