Today, the wholesale business “is coming out of the malaise” and is now producing higher quality loans than retail direct originations, he says.
Dallas is no stranger to wholesale, having founded First Franklin and Ownit.
Skyline Financial Corp., his latest venture, is a retail shop doing business as NewLeaf Lending. Retail is a high-cost distribution channel, and is expensive for some lenders to maintain as volume contracts, costs increase and margins decrease.
Originators are being fired and returning to mortgage brokering, he says. Others have come back to brokering because they don’t want to work in a banking environment.
The negatives in the third-party space are the 3% fee cap and 43% debt-to-income ratio cap coming out of the qualified mortgage rule. That has forced some banks to abandon wholesale. NewLeaf sees this as an opportunity to start its own platform.
On top of this, “I’m a product maven and I have got some products I want to roll through this channel. They are purchase products” which could include non-QM loans, Dallas says.
Skyline is approved by Fannie Mae, Freddie Mac and Ginnie Mae and it has jumbo investors to sell to.
NewLeaf Wholesale is already purchasing loans from mortgage brokers.
NewLeaf will also bring its retail technology system, the Intelligent Mortgage Platform, over to the wholesale side sometime in the first quarter of next year. It has been testing this technology with some of its broker customers.
The origination process has been slowed because of the regulatory requirements and tighter underwriting, and technology will speed things back up, Dallas says.
NewLeaf Wholesale’s first regional operational center is in San Diego and Marti Tromley, the former executive vice president and chief lending officer of Home Savings of America, is in charge. Other offices are planned for Portland, Ore., and Los Angeles. There eventually will be five regional offices in total.