One-stop financial shop is predicted for the industry

Real Estate Weekly, Jan 28, 1998 by Michael Landau

The mortgage market is entering a new era in which mortgage professionals will provide a more complete array of financial products.

Instead of "vanilla mortgages," mortgage professionals will accommodate borrowers seeking convenient "one-stop shopping" by offering much more efficiency and choice. In place of today's traditional lenders, we will see newer, agile and more responsive mortgage companies surface.

An example of this is Hampstead Financial, which established a new Commercial Lending Division in November to complement its already extensive activities in serving the residential mortgage market.

The new commercial division will finance large, multi-million dollar loans in both the urban and suburban markets. A small commercial loans program is also in the planning stages that will fund loans of $250,000 to $1.5 million.

Our debut in this new area will stand as a model of the agility and responsiveness of this new breed of mortgage companies. A $14.9 million loan - 85 percent of the purchase price for the purchasers of a 600-unit apartment building in Pennsylvania - was closed in only three weeks. Additionally, closing costs and legal fees were under $35,000 - extremely low for a deal this size.

The rash of recent consolidations among industry giants is based on the belief that combined size and technological prowess will lead to a larger market share of direct consumer originations, thereby - in principal - creating market efficiencies. The reality, however, is that borrowers will continue to seek the advice of their broker, attorney or other professional, who will in turn direct them to a mortgage professional in whom they have confidence. As a result, the more than 60 percent of mortgage originations currently rendered through the mortgage broker or smaller mortgage banker will not drastically change for the balance of the century.

The industry will see a new generation of mid- to larger-sized mortgage companies striving to meet the needs of these emerging trends. Growth-minded companies will appear to fill the void left by the consolidations of the mid-90's, providing greater efficiency, more personalized service and a willingness to develop the potential possessed by the smaller mortgage originators.

The advantages of being part of this "21st Century One Stop Financial Shop" is the "Three P's: Product, Profit and Positioning."

Companies will be offering a full array of loan types, including conforming, non-conforming, sub-prime and government and residential loans. Profits should increase because there would be more products to sell, less overhead and no yield spread premium to report.

The mortgage market is entering a new era. With the advent of the information superhighway, the next generation of financial customers will seek a one stop shop. Globalization of the market will enable mortgage professionals to provide an array of financial products and provide consumers with efficiency and choice.

(Michael Landau is president and CEO of Hampstead Financial Corporation, a national mortgage banking company based in Fort Lee, NJ.)