MReport September 2015 - Cool Under Pressure

TheMReport — News and strategies for the evolving mortgage marketplace.

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Th e M Rep o RT | 19 Feature A lthough they enjoyed marketplace dominance in the homebuying heyday, new purchase originations lost sway after the subprime crisis walloped the industry. Next came the seismic shift to refis and home equity loans, when interest rates plummeted and homeowners—the ones who could still afford their payments, anyway—opted to lower their monthly obligations. Now, with rates expected to rise during the last quarter of this year and into the next, we're moving back to new purchase originations yet again. How's that for a mortgage industry about-face? According to the Mortgage Bankers Association's mid-June mortgage finance forecast, origina- tions totaled a projected $378 billion in the second quarter of the year, up from $297 billion in the same quarter a year ago. For the full year, originations are expected to hit $1.281 trillion, up from $1.122 trillion in 2014. In other words, get ready for some serious action in the origination space. So we thought, what better time than now to spotlight the top originators by four main regions—North, South, East, and West—using their cor- porate headquarters to determine which region to put each lender in. To cull our data, we mined both their total originations and mortgage business. Next, we examined second-quarter mortgage origination figures for most, though a few lenders had not reported their second-quarter figures by our deadline. Without further ado, meet the top originators that are making mortgages happen … and making a name for themselves in the process. The North Q uicken Loans Inc., the na- tion's largest online retail mortgage lender and the second largest retail mortgage lender in the United States, originated $19.4 billion in the first quarter of the year, the latest period for which figures were avail- able. This ranks far ahead of the $11.2 billion recorded in the first quarter of the comparable quarter a year ago, putting the lender far ahead of last year's $60 billion in originations. Though several other top origi- nators were quick to cite their personnel as the reason for their performance, Quicken Loans VP Bill Banfield sees the lender's process and lending platform as its main differentiators. "We're able to scale up very fast; we don't have to add a lot of peo- ple the way we handle our loan process," Banfield explained, citing the ability to communicate quickly and transparently with borrowers and the ability to process loans quickly as the primary reasons for the lender's fast growth. "We've invested heavily in our platform over the last several years," Banfield added. When the lender started accepting online mortgages in the late 1990s, few consumers were comfortable with the process, but now a large per- centage of people prefer to trans- act online. They can upload any necessary documents and know where their loan is in the process without needing to contact a loan officer, though Quicken Loan borrowers do have the option of working with a human. Another strategy that sets Quicken Loans apart from its com- petitors is its focus on FHA loans, Banfield says. The company also become the nation's largest FHA lender and VA mortgage provider, choosing to focus in an area that many other lenders have abandoned due to the regulatory environment. The 50-basis-point mortgage insurance premium (MIP) reduction that went into effect in late January makes these loans much more af- fordable for low- and middle-income borrowers and a good business for Quicken Loans, Banfield adds. Rather than relying on online applications, Flagstar does most of its lending through brokers across the country, but it also has a retail arm. The bank cites its veteran mortgage lending network, including brokers throughout the country, as the primary reason for the lender's success: Its originations soared from $4.9 billion in the first quarter of 2014 to the first quar- ter of 2015 (second-quarter results weren't available at copy deadline). "At Flagstar, our success begins with our people. We empha- size that our people embrace a common set of values," said Len Israel, Flagstar's president of mortgage banking. "We focus on delivering exceptional service, accountability, and keeping our word. We have a lot of conversa- tions about how we play an im- portant part in our clients' lives." Even though Israel stresses the importance of people, the lender has a consumer portal that enables borrowers to start the origination process, as well as to see the prog- ress of a loan in process. "I don't believe that technology is the differ- ence. Technology is just a means to accelerate the loan process," he said. "At Flagstar, the key to the business is the retail loan officer." U.S. Bank originated $3.5 billion in loans during the quarter, up from $2.45 billion in the year- earlier quarter. Other top originators in the North region are PNC and Hudson City Bank. PNC contin- ued a steady business, generating $2.9 billion in originations during the second quarter, up slightly from the $2.6 billion in the second quarter of 2014—a figure the lender matched in the first quarter of 2015. Hudson City's mortgage business could grow significantly in 2016 as a result of its planned merger with M&T Bank, a deal that is expected to close at the end of this year. However, the merger has already been delayed once. The South B ank of America is the dominant lender based in the South. In the second quarter of 2015, the company originated $16 billion in first lien residential mortgage loans and $3.2 billion in home equity loans, compared to $11.1 billion and $2.6 billion, re- spectively, in the year-ago quarter.

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