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Stonegate Exec: Distributed retail lending ‘is small but important’

Returns to 'original footprint'

As it heads into the rest of this year and 2017, Stonegate Mortgage said it is realigning its distributed retail lending division to what its core was when the lender first started.  

Steve Landes, Stonegate Mortgage executive vice president, national director of sales and president of NattyMac, talked in-depth about the lender’s plans for distributed retail lending in a follow-up interview after the lender’s fourth-quarter earnings.  

During the company’s fourth-quarter investor call, Stonegate said it had already closed 63 locations, with 19 still open and fully supported well into the future.

Jim Smith, president and chief operating officer of Stonegate, said on the call, "We remained focused during the quarter on optimizing our retail distributed branch structure to maximize shareholder value. We had 19 locations at the end of December, primarily throughout the Midwest, after closing or selling a significant portion of our branch locations during the third and fourth quarters."

"Distributed retail branches represent 5% of our annual production. It’s small but important. This is very strategic in nature, going back to what our core was when we first started the business. Stonegate started with one retail branch in Indianapolis, Indiana. We are going back to that original footprint where we have the longest relationships and longest connections,” Landes said in the follow-up interview.

He explained that while Stonegate has added a few branches, what remains are the most profitable branches that produce the highest results with the lowest cost to originate.

“We want to maximize the chairs we have in all those spaces before we go back and do any growth,” he said. “Stonegate wants to grow that business from 5% to 10% or 12% annual production in 2017.”

Currently, Stonegate lends in every state except New York and Hawaii, and it operates distributed retail branches in Indiana, Ohio, Missouri, Kansas and Texas.

Landes did note that opening a new branch is not completely out of the question. “If we are presented with a significant opportunity, we would definitely consider it,” he said. 

The majority of Stonegate’s production comes from third-party origination and that is dealing with wholesale and correspondent clients, he explained.

“There is also 10% from the call center, which is currently bigger than distributed retail,” Landes said. “It is expensive to grow brick-and-mortar, and the economics are very critical to long-term success.”

Looking ahead, Landes said, “Every company has a different strategy. For us, it is to keep this core group because you never want to be out of a channel.”

However, right now, “Stonegate sees the path forward is to grow our TPO channel," he said.

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