Nearly a year after it moved to reduce its reliance on brokers to book loans, Huntington Mortgage Co. is moving full speed ahead.
Nearly 70% of the Columbus, Ohio, lender's loan closings in 1997 have come from the retail channel rather than third-party loans, said R. Frederick Taylor, president.
When Mr. Taylor came to Huntington in 1995, more than 60% of its business was through third-party sources. "Today that number has been cut in half," he said, "and I would not be surprised if it wasn't reduced to 20% in 1998."
While many lenders continue to rely on brokers for loans, Huntington is one of a growing group beginning to emphasize retail originations. With profit margins growing ever thinner, these lenders see the move as a way to reduce bad-loan costs and fees.
"We think it's the right thing to do, and that's why we're continuing this process into 1998," said Mr. Taylor.
Loan quality was one factor in Huntington's decision to continue deemphasizing brokers, Mr. Taylor said. "I feel that the quality of loans that are being generated by our retail outlets is as good as it gets," he said.
At the end of October, he said, the delinquency rate on loans in Huntington's servicing portfolio was less than 2.5%.
Craig Focardi, director of business development and marketing at Mortgage Information Corp., said delinquency data support Huntington's move. In its markets, "third-party originations appear to be riskier than retail originations," he said.
Last June, seriously delinquent loans originated by third parties nationwide were only slightly higher, at 0.63% of all loans, than retail originated loans, Mr. Focardi said. But in Florida and Ohio, two states where Huntington does business, the serious delinquency rate for third- party loans was 10 basis points higher than that for retail originations, at 0.90% and 0.49%, respectively.
In Ohio, the serious delinquency rates have gone down for retail and up for third-party loans, Mr. Focardi said, and in Florida, delinquency on third-party loans rose faster in the year ended June 30 than on retail loans.
Seriously delinquent loans are considered likely to result in default or a permanent loss to an investor because they are either 90 days past due or in foreclosure.
HomeBanc Mortgage Corp. of Atlanta, like Huntington, is doing most of its business at retail these days.
"We can control the customer service relations, we can build a long-term relation with the marketplace, and we can manage the effort of bringing quality assets or loans," said Patrick S. Flood, president. HomeBanc does about 90% of its business through retail channels, he said.
Huntington's volume slipped as a result of its reduction in brokered loans, but Mr. Taylor said the company has been able to offset the decline.
"We're continuing to open more retail branches now, and we look forward to opening more branches in the future," said Mr. Taylor. Huntington has about 20 retail branches in the Midwest and Southeast, he said; it plans to open two more this year and four to six in 1998.
"We have closed more loans this year than we did in 1996 even though we've gone through this transition," he said. "Yes, we suffered, but it was very temporary in terms of our volumes."
Huntington continues to work with a small group of brokers that meet performance targets. Mr. Taylor said Huntington doesn't work with brokers in markets where the broker would be in competition with the Ohio company's own branches.