American Home Mortgage’s Correspondent Lending Division off to fast start: A one-year reviewMortgagePress.comAmerican Home Mortgage, American Brokers Conduit, Progressive Payment, 5+5 Monthly Treasury Average
Rick Pishalski is an executive vice president of the
Correspondent Lending Division of American Home Mortgage Investment
Corporation, a publicly held real estate investment trust
headquartered in Melville, N.Y. American Home Mortgage Investment
Corporation started their Correspondent Lending Division at the
start of the third quarter of 2005 after hiring Rick Pishalski. For
more information on American Home Mortgages Correspondent Lending
Division, please visit www.ahmcd.com.
The Mortgage Press recently sat down with Rick Pishalski to get
an update on how American Home Mortgages Correspondent Lending
Division has done during its first year of operation and what is in
store for the future.
Q: Can you describe the rapid growth of the
correspondent lending channel at American Home
Mortgage?
A: We opened doors at the beginning of third quarter 2005 with no
customers and five account executives. We funded our first loan in
July 2005 and funded a total of $1 billion during our seventh month
of operations. Through the first half of this year, we had grown
our channel to nine account executives, two operations centers and
about 300 customers. Now, by adding seven new account executives
from a thrift that was exiting the correspondent business, we have
16 account executives and 480 approved sellers, giving us complete
national coverage and a platform with which to significantly
increase our business over the next six or seven months.
Q: What is the business model you put in place when you
joined a year ago to establish and build the correspondent lending
channel?
A: Our objective is to enable our correspondent lending partners to
operate more efficiently, add a service advantage and build a more
profitable modela model based on service and speed, and not just
volume and price. The foundation of our model is built on what we
call the four PsProduct, Process, Price and People. We believe we
can deliver on these value propositions because we have a better
understanding of the mortgage business and a commitment to being a
true partner with each one of our correspondent lending
partners.
Let me take a moment to touch on the last PPeople. In virtually
every case, our peopleour account executives (AEs)have been
customers and consumers of the products they are now offering as
AEs. Their experience spans a wide range of financial institutions,
such as savings and loans, mortgage banks, credit unions, community
banks and the like, so they have a deep understanding as to the
types of products and services their correspondents prefer. While
your products, prices and processes are all indispensable for a
successful correspondent lending channel, your people and the
relationships they continue to build in the market determine your
ultimate success. I believe strongly that we have those people.
Q: If you have the right people in place, are there
other challenges that you anticipate in building the correspondent
lending channel?
A: An increasing interest rate environment will decrease or
flat-line the amount of overall business that is available, which
will make competing for it a little bit tougher. However, with the
tools that we have available to us, the excellent quality of our
account executives, our innovative products and the support of the
best executive management team in the industry, we expect to
continue to grow the channel counter to industry trends.
Q: How do the correspondent lending channel complement
American Homes retail channel and the wholesale division, American
Brokers Conduit?
A: The correspondent channel leverages the existing internal
resources of American Home Mortgage and allows the cost of those
resources to be spread out over a much larger group of loans. The
same technology and efforts that go into product development,
underwriting and secondary marketing are also used for the
correspondent channel.
Q: How did your latest growth opportunity present
itself?
A: At American Home Mortgage, we are in the market on a consistent
basis for the best people we can find for any channelnot just
correspondent. When we heard that a large thrift was discontinuing
its channel, we invited a group of account executives to visit our
corporate office and review what we had to offer. Our entire
executive team was involved in this recruitment. These account
executives were recruited very heavily by other correspondent
lenders, but at the end of the day, we won them over.
Q: How will this successful recruitment complement your
overall goals? A: Our goal is to become one of the
industry leaders in the correspondent business, similar to what we
have done in the retail and wholesale channels. By adding these
experienced account executives, it helps us reach that goal a
little sooner. They are all seasoned industry veterans, who bring
with them a significant book of business that will grow our
customer base that much quicker. We are applying the same resources
and strategies that are being used in the other two successful
American Home Mortgage channels. Our business continues to grow as
the industry shrinks.
Q: What is the benefit of bringing over so many account
executives from the same shop?
A: Clearly, the benefit is that this team has worked together for a
number of years and has an excellent working relationship with one
another. Thus, their combined strength is more than the sum of each
player. And of course, its easier to train a large group than to
train each new account executive individually. In the short time
theyve been with us, theyve been negotiating the learning curve
smoothly and comfortably.
Q: What are the resources, products and strategies that
your new account found so compelling?
