Stonegate Mortgage is ensuring its customers — small- to mid-size correspondents — have access to liquidity during a time of when many nonbank warehouse lenders are disappearing.
The Indianapolis-based independently owned mortgage lender and servicer is growing rapidly. It just acquired warehouse lender NattyMac from Guggenheim Partners. The financial terms of the deal were not disclosed.
“There’s been an overall general lack of liquidity for those small- to mid-market correspondent lenders,” Stonegate Chief Executive Jim Cutillo says. “We’ll be able to provide funding for those loans and then position ourselves to acquire the loan and retain the servicing, which is really our overarching strategy.”
Stonegate’s revenues year-to-date hover 340% above 2011, while its servicing portfolio ballooned 235%, led by its correspondent channel, which in that period has grown 519% over 2011.
Three channels make up the company’s origination platform: a direct-to-consumer retail channel; a wholesale channel that buys loans form mortgage brokers; and a correspondent channel that buys loans from independent mortgage bankers.
The contracting number of nonbank warehouse lenders partly attracted Cutillo to St. Petersburg, Fla.-based NattyMac, which began in 2004 and is led by Chief Operating Officer John VanDolah.
“If you’re an independent correspondent and you require warehouse funding to fund your loans, I think you’d have to be concerned about the small number of nonbank warehouse lenders because the banks have been through great challenging times over the past five years,” Cutillo says. “There’s not a lot of liquidity there for them to fund loans on the warehouse side because of regulation.”
Cutillo says Basel III implementations, which puts more pressure on bank balance sheets, will curb warehouse lending even more.
In March, Stonegate announced plans to expand its third party originations and servicing portfolio after completing a private equity transaction with Long Ridge Equity Partners in, a New York-based private investment firm. And it continues to expand geographically from the 30 states it's licensed to boost market share.
The purchase of NattyMac's warehouse platform and its processes adds momentum to the Stonegate's business strategy, which involves creating an integrated warehouse and loan sale solution for its clients and expanding the platform by offering servicing flow transactions for Fannie Mae-, Freddie Mac- and Ginnie Mae-eligible loans.
“We didn’t want to start from scratch, so we thought it was a better play to acquire an existing entity that had experience and a good team," Cutillo says.