A number of mortgage lenders in Orange County have readied themselves for what’s expected to be a strong year for home loans.
Irvine-based residential and wholesale lender Impac Mortgage Holdings Inc. got the year started with an acquisition in a bid to boost its retail lending business. It bought CashCall Mortgage, part of Orange-based lender CashCall Inc., which retained its portfolios of personal and small-business loans.
Impac funded $2.5 billion in 2013, and its 2014 volume is expected to be higher, according to Justin Moisio, vice president of corporate and investor relations. Details will be announced in the company’s 2014 earnings in coming weeks. Its shares gained more than 40% since it announced the deal with CashCall, to a market capitalization of $90 million.
Impac “had been seeking to increase its retail consumer-direct” origination channel and found CashCall’s retail call-center business to be a “[nice] complement” to its current operations, Moisio said. “In addition, this acquisition is expected to unlock opportunities by expanding CashCall Mortgage’s geographic footprint from 11 licensed states up to 42 states.”
Impac was founded in 1995 and is headed by President Bill Ashmore. It paused on loan originations in 2007 and re-emerged in 2010, a move that helped the company avoid, at least in part, the effects of the housing market crash.
Eyeing Opportunities
Now it’s eyeing opportunities among would-be borrowers whose personal finances might have gotten dinged up during the recession—a group that requires some special attention but doesn’t necessarily compare with the subprime borrowers of yesteryear.
Moisio said that Impac is seeing “a large opportunity,” specifically in the nonqualified mortgage space, which is the group of potential borrowers that fall just outside the parameters of the Qualified Mortgage rule issued by the Consumer Financial Protection Bureau, a federal entity created under the Dodd-Frank Act, which instituted sweeping regulations on the financial industry.
Impac last year launched its “AltQM” programs to “target the underserved market of borrowers who are finding financing either nonexistent or available with stringent and costly parameters,” Moisio said. “Currently, almost all traditional banks are lending within the Qualified Mortgage box, which unfortunately excludes a large amount of very well-qualified and high-credit-quality borrowers that fall just outside [that] box. … There is a tremendous opportunity in the mortgage market today to provide borrowers with a product that has previously been unavailable to them.”
Alpine Mortgage Planning recently expanded its Orange County operations with a new office in Newport Beach, its fourth location here in addition to those in Seal Beach, Irvine and Laguna Niguel.
Alpine is the retail lending arm of Roseville-based Pinnacle Capital Mortgage Corp.
“We are definitely in an expansion mode from a retail [standpoint],” said John Reed, who heads the Newport Beach office, which has 16 employees and is expected to grow to about 40. “2014 was a tremendous year for Alpine. Pinnacle saw an opportunity to service the South Orange County area, as well as the coastal community, where they didn’t have branches before.”
Alpine funded about $1.8 billion in volume last year, up about 3% year-over-year. It had 22 retail offices overall as of the end of last year, an increase of six over two years. Reed said the company is planning to fund $2.3 billion this year and add six retail branches.
Pinnacle had about $7 billion in loans in 2013 and was ranked among the top mortgage lenders in the U.S. by the Scotsman Guide, a mortgage-industry trade publication, which based its latest rankings on 2013 volumes.
Local lenders’ positive outlooks are pegged on various economic and business factors, such as continued consumer demand for refinance and purchases and availability of opportunities in markets not served by traditional banks.
It’s also in line with the results of the latest Fannie Mae Mortgage Lender Sentiment Survey, which indicated 88% of respondents are looking to grow their mortgage origination business this year.
Banks as a whole, though, are largely seeing their demand unchanged, according to the latest Federal Reserve Board survey of senior loan officers. More than half of the banks said they’ve been seeing about the same demand for mortgages in recent months, while 33% said they have seen moderately weaker demand.
Dodd-Frank
Reed said there’s been a “spike in the [number of] direct lenders coming into the market” as the “big banks, which had dominated most of the business, pulled back” from the home-lending arena, primarily driven by the Dodd-Frank Act that placed more stringent lending rules.
“Dodd-Frank has definitely put a lot of compliance [requirements] on the banks’ plate,” Reed said. “So the big banks … wanted to decrease their market share. This gave opportunity for direct lenders. … Direct lenders [have] the ability to maneuver really quickly in the environment. Marketing with realtors, builders and referral partners—a lot of the direct lenders have become purchase-focused lenders.”
Being “100% focused on being a mortgage lender,” as opposed to providing a range of financial products and services, has been a key driver behind loanDepot LLC’s growth, said Dave Norris, president and chief operating officer of the Foothill Ranch-based lender.
LoanDepot, which was founded in 2010 by Anthony Hsieh, has about 4,000 employees. It funded more than $13 billion in 2014, up 57% year-over-year. The company is Hsieh’s second turn at building a mortgage lender—he founded HomeLoanCenter.com in 2002 and merged it with LendingTree two years later. The company was eventually bought by Discover Financial Services.
Norris said there’s likely to be opportunity stemming from the recently announced plans by the Federal Housing Administration to drop the annual insurance premiums for new borrowers by half a percentage point. Mortgage insurance is required of FHA borrowers, and the premium will be 0.85% of the loan amount, instead of 1.35%.
“The mortgage insurance that’s paid upfront has been dropped significantly,” Norris said. “It’s a meaningful amount. A lot of people that are in the FHA product will [take advantage] of it.”
OC Field
The latest stirrings by loanDepot, Impac and others come amid a well-stocked field of nonbank lenders here.
Santa Ana-based Stearns Lending Inc. is among the largest mortgage lenders in the U.S., with about $13.1 billion in loans in 2013. Others include Greenlight Loans in Irvine, part of Nationstar Mortgage Holdings Inc., and Orange-based Orion Lending.
“The upside of Orange County is that there is a lot of competition,” said loanDepot’s Norris. “And that’s good for the consumer. As far as opening a shop here, it’s a nice place to open up, because there’s a lot of mortgage talent.”
Smaller lenders, though, might have more challenges in terms of regulatory requirements and compliance, he said.
“I think that being a small lender today without scale, it’s difficult to be compliant,” he said. “If they’re audited by different parties, or if they’re forced to sell through different channels, that’s a significant price disadvantage. I don’t know the long-term health for small lenders.”
