Monday, February 13, 2006

ABN AMRO: Wholesale to the rescue

With refinance activity surely dying, lenders across the country are turning to full-court wholesale lending presses in order to shore up volume. By building out larger networks of happy third-party originators, these institutions hopes to keep their volumes from falling through the floor. That strategy seems to be working, at least for ABN AMRO.

The mortgage lender recently released its 2005 earnings, reporting total mortgage loan origination for all of its divisions at $53.4 billion, up from $50.5 billion in 2004. What's so impressive is that $40.2 billion of that total, fully 75% of it, came from the company's InterFirst wholesale lending channel.

If you know Garth Graham, or if you've heard him speak, you know that the company has been working for years now on technology that makes it easy for brokers to originate mortgages with a guaranteed closing cost that can be calculated at the point-of-sale. HUD has been going back and forth about whether it would include such a package in any RESPA update, but most recently experts are saying that the agency will drop it in favor of a new Good Faith Estimate policy.

That may make lenders happy as they won't have to perform the tricky calculations involved in figured out a cost to close and then having to take on the risk of guaranteeing it. But if this is the kind of technology that is attracting brokers to ABN AMRO, you can expect other lenders to be looking into it, even if HUD doesn't tell them they have to do so.