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 down with Scott Henley, senior vice president of correspondent lending at Gateway Mortgage Group, to discuss how the lender maintains a personable rapport with its clients while still growing.
HousingWire: Who is your target customer, and why are they a good fit for your business model?
Henley: Initially, we targeted banks, credit unions and independent mortgage bankers who sell their loans on a best efforts basis. However, we will soon be offering a mandatory delivery option which will allow us to serve additional lenders.
HW: How does lending fit into your overall business strategy? In other words, what other lending divisions do you have, i.e. warehouse, wholesale, etc.?
Henley: In addition to the correspondent lending division, Gateway also has a strong retail footprint with 45 branches in 16 states. We service our loans in-house, and also offer default and specialty servicing to other lenders.
HW: What do you see as the greatest challenge(s) your clients face today?
Henley: Managing their profitability in a shrinking-margin environment while juggling all of the current and proposed regulations adds layers of complexity onto an already challenging business.
HW: What made your firm decide to ramp up its correspondent division?
Henley: Gateway saw an opportunity to enter the correspondent space in late 2011 as some of the nation’s larger firms were exiting the channel. We want to increase the size of our servicing portfolio and buying loans from correspondent clients is an efficient way to achieve that goal.
HW: How broad of a market do you serve today and what does the next 12 months look like from an expansion standpoint?
Henley: Today, our correspondent clients are located in ten different states, but we expect that we will be doing business in most states in the coming years.
HW: 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?
Henley: Technology and service. We are working on a new correspondent system that should be rolled out in early 2014. We are also very high-touch with our customers. Our clients know us, and we know them.
HW: With the increased competition in the correspondent arena, what do you think is the single most common mistake you see other correspondents making?
Henley: Ramping up too quickly. Some have hired an army of account executives and they initially bring in more volume than their operational infrastructure can handle, which leads to poor service levels.
HW: Tell us about the team you are building and who sits at the core of the operation?
Henley: We were fortunate, because from day one we were able to hire personnel with a lot of correspondent lending experience. Our operations manager has extensive expertise in correspondent lending. In addition to their correspondent sales manager, each client has a client liaison who helps expedite their loans through the purchase process.
HW: 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?
Henley: Spreads will continue to narrow due to more correspondent buyers competing for fewer loans in a rising-rate environment. It is a cyclical business, and this is just part of the cycle. We will offset the impact of rising rates by continuing to add more clients from which we can buy more loans.
HW: 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.?
Henley: We have been preparing for the new rules for quite a while. We have beefed up our compliance team and will leverage technology that will test for compliance with the new regulations.
