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Lending

Chasing Crumbs: PennyMac bets on call centers for more mortgage share

Touts superiority of consumer-direct lending to branch network

crumbs

PennyMac (PMT) is not a big fan of mortgage lending via mortgage branch network.

In fact, Chief Executive Officer Stanford Kurland, is giving a presentation at 2013 Barclays Global Financial Services Conference today to explain why he believes the future of PennyMac mortgage lending is in the direct-to-consumer model.

In the presentation he explains his belief that call centers are more efficient and can act quicker on corporate-directed leads. Furthermore, according to the presentation provided to the Securities & Exchange Commission, the centralized environment makes for much greater control. As long as they keep up with the research and development, Kurland states, they can remain above the competition.

Admittedly, mortgage lending is suffering in this environment of recent rate increases. Kurland believes this actually helps his company position itself better, considering its established national platform. In what was once a $3 trillion market in 2006, mortgage originations are now less than a third of that, and expected to get 30% smaller.

And, it's part of a larger discussion currently consumming the mortgage lending world.

Commentator Rob Chrisman touched on the issue in an email to the mortgage lending space this morning.

"Large banks, and many smaller ones, have their branch network, union business channels, wealth management divisions, Realtor services, builder connections, and so on - definitely a multi-pronged approach," he wrote.

"Many consumers, however, are suspicious of the large banks, and are much more comfortable working with mortgage brokers and bankers who have made it known that borrowers have more options by using them, and may offer faster processing times," he said.

PennyMac will look to capitalize on this homeowner weariness of banks. PennyMac is already the largest nonbank correspondent lender and will also expand in this area, along with continued purchases of mortgage servicing rights. Further, distressed whole loans purchases increased to $929 million in the third quarter, compared to less than $400 million last year.

Things are good at the firm. At least as good as can be expected in today's market. The company recently dealt with an uber-critical piece in the New York Times. And year-to-date the stock is down more than 20% according to the HW30, an equity index of companies impacting the housing economy.

Still, PennyMac posted a second-quarter profit of $48.2 million as the firm gained traction from a 6% quarterly jump in mortgage banking revenue and benefited from growing servicing and loan production activity.

The firm, which launched its initial public offering in May, also reported revenue of $110.8 million. Net income attributable to common shareholders for the post-IPO period reached $2.8 million, or 22 cents a share.

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