Contifinancial Corp. is on a roll.
In the past 10 months, the company has aligned itself with or bought eight home equity retailers. In addition, in the past six months, it has securitized more than $3 billion in loans, racked up a sizable increase in home equity originations, and bought into auto finance and nursing home mortgage lending.
"We started saying to the public last year, when we did our bond issuance, that we were contemplating the possibility of doing some acquisitions," said Contifinancial chief executive James Moore, in typical understated fashion.
In an industry where many chief executives got their start as salesmen, loan brokers, or repo men, Mr. Moore's reserved manner, Harvard degree, and years as an international investment banker set him apart.
He also has the distinction of having created the first credit-enhanced, home equity-backed security, for Advanta Corp. in March 1988. Credit enhancement subsequently became the favored way to securitize home equity loans-until Mr. Moore developed a senior-subordinated structure this year.
Now Mr. Moore is leading Contifinancial, formerly a division of Continental Grain Corp., on a multiphase growth plan. Goals include moving west, adding retail, and beefing up commercial mortgage activity.
The company's recent rash of acquisitions reflects this. Contifinancial's mortgage division, which produces the bulk of the company's profits, is in transition, Mr. Moore explains. ContiMortgage is adding retail to its origination mix. The goal is to build retail to one- third of annual loan volume, versus virtually none a year ago.
The unit, based in Horsham, Pa., specializes in refinanced first mortgages to consumers with less-than-perfect credit.
Other lenders in the increasingly competitive home equity field have been searching for ways to increase their retail lending, but Contifinancial's tactic is unique in its precision.
The company relies on an internal data base that tracks the performance of every loan it has bought to test the caliber of its more than 100 wholesale correspondents. The top 15% are considered for a possible purchase or partnership. Those that don't live up to expectations are dumped.
"We're a bit like a rating agency," Mr. Moore explains. The company has spurned 10% of its correspondents since it began rating loans.
Late last year, Contifinancial bought outright three regional home equity lenders whose performance was exemplary. Now the company is working on strengthening relationships with other originators whose loan quality stands out.
Since mid-March, the company has bought equity stakes in four more retail lenders in exchange for securitization know-how and warehouse lines. The partnerships don't necessarily mean that Contifinancial is planning on buying the companies outright, Mr. Moore said. But they do give it the first right of refusal-or the right to buy any loans the regional lender originates.
The relationship gives small companies additional capital, and investment banking support, Mr. Moore said. "It's an opportunity for them to grow, maybe go public, or be acquired by third parties," he explained.
"It's more than securitization," he said. "We link ourselves to our clients in a way that's more long-term than traditional investment banking fees."
Contifinancial's current patriarchal stance is not unprecedented. In recent years, it has acted as an investment banker for the Money Store Inc., Cityscape Financial Corp., First Alliance Corp., IMC Mortgage Corp., Equicredit, and Delta Financial Corp. - among others. "It's kind of a long list," Mr. Moore noted.
A recent restructuring at Contifinancial will allow Mr. Moore to concentrate on strategy. Glenn Goldman and Scott Mannes have been promoted to co-presidents of Contifinancial Services, the company's broker-dealer unit. Mr. Goldman and Mr. Mannes, who have more than 10 years at Contifinancial between them, will also manage the company's merchant banking subsidiary, ContiTrade Services LLC.
Commercial mortgage origination and securitization will be high on Mr. Moore's to-do list in the next 12 months. The company is planning to take part in a multilender securitization of more than $1 billion in September.
The company is also committed to continuing to build its home equity operations, albeit only the United States. The company recently decided to pass on making a foray in the United Kingdom.
"While we think there are interesting opportunities there... we didn't want to take our eye off the ball here," Mr. Moore said. "You can only do some things really well."