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360 Mortgage Ready to Step In When Chase Quits USDA Wholesale

MAY 21, 2013 12:40pm ET
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Independent mortgage banker 360 Mortgage Group sees the exit of Chase Rural Housing from the wholesale U.S. Department of Agriculture loan purchase channel as an opportunity to grow its own business in this big but underserved market place, an executive said.

A spokeswoman for JPMorgan Chase said the USDA broker channel made up a very small percentage of its overall rural lending portfolio, less than 5%.

“For more than two decades, Chase has served low- and moderate-income rural families. We are proud to be the largest investor of rural housing and will continue to invest in this business. In our ongoing effort to manage and improve the customer experience, we will no longer use brokers to make USDA loans.”

Chase Home Mortgage had shuttered the majority of its wholesale business during the mortgage crisis, which at the time was accompanied with disparaging remarks by its CEO Jamie Dimon.

Andrew WeissMalik, chief operating officer for 360 Mortgage, said that Chase was a formidable competitor for brokered business of these USDA loans.

It was one of the last big players in this area and its exit “creates a lot of opportunity for companies like 360,” WeissMalik said.

Several companies who had been brokering these loans to Chase that 360 had been trying to recruit have contacted the company.

In approaching these brokers, 360 had emphasized its USDA offerings, but WeissMalik said the brokers had been happy with the service they had been receiving from Chase.

Now that the news has broken, these originators have contacted 360 looking to become approved because in the third quarter their favorite outlet for the product is going away.

He believes 360 has an advantage over the remaining competition because it does not make any pricing adjustments on these loans; the rates are the same as what it offers for Federal Housing Administration-insured loans.

It is able to do this because it originates these loans for its own servicing portfolio. When it securitizes the loans with Ginnie Mae, it retains the servicing rights, unlike other companies (including the retailers that 360 does not compete with) who sell the loans to aggregators prior to securitization.

Besides wholesale, 360 also purchases closed USDA loans through its correspondent channel.

WeissMalik did not quantify how many mortgage brokers sell these loans to 360, but added, “There is a lot of demand out there for USDA, there are just not a lot of homes for it.” He said all of the company’s broker and correspondent originators who are FHA Direct Endorsement approved are eligible to sell their USDA production to 360.

“If they know how to do FHA business, we let them do USDA, we don’t require separate training,” he said.

WeissMalik said, “We’re here to help them learn how to originate that product, how to close that product and how to sell the product. We are big fans of the USDA product.”

Among the misconceptions about the product, which might be holding it back in the marketplace is that it can only be used for farmland.

In fact, it can be used for single-family purchases. All states have eligible areas for the product (there is an income limitation) and in some cases those areas encroach on what would be considered urban areas.

WeissMalik added there is now a streamlined refinance version available as well, and 360 Mortgage is one of the few lenders which offer it.

“There is a lot of opportunity for this product, especially for the independent mortgage banker,” he declared.

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