A New Mexico real estate investment trust with 16 employees is trying to compete in home lending, a business infamous for thin margins and cutthroat pricing and one that is dominated by large players.

In September, Thornburg Mortgage of Santa Fe began originating mortgages in Texas, New Mexico, and Colorado. Using direct mail and telesales, the company is targeting its own shareholders and the brokers who distribute mutual funds for its sister company, Thornburg Investment Management. It plans to add an Internet capability soon.

Larry Goldstone, Thornburg Mortgage’s president and chief operating officer, says his company intends that within two to three years its direct-to-consumer lending channel will account for 50% of the $1.5 billion of assets it acquires annually.

Thornburg Mortgage, which has been buying loans from correspondents since 1999, announced its intention to lend directly to consumers a year ago. Mr. Goldstone attributed the company’s delay in initiating direct-lending activities to its aborted attempt to buy a savings and loan.

Thornburg Mortgage announced last week that an agreement it negotiated last October to buy Fasla Holding Co., whose principal subsidiary is the Phoenix-based First Arizona Savings, had expired. Mr. Goldstone said his company originally saw a thrift acquisition as a quick way to gain lending authority in all 50 states, but soon grew weary of the numerous regulatory hurdles the deal presented.

“The regulatory process has taken an extended period of time, and it’s gotten frustrating,” Mr. Goldstone said. “So we decided to take approach B,” obtaining individual mortgage lending licenses in all 50 states.

Mr. Goldstone said that getting the state mortgage banking licenses may prove a faster way to gain lending authority than acquiring a federal thrift loan charter or a federal bank charter— though the latter options offer some conveniences because the regulatory regime is uniform nationwide.

Thornburg, which kicked off its new venture with a direct mail campaign on Sept. 8, is currently lending in Texas, New Mexico, and Colorado, and officials submitted applications to 10 additional states on Sept. 22.

“It’s possible that we may find that the individual state licensing process works very well,” Mr. Goldstone said. “At this point I’m not sure we need a savings and loan charter to accomplish what we want to accomplish.”

The new venture, called Thornburg Mortgage Home Loans, was created as a licensed mortgage banking company and subsidiary of Thornburg Mortgage. Mr. Goldstone said the company will offer a full menu of mortgage products—albeit to prime borrowers—but will specialize in making adjustable rate mortgages for its portfolio. Any 30-year or 15-year fixed-rate mortgages will be sold into the secondary market, he said.

Mr. Goldstone said Thornburg Mortgage Home Loans will focus its efforts on telephone and Internet sales, with minimal marketing expenditures. He said that the current cache of Thornburg clients offers ample lending opportunities.

“I think that we’ll try to develop some marketing and advertising campaigns, but we already have 150,000 potential borrowers in clients of Thornburg Companies,” he said. “We feel that we already have an audience in the collection of clients who deal with one of the three Thornburg companies,” Thornburg Mortgage, Thornburg Investment Management, and Thornburg Foundation Realty.

Though Thornburg Mortgage has only 16 employees, Mr. Goldstone said, its expansion into mortgage lending will not result in massive hires. The company, he said, plans to outsource most of its processing and service functions.

He said the company has no specific goals for this year, but would like to originate between $100 million and $200 million next year, and maybe double that in 2002.

“The most significant variable is going to be recognition, or people finding us,” he said. “I think once they find us, they’ll find that our rates are great.”


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