With new backing, Mortgage Builder makes a play for more market share

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Mortgage Builder is making a push to improve its market share now that it is under new ownership, and more lenders and servicers are considering upgrading their technology.

"With this new organization behind us, we're going to have lots of opportunity for growth," Stephen Ryczek, general manager of Mortgage Builder, said in an interview. "We are going to look to get some cross-functional opportunities in the organization itself in terms of the technology, and how we can leverage and use that to support our client base; and are getting back out there and focusing on looking for new opportunities in the marketplace."

Mortgage Builder currently has approximately 100 clients, mostly in the mid- and small-size range that use its loan origination system and/or Colonnade, its servicing system.

"That's where we like to focus our attention, that's where we've had the most success and that's where we see the most growth opportunities as well," said Ryczek.

The challenge it faces is that segment of the market has been contracting and operating on thin margins. In the fourth quarter, mortgage bankers on average lost $200 per loan originated.

"Consolidation happens all the time. This year is probably no different than last year or the year before. We see that on both the origination and the servicing side," he acknowledged.

But looking at 2019, "there are lots of growth opportunities," with lenders reconsidering their current systems and reaching out to Mortgage Builder as a result, Ryczek said.

Mortgage Builder's new owner, Constellation Real Estate Group, sees potential for the company to grab more market share.

"We invest in technology with the goal of being the No. 1 or No. 2 provider in the vertical market software space," President Scott Smith said in an interview. "Mortgage Builder's an interesting company, they have a nice client base and a nice team there and we think it's a good fit to fit in our portfolio."

Constellation Real Estate Group acquired Mortgage Builder on April 1 from Altisource Portfolio Solutions. The purchase price was not disclosed.

Constellation Real Estate Group is a division of Constellation Software. There are 12 companies in the real estate sector in its investment portfolio; Mortgage Builder is its first in a finance-related business.

Altisource originally acquired Mortgage Builder in 2014. Mortgage Builder started operating as a stand-alone company in 1998, and in 2012 it purchased former parent GCC Servicing Systems.

Altisource separately agreed on April 1 to sell its financial services business to Transworld Systems for $44 million; that business provides customer relationship call center, accounts receivable management and mortgage charge-off collection services.

"In 2018, we established Project Catalyst to streamline our organization and focus on our larger opportunities. The anticipated sale of our financial services business furthers this objective and supports the continued deleveraging of Altisource's balance sheet," said Chief Executive Officer William Shepro in a press release about the sale to Transworld Systems. "If completed, the sale will provide the customers and employees of the financial services business a partner in TSI that is a leader in the customer relationship management and collections industries."

Altisource saw potential value in Mortgage Builder, but sold it as part of a broader cost-cutting measure.

"This sale is part of Altisource's strategy to streamline our organization and focus on our larger core opportunities," Shepro said in an email when asked specifically about the Mortgage Builder deal.

"The Mortgage Builder customers and employees join a business with a proven track record of delivering long-term value and stability to the companies it invests in through a buy-and-hold strategy," he added.

Mortgage Builder is not the only loan origination system provider to change hands in recent months. Ellie Mae is going private in a $3.7 billion sale to Thoma Bravo. As a private company, Ellie Mae might be better able to deal with the changing environment without having to worry about pleasing investors, several people in the mortgage industry said.

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