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, we sat down with Gabe Medrano, a regional sales executive for the correspondent lending division of NexBank, to learn how the lender does business the old-fashioned way with a modern twist.
HousingWire: Who is your target customer, and why are they a good fit for your business model?
Medrano: Our clients vary. We offer different products like warehouse lines. We purchase MSRs from other institutions. And, of course, we offer correspondent. From a correspondent perspective our typical clients originate $15 million to $75 million a month. We are very limber and you can call us direct, so no need to stay on hold for hours to get an answer to a question.
HW: How does lending fit into your overall business strategy? In other words, what other lending divisions do you have, i.e. warehouse, wholesale, etc.?
Medrano: We offer deposit management, warehouse lines, and wholesale in selected regions, but more importantly we do not play in the retail space. So we do not directly compete with our client's customers.
HW: What do you see as the greatest challenge(s) your clients face today?
Medrano: They are faced with market-rate risk, hedging correctly, and the ability to change quickly (refi to purchase).
HW: What made your firm decide to ramp up its correspondent division?
Medrano: It is a very interesting market to be in, especially with the right client. We are able to execute for clients and with continued growth you would see capital structures make a return.
HW: How broad of a market do you serve today and what does the next 12 months look like from an expansion standpoint?
Medrano: We lend in all 50 states.
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?
Medrano: Price, service, and execution. We believe in all these aspects. We are doing business the old-fashioned way with a modern twist.
HW: With the increased competition in the correspondent arena, what do you think is the single most common mistake you see other correspondents making?
Medrano: Service, service, service; and managing your cost of funds. If you are able to provide great service and keep your cost of funds low. Your clients will benefit!
HW: Tell us about the team you are building and who sits at the core of the operation?
Medrano: Our team brings a vast amount of experience. We work smarter not harder. We use technology to create efficiencies without sacrificing the personal touch you receive when doing business with NexBank.
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?
Medrano: I think they are going to minimize, especially with FHA cap coming in 2014. However, I also believe portfolio lenders like us will become more aggressive and offer additional programs to our clients. I believe the purchase market will begin to grow aggressively.
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, etc?
Medrano: If anything, I believe they will help us increase our business. We are very limber and easy to work with. Our clients are able to contact us directly to get answers to their questions. It's a little different if you are selling to the larger aggregators. Our technology and compliance areas are top notch. We have been in business since 1922 we believe we offer a great product and have a great interest in protecting ourselves and especially our clients.