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Big ‘09 Growth For a Startup Texas Lender

Eighteen months ago when industry veteran Rick Thompson bought into a small mortgage banking firm in the Houston area — with an eye toward molding it into a national lender — people thought he was crazy. “I was told this wasn’t such a good idea,” he said. “The industry had blown up, especially the middle-tier firms.”A further challenge for Mr. Thompson — who’s been in the business for three decades — is the fact that Envoy Mortgage is a nondepository and depends on warehouse lines of credit. “Three months ago our warehouse providers were Colonial, Guaranty and National City.”In case you’ve been living in a cave, here’s an update on those three firms: Colonial Bank (once the nation’s largest warehouse provider) has gone bust, as has Guaranty. As for National City, it’s now the property of PNC Financial Services, a bank well known for loathing the residential mortgage business.PNC, said Mr. Thompson, is continuing to extend credit to Envoy and BB&T “has picked up our Colonial line.” Even though three months ago Envoy had just there warehouse lenders, today it has six. And business is booming at the 50-branch retail-only lender. By the time 2009 ends, Envoy will fund $2 billion in loans, a handsome 189% gain from last year.All of its originations are either Fannie Mae, Freddie Mac or FHA-guaranteed product. Most of its loans are sold servicing-released, but Envoy one day hopes to service its own originations. The company is a Fannie Mae seller/servicer and is waiting on final approvals from Freddie and GNMA.Mr. Thompson, who made his name in the industry by managing Troy & Nichols of Monroe, La., and then later on Aegis Mortgage, Houston, wants to take the company to the next level. (Mr. Thompson left Aegis in 2006, a year before it filed for bankruptcy protection. He’s declined to talk in detail about Aegis’ majority owner, Cerberus Capital, but he’s made it clear in past interviews that he and the hedge fund’s upper management didn’t exactly see eye-to-eye. Aegis was a Fannie/Freddie/alt-A lender with occasional forays into subprime.)His ultimate goal is to make Envoy into what he calls a “middle tier” lender, one that ranks between 10th and 50th nationwide. In short, he believes much of the old existing middle tier has gone bust and that in time a new middle tier will rise from the ashes. “We believe the middle tier will be reconstituted,” he said.But to get there, Envoy, said Mr. Thompson, will need additional capital — and a banking charter. “We’re looking to buy a bank or affiliate with one,” he said. “I’ve been looking at a lot of banks these days but we’re not quite there yet.”Whether he and his partners will actually get a bank remains to be seen, but rest assured he isn’t the only nonbank executive toying with the idea of getting his hands on a depository. Rumors abound that all sorts of former nonbank executives are lining up to buy depositories for the simple reason they want a reliable source of funds (deposits) which they can use to fund and service residential originations.One West Coast-based nonbank servicer I know told me recently that he’s been looking at dozens of banks in California but so far hasn’t found a small to midsized depository that he can get comfortable with. “A lot of them have commercial (real estate) loans that are ready to explode,” he said.As for Mr. Thompson, he’s hopeful. He believes that thanks to the industry’s warehouse crisis being small these days puts nonbanks of all sizes at a major competitive disadvantage. “Smaller firms are definitely having a tougher time getting warehouse lines. There’s a fear about buyback requests,” he said. “And then there’s the cost of compliance — it keeps going up.”Paul Muolo can be e-mailed at Paul.Muolo@SourceMedia.com.