While a mass recruitment of origination talent takes place throughout the mortgage industry, First Guaranty Mortgage Corp. is employing a hiring strategy of its own.
The McLean, Va.-based wholesale and retail lender is on a hiring spree. But instead of adding staff with the intent of boosting mortgage production, it’s doing so to address quality control, due diligence and underwriting of its mortgage origination line.
“2012 and 2013 will go down in mortgage history as the years of compliance and regulatory changes," says Chief Executive Andrew Peters. "It sets us up on the other side unscathed and ready to grow. I think a lot these companies that are just focusing on production could have a lot of issues when it comes to quality.”
First Guaranty recently added national training, underwriting and due diligence managers to put itself in a long-term position to recruit top mortgage origination talent. The bank also just partnered with New York-based Lenders Compliance Group to provide a compliance review of its entire origination process.
Companies such as HomeStreet (MHST), Walker & Dunlop (WD) and TD Bank are beefing up production by either hiring employees from companies that exited mortgage business (MetLife (MET)) or have disappeared altogether (Home Savings of America, where First Guaranty's new due diligence manager comes from).
For example, Dallas-based wholesale and retail mortgage lender Caliber Funding hired 300 former MetLife employees as it expands operations.
About 80% of First Guaranty's wholesale and retail lending is purchased-based. Its first quarter was one of the most profitable in the company’s 30-year history, says Peters, who expects their corresponding lending to grow over the next six to 12 months.
The hiring strategy is an attempt to strengthen oversight of First Guaranty’s due diligence of Correspondent’s Edge, a one-stop shop the company formed in August to house all of its related products.
“In the last six months, all the old players who used to be in wholesale are now opening up new wholesale shops and delving into correspondent and really trying to ramp up, creating more competition,” Peters says.
Correspondent lending is proving it may still have a heartbeat, as smaller lenders are lining up to enter the space in an effort to grab business that some larger commercial banks have recently decided they don't want. Many in the industry thought rule changes for mortgage brokers over the past couple years marked the endless deterioration of wholesale lending.
“I’ve always been a big proponent of mortgage brokers,” says Peters, who distinguished himself for the past 15 in wholesale. “I think brokers have gotten a bad wrap in terms of their reputation. They’re the core of the industry. It’s where borrowers go locally to get loan.”
Blamed by many for blowing-up the real estate market, the ranks of mortgage brokers have been cut to nearly a third and most are doing significantly less business as potential homeowners shy away from them in droves. Brokers made up 31% of all loans in 2005 to 11.4% at the end of 2010.