When it comes to mortgage banking, Jess Lederman has been around the block and then some.
He has worked at a mortgage insurer, launched Bear Stearns & Co.'s "A" paper conduit two decades ago, put the former Ohio Savings Bank (now Amtrust Bank) on the map as a national correspondent lender and worked for Countrywide Home Loans in global risk management.
Today, Lederman said, he sees a huge opportunity in the jumbo mortgage market — home loans that exceed the conforming limit of $729,750. "There are excellent returns with minimal risk," he said.
With the blessing of his current employer, a California credit union, Lederman is slowly ramping up production of loans with a maximum size of $4 million.
Kinecta Federal Credit Union in Manhattan Beach is bucking tradition. Credit unions have not been huge players in mortgage banking, with some notable exceptions (Navy Federal and Pentagon Federal credit unions and State Employees Credit Union of Raleigh).
Also striking is that Lederman plans to fund jumbo loans through mortgage brokers, the third-party salespeople whose collective reputation was tarnished in the subprime meltdown.
But Kinecta is not using just any old loan brokers. "We're only going to use brokers we know, trust and have vetted," Lederman said. "For us to work with them they need to have years and years of experience."
There's another catch: If brokers and correspondents want to use Kinecta they must promise to sell most of their Fannie Mae, Freddie Mac and Federal Housing Administration production to the credit union. "In return for using us, we will want a disproportionate amount of their agency business," Lederman said.
Securitizations of all things nonconforming seized up during the worldwide credit crisis of 2008. The secondary market for jumbo loans has yet to revive. But with Kinecta's cost of funds (it uses retail certificates of deposit) so low these days, Lederman said, the credit union can hold the loans and profit from the interest spread.
Just how much demand is there for jumbo loans in Kinecta's Southern California market? Since January, the credit union has funded $500 million. "We plan to grow this gradually," said Lederman, who joined the lender eight months ago. "We won't be shooting for the stars."