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 with Amy Brandt from Prospect Correspondent Lending to learn about the firm's recent expansion. 

1. Who is your target customer and why are they a good fit for your business model?

Amy Brandt: Our target customers can vary in size and geography but they all share a strong industry background and commitment to quality and customer service. Our business model is to provide value for these lenders and stable source of liquidity. As we grow, we plan to continue to seek new ways to enhance our service to this customer base. There is a quite a bit of pressure on the small to mid-size players from a regulatory, compliance perspective and it is through successful partnerships that they will flourish.

2. How does lending fit into your overall business strategy? In other words, what other lending divisions do you have, i.e. warehouse, wholesale, etc.?

Brandt: Prospect Mortgage is one of the nation's leading independent residential retail mortgage lenders with a heavy focus on the purchase segment of the market. With a nationwide footprint, direct lending and substantial portfolio of owned MSR, Prospect is in a fantastic position to continue its growth into other segments of the industry. The most logical expansion was into correspondent lending, where we believe we can add tremendous value in terms of service, price and stability to our client-partners. This is why we launched our correspondent division in March and are looking forward to significant expansion. We will continue to look for opportunities for growth and value creation.

3. What do you see as the greatest challenge(s) your clients face today?

Brandt: Our clients are facing the realities of market volatility, rate movements and increased regulation, which all increase operational complexities. The level of sophistication required to run a mortgage company has never been greater.  This means that all the players are managing the cost of this sophistication, while still looking for ways to optimize quality, efficiency and improve customer service. Candidly, as an industry, we will have to lean on each other to find good partners and best practices.

4. How broad of a market do you serve today and what does the next 12 months look like from an expansion standpoint?

Brandt: Correspondent was launched relatively recently at Prospect, there is considerable opportunity for us to expand as we pursue our vision for the unit. Currently, we have the ability to purchase loans in 48 states and are pursuing a nationwide footprint. We have a sales presence in most major markets. Our expansion goals are controlled, but aggressive. Our loan fulfillment centers are in California and Texas to optimize time zone coverage and service levels.

5. 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?

Brandt: Client-dedicated support team, flexibility and a seamless process are the keys to our success. Our robust, easy-to-use web platform incorporates innovative technology for flexible delivery options, streamlined purchase processes for fast funding, and a streamlined quality assurance and underwriting reviews to mitigate risk. The in-house operations team and dedicated client teams offer complete client integration training and customizable support.

Finally, we provide a strong product set with consistent and easy to understand underwriting and document requirements.

6. With the increased competition in the correspondent arena, what do you think is the single most common mistake you see other correspondents making?

Brandt: With increased competition, we will likely see intense price competition with some irrationality. Our goal is to stay true to our mission, which is to originate and build a customer-focused platform that builds loyalty by delivering high levels of service and continually adding new services and products at a cost structure that will allow us to grow. The long-term winners will be the aggregators with strong capital positions and a long-term focus.   

7. Tell us about the team you are building and who sits at the core of the operation?

Brandt: The mortgage business has always been relationship and talent driven. Our production team is client-centric, pairing field representatives with internal sales coordinators to ensure a smooth submission/approval/purchase process.  The business starts in the field, so we have hired experienced, proven account representatives with a track record of quality relationships and production. The operations team is lead by Emily Shapiro, Senior Vice President Correspondent Lending and Servicing. Throughout her career, Mrs. Shapiro has led finance, risk, analytics, servicing oversight, and mortgage origination organizations, personally managing complex transactions for major banks and GSEs. The sales team is lead by Gian Russo, Vice President of Correspondent Production Leader who has more than twenty years of industry sales experience.

8. 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?

Brandt: The immediate impact of the current rate environments has been to put pressure on the hedging strategies of lenders and has created some short-term pressures.  The longer-term pressure comes in the form of a decrease in refinance activity. Correspondent lenders and reps that have focused on refinance shops are going to have difficulty in retooling for purchase business and will feel the pain of excess capacity. It takes a focused discipline to successfully manage capacity and volume in a rising rate environment. Those with market experience have seen many cycles and know what it takes—these are our target customers.

9. 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.?

Brandt: Compliance has always been a top priority for Prospect. Given the shifting regulatory environment of the industry, not only do companies need to have an adaptable and robust compliance processes and infrastructure, but they also need to make compliance a part of the core culture of the organization. 

As a correspondent loan buyer, Prospect has embedded critical risk management techniques and systems into its operations. We believe that risk management starts with a quality, in-depth assessment of those we do business with. Hence, our correspondent approval and ongoing monitoring process is highly developed and is supplemented with a risk based/weighted approach to how we look at products, transactions and sub-channel of delivery.

Where possible we will incorporate into our technology solutions as many checks and balances as are reasonable but we understand that, in the end, we as people are responsible for creating a compliant correspondent lending environment.

bswanson@housingwire.com