A: We offer a compelling value proposition that is recognized as
the type and kind of support that is required to be successful in
the correspondent business. Were employing the same strategy that
has worked in our other channels. We offer a high level of customer
service, competitively positioned programs and technology that
works to support our sales teams and customers. Moreover, weve made
a total commitment to this channel and have an understanding of the
business that enables us to grow and expand much more rapidly than
other players. We are solely focused on one objectivethe mortgage
lending business. The fact that we are a real estate investment
trust that can react quicker than other players in the industry
gives us a competitive edge in what we do. Our superb marketing
department also gets us in front of our customers with outstanding
support.
Q: How will the new AEs customers benefit from joining
American Homes correspondent lending channel?
A: Their correspondent customers will receive better products, as
well as a greater variety of products to choose from. Moreover,
theyll be working with a correspondent lender truly committed to
them and their business. Our approach is that correspondent lending
is not a one-time secondary marketing transaction, but a
partnership, where we are committed to their success. Foremost, our
customers know that American Home Mortgage has made a tremendous
commitment to this channel, on an equal footing with the retail
channel and American Brokers Conduit, our wholesale division. At a
time when major mortgage lenders are cutting operations, we are
rapidly expanding our correspondent channel. Our stability and
growth model should send a very positive signal to the
correspondent market.
Q: Which products are your customers most enthusiastic
about?
A: Two of our newest and most innovative products are the
Progressive Payment and the 5+5 Monthly Treasury Average
(MTA).
Our new Progressive Payment Saver is similar to a 2-1 buy-down, but
with a new twist. It is an interest-only loan that provides
borrowers with a two percent lower rate and payment the first year
and one percent lower rate and payment the second year, funded by a
three percent financed discount that is added to the loan amount.
Although the buy-downs end after the second year, borrowers still
receive payment protection because they continue to pay only the
interest on their loan amount through the first 10 years. Over the
remaining 20 years of the loan amount, principal and interest are
fully amortized. With the Progressive Payment Saver, there is no
negative amortization, no out-of-pocket costs to finance the
buy-downs and no mortgage insurance. Moreover, the borrower
qualifies at the first-year bought-down interest-only rate, so
qualifying is a snap.
Our new 5+5 MTA combines all of the payment options of the
popular MTA option adjustable-rate mortgages (ARMs) with the
stability and security of a fixed payment rate for the first five
years. It appeals to borrowers uncomfortable with fluctuating
monthly payments associated with most option ARM products. The
interest-only option and minimum payment option are based on a
fixed rate that does not recast during the first five years of the
loan. If the minimum monthly payment option is selected every time
for the first five years, deferred interest will occur, but
borrowers know exactly what this amount will be. Fifteen- and
30-year fixed amortization payments can also be made. Whichever
monthly payment borrowers elect, it is always their choice.
Q: What size range of customers are you
serving?
A: Our sales teams have been reaching out to correspondents whose
net worth ranges from about $500,000 to $10 million and above. The
majority of American Home Mortgages business will gravitate toward
the middle range. Our breadth of business ranges across a broad
range of financial institutions, such as thrifts, mortgage banks,
credit unions and community banks.
Q: Weve talked about your people and products. What
about that other key P called Process?
A: Were able to leverage American Home Mortgages reputation for
operational excellence, guiding loans through their four major
touch points. From registering correspondents and locking in loan
prices to underwriting and purchasing loans, our commitment to
excellence and quality ensures were meeting the highest standards
and requirements. Let me add that we havent built this
infrastructure in a vacuum. From the start, we have leveraged the
vast resources of our successful retail and wholesale channels. In
fact, as the newest channel, weve been able to cherry-pick the very
best products, services, operations, marketing and management
talent that our company has to offer. Thats why weve been able to
grow as quickly as we have. We didnt have to experience the normal
growing pains associated with such an ambitious undertaking.
Q: Youve come a long way in a short time. Where are you
headed?
A: Looking forward, our goal is to become a top 10 player in the
correspondent industry and pull our weight right alongside our
other two channels. One-third of the total American Home Mortgage
business is a big goal, but we have the kind of people, products,
pricing and process to make this happen.
Q: That puts a lot on your plate. Will that leave room
for any outside interests? If so, what are they?
A: A few years ago, I learned how to ride a motorcycle and am now
the proud owner of two Harley-Davidsons. In addition, I am an avid
bicycle enthusiast. That takes care of the summer months. In
winter, I ski. I have skied at over 45 different resorts and
occasionally heli-ski in British Columbia.
