Irvine-based New Century Financial Corp. has launched a marketing push to get more business directly from homebuyers and refinanciers in an expansion play for the subprime mortgage lender.
New Century, which gets most of the loans it funds via mortgage brokers, has tapped home improvement guru Bob Vila in a bid to directly appeal to consumers.
The company hopes to drive people to its 74 retail branches, which up to now have played second string to New Century’s dominant broker business.
The lender is following the lead of its close rival, Ameriquest Mortgage Co. of Orange, the largest subprime lender in the country with some 300 retail offices nationwide.
Ameriquest long has appealed directly to consumers with its TV commercials and sports sponsorships. In the past year, Ameriquest has stepped up its marketing as it looks to move into more traditional lending.
New Century ranked third nationally among subprime lenders in the third quarter, funding $10 billion in loans, according to National Mortgage News. Ameriquest topped the list with $16 billion followed by Calabasas-based Countrywide Financial Corp. at $12 billion.
The move has its risks for New Century. The company will be playing catch-up with Countrywide and Ameriquest, which are known better among consumers.
And going after consumers will come at a higher marketing cost for New Century, which is used to getting most of its business relatively cheaply from brokers.
In May, New Century quietly bought the assets of Ponte Vedra Beach, Fla.-based Home 1-2-3 Corp., which had been using Vila as its spokesman.
New Century paid $3.7 million in cash and assumed some debt for the Home123 brand, a toll-free number, a Web site and loan offices in Morris Plains, N.J., according to the company.
In the next few months, New Century said it plans to rename its retail branches as Home123. The lender has started running 60-second TV spots weekly and also is doing print ads.
In the past, New Century just did direct mail advertising.
The Home 1-2-3 buy “allows us to engage in a much more integrated marketing strategy,TV, outdoor print, direct mail,” said Carl Vernon, president of New Century’s Home123 unit.
The company’s wholesale arm that works with brokers is set to retain the New Century name.
New Century has nearly 5,000 workers nationwide, including 1,300 under Home123.
The new venture’s slogan is “cutting through the loan clutter.” Home123’s Web site features Vila holding a chainsaw.
The move is the second big one for New Century in recent months. Late last year, New Century converted to a real estate investment trust that owns mortgages. REITs get a break on taxes and pay out at least 90% of their income to shareholders.
The past three years have been boom times for subprime lenders, which lend to borrowers with imperfect credit. As home prices surged, homeowners swapped credit card debt for a refinanced home loan or a second mortgage.
New Century, Ameriquest and other subprime lenders have been big takers of office space here. A division of Ameriquest recently scooped up about 90,000 square feet at 2600 Michelson Drive in Irvine, which also is home to the Business Journal.
New Century is set to lease 480,000 square feet of space at Park Place, a sprawling commercial campus in Irvine. The deal includes plans for construction of a 20-story office building. New Century plans to take about half of the new building.
Still, subprime lenders seem to be aware that they can’t depend forever on a hot market to supply growth. Like Ameriquest’s move into traditional lending, New Century likely sees Home123 as a way to grow after carving out a big chunk of the subprime market.
A bigger concern: if short-term interest rates ever match long-term rates. Such a phenomenon, known as an inverted yield curve, has wreaked havoc in the past for risky investments such as subprime loans.
Long-term rates have remained low, despite the Federal Reserve Bank ticking up a key interest rate all of last year. That makes the prospect of an inverted yield curve conceivable, if not evident yet.
