Tech-fueled retail mortgage lender InstaMortgage has merged with mortgage broker shop All Cal Financial, a rare example of a top-performing brokerage switching channels.
Terms of the deal, which was announced on Tuesday, were not disclosed.
As part of the merger, Jim Black, the founder of All Cal, will become chief lending officer of InstaMortgage. Black, a licensed mortgage loan officer and broker, will also lead product development, tech partnerships and sales growth.
Merging with All Cal gets InstaMortgage much closer to local real estate partners during a period in which refis have dried up and the purchase market remains hot, said Shashank Shekhar, founder and CEO of InstaMortgage.
Formerly known as Arcus Lending, InstaMortgage originated about $800 million in volume last year and All Cal notched about $300 million in origination volume in 2021, Shekhar said. Black himself is a top producer, having originated about $192 million in mortgages in 2020, according to Scotsman Guide rankings.
“Jim also brings a lot of unique products that I think will be extremely valuable for our loan officers,” Shekhar said. “Now that we are licensed in 26 states, we can scale that pretty quickly. That means that they get more product options. That means that real estate agents that we work with, get to offer… bridge [loans] and trade-in mortgages, which seems to be the biggest need right now because of rising home prices. If you are somebody who’s living in a house and want to move to another home, that’s a pain right now given how mortgages are structured, because you have to qualify for two mortgages at the same time.”
With the merger, InstaMortgage has expanded to just over 125 people, still a far cry from the large IMBs that employ thousands of people.
The deal was struck after about eight months of talks, Shekhar told HousingWire.
Part of the appeal for Santa Ana-based All Cal was working with an entrepreneurial lender that controls its own technology and is deeply customer focused. InstaMortgage plans to roll out a proprietary end-to-end mortgage platform this year.
“As a brokerage, even if you have good technology, it’s really not yours – it’s the lender’s that you’re using,” Shekhar said, noting that some brokerages had to switch following the UWM ultimatum. “So, and that’s that’s how I started the conversation [with All Cal] – is that you really don’t own anything.”
Shekhar said InstaMortgage’s goal is to automate 50 to 70% of the overall mortgage process, which will enable them to achieve scale.
“Our plan is not to lay off people but as we drive growth, our people will be able to do more high-impact jobs because we’re using robotic process automation and OCR technology to be able to classify and read all the documents as they come in,” he said. “And then bots will be able to do all the low-end stuff…if you’re ordering flood certs or ordering home insurance, you don’t need a processor with 10 years experience doing all of that, which is what the industry does right now.”
Headquartered in San Jose, InstaMortgage in August was named to Inc. Magazine’s list of the 5,000 fastest growing companies in America in 2021.
With its technology platform in development, Shekhar said the company is looking to beef up its product mix and grow presence in its multiple markets. InstaMortgage currently offers conventional, FHA and VA products in-house through its retail LOs and only brokers out a small portion of loans: jumbos and non-QM. It will be adding reverse mortgages, bridge loans and trade-in mortgages through an exclusive partnership with another lender, Shekhar said.
All Cal will not be keeping relationships with large wholesale broker shops as part of the new arrangement.
Shekhar, himself a former top mortgage broker, dismissed the idea that All Cal’s loan officers lose independence by becoming retail LOs.
“Even as an IMB, we sell to 12-15 of the best-priced investors at the back end and the secondary. So technically, we are using all those options when we are pricing loans or when we are underwriting loans,” he said. “So when you say independent, you’re still independent. And it’s not as if we are saying that some mortgage has a guideline and that’s all the guidelines we do follow. We have zero overlays on any of the Fannie, Freddie, FHA guidelines or VA guidelines, which means you’re underwriting the same guideline as a UWM underwriter or Homepoint underwriter. And of course you get the access to the in-house underwriting team, in-house funding team, which gives you the flexibility especially in this purchase market to be able to address the customer and Realtor needs.”
As for what’s next, Shekhar said the merger with All Cal has already provided growth opportunities.
“After we announced the merger, three major teams across the U.S. reached out to me for a potential arrangement,” he said.