Friday Funding is a HousingWire web series profiling the lending segment in depth, and highlighting the operations and the people that make this sector tick. In the latest installment of Friday Funding, we sit down with Terri Davis, senior vice president of the correspondent channel with CMG Financial, to learn how they fill the aggregator void and plan to launch a jumbo channel.
HousingWire: Who is your target customer and why are they a good fit for your business model?
Davis: We provide a competitive advantage to mid-size customers by adhering strongly to agency guidelines and applying very few overlays. We offer an aggressive best-efforts price and an optional bulk delivery process. Lenders enjoy working with our seasoned back-office team, where experience and service join to exceed customer expectations.
HW: How does lending fit into your overall business strategy? In other words, what other lending divisions do you have, i.e. warehouse, wholesale, ect.?
Davis: CMG Financial has been originating mortgages for twenty years. Like many of our customers, we grew from broker to banker and continue to grow and diversify our business channels. Lending through our retail, wholesale, affinity and correspondents channels is our core business.
HW: What do you see as the greatest challenge(s) your clients face today?
Davis: Our customers frequently reference regulatory reform and the ambiguity of the future of the secondary market as their greatest challenges. As rates rise, more are also focused on diversifying their business and increasing purchase business.
HW: What made your firm decide to ramp up its correspondent division?
Davis: CMG is passionate about our industry and the survival of small and mid-size mortgage bankers. We saw the exit of several large aggregators as an opportunity to fulfill an important need for mortgage bankers. We are a direct lender with Fannie Mae, Freddie Mac and Ginnie Mae and we pass the benefits of our direct relationship on to our correspondents.
HW: How broad of a market do you serve today and what does the next 12 months look like from an expansion standpoint?
Davis: CMG is a national lender purchasing a full menu of fixed and adjustable rate conventional and government loan programs, including USDA. We will add a true jumbo program soon.
HW: There have been a lot of new entrants into the correspondent market over the last 12 months, what is going to be the key that helps your firm rise above the rest?
Davis: We truly understand our customers’ needs and believe we can elevate the level of partnership they expect from an investor by engaging them differently. We will essentially share any best practice or lesson learned from our own experience to help a customer succeed.
HW: Tell us about the team you are building and who sits at the core of the operation?
Davis: We have a team of seasoned mortgage professionals both in the field and in the operations center in San Ramon, Calif. We have been lucky to attract knowledgeable and passionate leaders. Sam Gomaa heads up the risk organization for Correspondent, bringing with her over thirty years of lending experience and she may have one of the original Direct Endorsement designations. Her knowledge of government lending is particularly vast. AJ George heads up our operations team and is a ten year CMG veteran and member of the Future Leaders of the MBA. I am also a veteran of our industry, having spent nineteen years at Fannie Mae and seven years at PMI before that. We continue to recruit exceptional regional sales executives who are well versed in the primary and secondary markets, and deliver extraordinary service every day.
HW: Correspondent lenders are paying a high premium for loans. What do you see happening to spreads over the next 12 months? How will rising rates impact your business?
Davis: Margins have definitely compressed and we have observed new entrants are aggressively priced as they enter the market. It seems likely that rising rates will reduce production volume and result in even more margin compression. CMG is well positioned to compete in this environment as we are efficient and nimble.
HW: Finally, with all the new compliance and regulation rules coming out, how will new compliance rules impact your business? What are you doing to stay on top of compliance, i.e. technology, new software, ect.?
Davis: CMG is very fortunate to have recruited Melissa Richards, JD and CMB, to be our chief legal and risk officer. Melissa’s depth of knowledge in regulatory rules and their application to our business is exceptional. Melissa has recruited a compliance management team and has overseen the implementation of several policies that position CMG well for the new regulatory environment.