How do you woo a really, really small bank?
If you're New Jersey Mortgage and Investment Corp., the obvious answer is: offer them both equipment leasing and subprime lending programs.
The two may seem like strange bedfellows, but links between them are an integral part of business expansion for NJMIC.
A year and a half ago, the 59-year-old mortgage banking firm began a major push into subprime lending, offering nonconforming products to its broker network, building up more retail branches, and hiring more loan officers.
And now it's looking to Federal Leasing Corp., its 24-year-old equipment leasing subsidiary, to steer small-bank homeowners its way.
America's Community Bankers is slated to endorse Federal Leasing Corp.- which provides loans for medical, computer, and industrial equipment-as a source of noninterest fee income. In return for referrals, Federal offers banks a percentage of the lease income.
The endorsement will provide the company with access to over 17,000 community banks. NJMIC is hoping to follow up a leasing relationship with an introduction to its subprime mortgage program.
"Federal Leasing and the mortgage division are going to feed off of one another," said Sanford R. Seiler, vice president of the leasing division. Until mid-1996 Mr. Seiler was president of a New Jersey community bank.
Smaller banks - those with under $250 million of assets- need a way to compete with larger banks with subprime mortgage lending subsidiaries or large finance companies, he said. "Saying 'I'm sorry, I can't help you' really hurts small banks," he explained. Affiliation with a company like NJMIC will allow bankers to "act as gatekeepers" of their customers' affairs, he said.
Mortgage loans are available for any borrower, Mr. Seiler added. "Today no one's not qualified for a mortgage-it's just a matter of rates and points."
A large part of the battle to sign banks on as either leasing or home- lending affiliates is gaining their trust, Mr. Seiler said. "Bankers need to be comfortable that we are not a competitor."
NJMIC stresses to banks that it is not out to steal customers, he said. The company pays a referral fee to the bank that sends it customers-not only for the first transaction with that customer, but for every transaction afterward.
"Once banks realize that we can make them some money, the light goes on," he said. So far, the company has eight banks signed up to its equipment leasing program and 17 on its mortgage lending program.
The pairing of equipment leasing and subprime mortgage lending makes for more than just a way to attract small banks, explained Leon Godfrey, president of Federal Leasing. Cross-selling opportunities exist between the two divisions, he said.
For example, often the company leases equipment to new doctors who have high debt levels but the potential to earn high incomes. When these same physicians shop for a home, their high debt levels shut them out of conventional bank loans-and NJMIC steps in to offer them a mortgage product.
Although NJMIC is pushing bank affiliations, the company already makes home loans through a network of relationships with real estate brokers, lawyers, and other professional groups, as well as a pool of correspondent brokers and eight retail branches.