Absorbing CUNA Mutual Group's mortgage unit immediately doubled PHH Corp.'s bulk in the business of helping credit unions make mortgages, executives at PHH's mortgage unit say.
The Mt. Laurel, N.J., company's acquisition late last month of certain assets of CUNA Mutual Mortgage Corp. - mostly its $10 billion of servicing rights - also brought PHH Mortgage Corp. a slew of new relationships it expects to retain, according to Bob Smith, the PHH Mortgage senior vice president of credit risk management and correspondent lending.
CUNA Mutual Mortgage had bought, funded, or originated mortgages from or for about 500 credit unions; it had about $1 billion of production in the 12 months before the deal was announced, Mr. Smith said in an interview last week. In that period PHH received about the same amount of production from its 500 or so customer credit unions. (There was some minimal overlap in the customer bases, he said.)
PHH could have tried to woo the CUNA unit's customers one by one, Mr. Smith acknowledged, but "a strong allegiance" to the unit had stood in the way. "We found that it took CUNA indicating they wanted to exit the mortgage business to really present a sizable opportunity we can capitalize on."
Neither side said exactly how much PHH paid, but Mr. Smith said it paid "fair market value."
PHH also works with 400 community banks, as well as scores of other major financial institutions, on a private-label basis. It also owns a joint lending venture with the realty business of its former parent, Cendant Corp. All told, PHH originated $13.1 billion of home loans in the second quarter.
About 80% of the CUNA unit's production came from its correspondent and wholesale channels, in which it bought closed loans from credit unions or funded loans that they brokered to it, Mr. Smith said. The rest came from a retail channel in which it made loans to credit union members through the Web and call centers.
PHH has already begun doing all of that for CUNA clients, but the transition will not be completed for a few months, he said.
In integrating the operations, PHH has also decided to continue a CUNA program in which credit unions get help with portfolio loans, he said. "Credit unions have a need for short-term assets, as does any financial institution right now," and if they can "make that asset a loan to their own member, that's a great thing."
CUNA Mutual Group, which provides insurance and other financial services to credit unions and members, announced early last month that it had decided to sell the unit's assets to PHH and examine other "noncore business areas companywide in an effort at improving its focus and efficiency."
Jeff Post, CUNA Mutual's chief executive, said in a press release announcing the deal that, in reviewing the mortgage business, it "became quite clear the additional investment required to deliver efficient, best-in-class services … could not be justified."
PHH is replacing most of the 180 CUNA Mutual Mortgage workers in Madison, Wis., with about 100 at its New Jersey operations center. Some former sales staff members will remain in Madison; some overlapping jobs, such as in information technology departments, will be eliminated.
Sharon Fuller, the senior vice president of business development at PHH Mortgage, described the deal as another sign that its business is back on track after struggling in conversations with potential clients ahead of the February spinoff from Cendant. For example, she cited a private-label services contract PHH recently signed with MetLife Inc.
"We really feel we're reaching a momentum phase of PHH's growth," she said.
