DEC 27, 2013 5:03pm ET

Bexil American Is Latest Entrant in Correspondent Channel


Castle Mortgage Corp., a unit of Bexil American Mortgage Inc., is entering the correspondent lending business using the same technology it already provides mortgage brokers.

This is just another sign of the vitality of the channel, which just a few months ago had its future called into question as three of the top four players (Bank of America, Citi and Ally/Residential Capital) exited the scene.

Helping to fund Castle’s growth is a strategic partnership which Bexil American has entered into with Big Moat REIT. At the same time, Alex Rozek has been named executive chairman of Bexil American.

It was one year ago when Bexil American acquired Castle Mortgage Corp. with the help of Boulderado Group, where Rozek is the managing member.

Last May, even the Mortgage Grapevine was speculating that the traditional correspondent business had a short life expectancy. But others in the business saw the opportunity.

Among those companies which started a correspondent channel in 2013 are Embrace Home Loans and Caliber Funding, which saw the departure of the banks from this channel as an opportunity.

Embrace resisted entering correspondent lending until it could provide the unit with marketing, technology and credit support resources.

Castle already had been in the mini-correspondent channel, which also has seen plenty of new entrants in the past few months.

The addition of traditional correspondent is being driven by Castle’s third-party originators, including mortgage brokers who are making the move into mortgage banking, Rozek says.

Castle wants to be a “boutique correspondent” purchaser. The lender has some customers who shift from brokering loans to banking loans depending on situation and these firms are looking have a common platform.

And that is what Castle offers them, the opportunity to broker, be a mini-correspondent or correspondent through its proprietary web portal, called The Express, Rozek adds. The company wants to be the provider of choice no matter which way the TPO wants to interact with Castle and that is the hallmark of a boutique.

This type of customer-friendly service is what Boulderado is looking for from the banks it does business with and it finds that more at the smaller, nimbler players than the large banks, he says.

Castle offers a menu of conforming and government products in 24 states. It does not do jumbo at this time, but is looking into it as the relationship with Big Moat REIT will allow it to consider product expansion.

Another opportunity lies in the disaggregation of the whole loan purchaser market. In 3Q13, only the top two purchasers, Wells Fargo and Chase, had over $10 billion of volume. At Wells, the $35 billion purchased is half of its 3Q12 volume.

Those two banks hold over half of the market, with the next largest buyer being U.S. Bank at 9%. The full-year 2012 data show over 400 buyers whose market share is less than 1%.

“To be successful, you don’t need to grab all of the share, that is the beauty of it,” Rozek says, adding creating good relationships with sellers will allow both parties to grow together.

Just over one year ago, Titan Lenders Corp. started its own aggregation business, concentrating on jumbo loans.

Anytime a company enters a new line of business, things take longer to get going than it originally expected, says Ruth Lee, executive vice president. Given the heavy regulation around mortgage originations, it was important for the company to have the proper structure in place before going ahead and buying loans.

It spent the time building an operational foundation. Titan, which specializes in outsourced services to lenders, wanted to make sure it had that foundation in place, especially when it came to quality control and risk mitigation, she says.

This allows it to play in an area that when Titan came into the space there was little, if any competition. Now others are beginning to sniff around, Lee notes.

There are 93 lenders which have submitted applications to be able to sell loans to Titan and so far it has approved 41 of them. The approval process started in June. It only started to appear in the product and pricing engines in September.

Unlike Castle, Titan was starting from scratch. Because it didn’t have a track record, it felt it needed to adopt a posture from day one regarding the people it would do business with that it could use for the next year when the relationship would undergo an annual review.

The qualified mortgage rule could complicate things, but the industry is resilient, she says. It has learned how to build and produce quality loans. The credit quality in the jumbo is strong, with low loan-to-value ratios and high FICO scores.

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