Thursday, February 08, 2007

ABC: Not buying the media’s lede

Word on the street is that the mortgage business is in trouble. Serious trouble. Pack your stuff and move to high ground trouble, if you believe the story that came out today on USA Today.com.

“The mortgage industry plunged deeper into distress this week as two lenders said sagging home prices and higher interest rates are pushing many borrowers into delinquency…Shares of mortgage lenders fell across the board Thursday. Countrywide Financial and IndyMac Bancorp., the two biggest independent U.S. mortgage lenders, each fell more than 2%. Novastar Financial fell more than 11%, hitting a new 52-week low.”
Without getting into a long discussion on cycles and market trends and government agency intervention, let me just say that not every lender out there is buying it. America’s Broker Conduit (ABC), Melville, N.Y., for instance, is adding people at a fairly furious pace. H. Hilary Hamer was named the company’s new Senior Vice President of the Midwest Region earlier this month and last month the company hired Doug Hatch to be Branch Manager for the Las Vegas, Nevada branch. Hamer was previously with Well Fargo Home Mortgage as Senior Vice President, Central Division Manager, Institutional Lending. Hatch was a Vice President at Greenpoint Mortgage.

American Brokers Conduit (ABC) is the wholesale division of American Home Mortgage Investment Corporation, a publicly held Real Estate Investment Trust (NYSE: AHM). ABC operates nationwide and has built a business model based on a broker-centric strategy. At the end of Q3 2006 ABC was ranked as the 6th largest residential wholesale lender in the US with a market share of 3.88% according to National Mortgage News. The company works with 6,500 brokers through 33 wholesale branches in 21 states.

The company basically came out of nowhere to become a dominant player, which will not surprise you if you know CEO Don Henig. When he took over the management of the wholesale business in Q2 2002, American Brokers Conduit wasn’t even ranked in the top 100. Today, ABC produced just over half of the $15.5 billion in loan volume its parent company reported in 4Q06.

But can this business continue to grow when so many are scaling back operations, closing branches or going out of business?

I spoke to Lisa Schreiber, Executive Vice President for ABC about how she thinks that will happen.

“A lot of our competitors are still very focused on the transaction,” she said. “That’s important, but I think there are a lot of opportunities many are missing around partnering more closely with the broker.”

When I pointed out that many wholesale lenders are focused on the transaction because that’s where their brokers are focused, she agreed, but added that the lender has a responsibility that goes beyond that.

I have visited with Schreiber before and understand her company’s emphasis on broker training and how a lot of online real estate is devoted to it, but was impressed when she told me about the new initiative ABC launched to train its trainers.

“We’ve hired technology training specialists in each of our five regions,” she said. “They go out and help the Broker Relationship Managers (a special position inside ABC dedicated to supporting both the wholesale Account Executive and the broker) understand the technology we provide to brokers. Everyone inside is certified so they can, in turn, better train the brokers.”

Lots of lenders talk about providing training. Most mean brainwashing the brokers into thinking they are the only wholesale lender worth working with. When a lender takes its own medicine, on the other hand, is an indication that there might be a reason to make such a claim.

Only time will tell whether this strategy will take ABC through to the other side of the cycle. I’m not betting against them, and I’m not taking down this post. So we’ll look back and see in 2009.

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