The Mortgage Bankers Association pegs independents’ share of the market at 40%. But both Bill Cosgrove, chief executive officers of Union Home Mortgage in Strongsville, Ohio, and Bill Emerson, CEO of Quicken Loans, said at the MBA's annual Independent Mortgage Bankers meeting that the MBA's figures for 2012 are probably understated, if only because the MBA's sample is so small.
Moreover, both industry leaders—Cosgrove is MBA's chairman-elect and Emerson is vice chairman—believe that independents will garner an even larger market share going forward.
Despite shrinking originations and tighter margins, says Cosgrove, whose firm will close on more than $1.2 billion in lending this year, small and midsize independents have picked up market share in 2013. Even though challenges lie ahead, he added, independents will grab an even larger share in 2014.
Emerson, who heads the nation's largest online lender and third largest retail originator, says the retail channel is growing mainly because those types of operations can close loans more quickly than their competitors. "Realtors care more about that then just about anything else," he says.
Emerson also pointed out that small and midsize lenders can take advantage of the numerous niche markets—cash-out refis by borrowers who are no longer underwater and borrowers who face upward adjustments to their adjustable-rate mortgages, just to name two possibilities—that are presenting themselves.
Independents "have a massive opportunity to grow because they are nimble," he told the conference. "Smart people can grow in a down market."
Being quick afoot is "our strength," added Eddy Perez, president of Equity Loans, which has 30-plus branches in 30 states. Perez, who sat on the CEO Forum with Cosgrove and Emerson, said, "Our nimbleness gives us essentially a competitive advantage."
Meanwhile, in an invitation-only session, MBA chief economist Jay Brinkmann gave warehouse lenders a deeper look into the association's quarterly performance report.
Though profits have been basically cut in half—the average fell from $1,528 per loan in the third quarter of 2012 to $743 per loan in this year's third quarter—Cosgrove called independents the backbone of the business whose market share is likely to continue to rise as the market shifts away from a preponderance of refinance loans to purchase money mortgages.
Not just nimble but also "multifaceted," he says, adding that "independents excel at purchase lending...community lenders are the future of real estate finance in America."
The performance report covers 324 companies, three out of four which are independents. Some of the key findings:
· For the fourth consecutive quarter, profit in terms of basis points fell, this time from 75 to 38.
· Average production volume per company during the period was $391 million, down from $439 million. Volume by loan count was 1,788, down from 1,921 a year ago.
· The purchase share of originations increased from 52 to 67%. For the industry as a while, the MBA estimates the purchase share in the third quarter was 49%, up from 34% a year earlier.
· Total loan production expenses—commissions, occupancy, equipment and other costs—were at $6,368 per loan on average, the highest they have ever been since the performance report was created in the third quarter of 2008, Brinkmann says. A year ago, the total cost to produce a single loan averaged $5,818.
Lew Sichelman is an independent journalist who has been covering the housing and mortgage markets for more than 40 years.