First Mortgage Network said it has agreed to acquire American Finance and Investment, an Internet lender.
The merger would increase First Mortgage's originations more than 33%, to about $160 million a month. American Finance of Fairfax, Va., would become a division of First Mortgage.
The deal pairs two companies that have been successful in niches where larger mortgage companies have foundered.
First Mortgage, based in Plantation, Fla., buys mortgages of A through D quality from a 100-member network that uses its proprietary laptop origination system. It sells the loans on the secondary market.
The company also markets technology services to mortgage bankers outside its network, and helps them build mortgage-banking divisions.
American Finance has been originating mortgages since 1994 over the Internet, phone, and fax lines. It also sources its call-center and Internet solution services to financial institutions and mortgage banks.
'First Mortgage's members include home builders, real estate companies, community banks, and credit unions, predominantly in California, Florida, and Georgia. Traditionally bankers have struggled to find the best way to reach these institutions.
"There aren't many folks that are pursuing this business in a concentrated fashion," said David Larson, president and chief operating officer of First Mortgage, in explaining the company's success. "But we don't view this as a sideline business."
Once a new member comes aboard, First Mortgage will often help it process and originate loans. The loans are originated through the company's Closer system, and often underwritten by First Mortgage.
The Closer features fully computerized originations, pricing, locking, product manuals, and interfaces with automated underwriting.
"We offer a fully functioning office in a computer," Mr. Larson said. Lenders have the option of customizing their systems, and adding new technologies, like video conferencing.
"We believe there are many ways mortgages will be done in the future," he said. "We're not making a bet on any one of them."
