Who's who in wholesale 2002

Mortgage Banking, June, 2003 by Tom LaMalfa

Last year was a huge one for wholesale and correspondent lending. According to this annual survey of purchased production, Washington Mutual, Seattle, took the top spot with $195 billion in correspondent and broker/wholesale business. But for all 25 lenders surveyed, 2002 will go down as unforgettable.

THE PAST YEAR WAS UNBELIEVABLE. Whether originations ultimately total $2.5 trillion or $2.8 trillion matters much less than the fact it was another record year for mortgage production--following on the heels of a record year in 2001.

Who possibly could have thought during late summer/early fall of 2000 that origination volume would rise 140 percent in 2001 (year-over-year) and then rise at least another $400 billion in 2002? No one.

In late summer and fall of 2000, as mortgage bankers packed their bags for the 87th Annual MBA Convention in San Francisco, the industry was prepared and praying for $1.5 trillion in 2001. If realized, it would be a 50 percent improvement over 2000--thus a good, solid year.

Today, when I look back at 2002, I see all these firms as racehorses--fit, muscled and ready to run. And run they did, at the fastest pace ever. The industry deserves a big silver trophy--huge and shiny.

Approximately 13.5 million borrowers (assuming one transaction per borrower) were served by the nation's mortgage delivery system last year. Say it again: 13.5 million. For 2001, approximately 12.2 million transactions took place, using the same rationale.

The racehorses, out of necessity, wore blinders last year. Distractions weren't permitted, and discipline was mandatory. The demands of production made all else almost invisible.

Phone calls and e-mails went unreturned for days or longer. There was less interest in legislation and regulatory issues and research was expendable. Staffing was paramount.

Everyone (nearly) got to expand their margins. The real question was by how much. Market dynamics appeared alive, well and, most importantly, at work. As demand rose over the past 30 months while supply increased (but at a slower clip), brokers and lenders earned a better profit--especially versus 2000, when margins bottomed in the latest business cycle.

And gratefully, the industry's denizens made a lot of money--but they also gave up much leisure time. Wholesale account executives, loan officers, regional managers, owners of brokerages, processors, closers, appraisers, underwriters--nearly everyone had great income-generating years.

Top-producing wholesale account executives at big firms like Wells Fargo Home Mortgage, Des Moines, and ABN AMRO Mortgage Group, Troy, Michigan, made high six figures, sometimes more. But there was a tradeoff--they also worked 60-hour weeks, and seemingly had cell phones installed internally. They had to, because during every business day in 2002, mortgage lenders and their business partners closed roughly $10 billion of residential mortgage loans.

It has been said the mortgage and housing market saved the day for the economy last year. Recently Federal Reserve Chairman Alan Greenspan buttressed that observation when he told the Independent Community Bankers of America, "Last year was surely one of the most memorable years ever experienced by the home mortgage market." Such is the environment in which I pen this article, the 15th annual article in the Who's Who in Wholesale series.

For the past decade and a half, Wholesale Access, a Columbia, Maryland-based research, advisory and publishing company specializing in mortgage banking, has collected, compiled, examined and shared information about wholesale lending with Mortgage Banking's readers. This year, 25 wholesalers completed our survey.

Although we only surveyed prime market lenders, some home-equity and subprime loans undoubtedly leaked into the data. Though many prime lenders are now major subprime lenders, volume from subprime subsidiaries was excluded.

All firms listed in this article specialize in wholesale production, though many are also major retailers, Figure 1 alphabetically lists those included in the survey, along with their wholesale origination volumes for the last two years. The dollar amounts represent the volume of loans closed and funded.

Most wholesalers are owned by large regional and national banks. Six are owned by thrifts, two are subsidiaries of foreign banks. One is a publicly held mortgage company, another is a subsidiary of a publicly held insurance company, another is a subsidiary of a financial subsidiary of an industrial company and another is a subsidiary of a publicly held financial services conglomerate. It is a highly competitive market of firms. Only part of the growth of these firms is organic; much is built upon acquisitions.

Figure 2 ranks the firms by 2002 volume. The data indicates that total wholesale production was $1,075.4 billion for the 25 firms surveyed. That amount compares with $714.8 billion in the year earlier, and represents a 50 percent gain year-over-year. Wholesale Access estimates that total one-to-four-family originations were $2.5 billion last year, 22 percent higher than 2001's level.