Though its margins are thinner than any other production channel’s, correspondent lending still appeals to home mortgage companies, and two midsize players have recently entered the niche.
MortgageIT Holdings Inc. expects to complete the launch of a national correspondent lending platform shortly after Jan. 1, American Banker has learned.
The New York firm already has sizable retail and wholesale lending operations. Doug W. Naidus, the chairman and CEO, said it has already hired several key executives to spearhead the initiative, which it has been working on since the early part of this year.
Larry P. Lewis, who had been the company’s chief operating officer, heads the new division.
Another lender, American Mortgage Network, whose new correspondent division is to start looking at loans this week, sees it as complementary to its main business of funding loans through brokers.
There is “a natural handoff from wholesale to correspondent” lending, said American’s CEO, John Robbins. In its wholesale business, the San Diego company often came across small banks and credit unions that underwrite and fund their own loans and that it would have liked to buy loans from, Mr. Robbins said.
Also, by doing business with these smaller lenders, the lender, known as AmNet, will probably come across more broker contacts for its wholesale business, he said.
“We now have a source for … [wholesale sales offices] to hand that client off to, or when the correspondent group runs into a smaller broker, they have a source to hand off to,” Mr. Robbins said.
The division’s four account representatives formerly worked for Principal Residential Mortgage and moved to AmNet after Citigroup Inc. bought the unit of Principal Financial Group Inc.
Half of the division’s 25 staff members are from Principal; the others have been hired since the division made the switch.
The division, which had been one of Principal’s regional centers, officially joined AmNet on Sept. 1.
Mr. Robbins would not give the start-up costs. But he said that from this past September through the second quarter of next year, when he expects the division to become profitable, about $750,000 will be invested in it.
Mr. Robbins said he expects the division to “do volumes of several hundred million dollars a month” at the outset and about $1 billion a month in 2005 and 2006, with the wholesale channel providing about the same amount, he said. Wholesale closed $860 million last month.
The correspondent division’s volume will grow as AmNet expands nationwide, Mr. Robbins said. For now it consists of one office, in Columbia, Md., and does most of its business on the East Coast.
