Manhattan Mortgage, believed to be one of the largest loan brokerage firms in the greater New York area, is on the auction block—a victim (supposedly) of its dependency on using table funding from Wells Fargo & Co.
The thinking on Manhattan Mortgage goes like this: The company, founded 26 years ago by loan officer Melissa Cohn, hitched its wagon to Wells as its main table funder. When the megabank pulled out of the channel last month its future suddenly didn’t look so bright, even though home values in the New York/New Jersey area seem to be quite healthy.
In swooped
To date, both companies have declined to comment on what’s going on, but multiple sources have confirmed the talks, telling this newspaper that Wells’ exit from wholesale was the impetus for a deal. The key here is probably the fact that MM’s focus is on jumbo loans, a product that many wholesalers still won’t touch with a 10-foot pool.
Just about the time NMN published its first story about MM and Guarantee, news broke that Sterling National Bank out of New York was buying a successful brokerage firm in Brooklyn by the name of Universal Mortgage.
Do we see a pattern here?
Don Frommeyer, president of the National Association of Mortgage Brokers, told me that some brokerage firms are indeed getting out of the business because the money being offered is “great.”
Chuck Klein, who runs Mortgage Banking Solutions, Waco, Texas, for one, would like to talk to any brokerage firm that wants to sell. “I have buyers who want to grow and are interested,” he said. “You can print that.”
But Frommeyer, senior vice president of Amtrust Mortgage, Carmel, Ind., also says he’s seeing “a lot of people that were brokers and went to work in a bank, coming back to being a broker because of the amount of business that you can do using several companies instead of one.”
When Wells said goodbye to the business the optimistic view was that other wholesalers would quickly fill the void. But what a void it is: in the first half of 2012 Wells table-funded upwards of $14 billion through brokers, ranking first with a market share of about 15%.
The capacity that Wells provided likely will not be easily filled. For nonbank wholesalers it will be a matter of whether their warehouse lenders (commercial banks one and all) are comfortable with more brokers upstreaming product to them. Some warehouse banks place a cap on how much wholesaling they will allow.
Still, there’s hope. “I have personally seen more lenders enter the wholesale market now than any time in my career,” said Andy Harris, president of Vantage Mortgage, Lake Oswego, Ore. “The important thing to realize is that wholesale and correspondent lending are siblings. Wholesale will be around as long as correspondent lending is around.”
Indeed, correspondent lending appears to be healthy though there have been some casualties in the space, most notably Bank of America.
Harris points out that Wells and other correspondent buyers have stated for the record that they will continue to purchase loans from correspondent sellers, even if those loans in turn were sourced to them brokers—which is important.
But if correspondent investors ever begin putting stipulations on mortgages sourced though brokers then indeed it will be tough sledding ahead.
