First Priority Financial Corporation, a privately held retail mortgage origination firm (1,000 loan originators strong) has announced the intended acquisition of Austin Perry Financial Corporation, a privately held residential wholesale mortgage banker based in Santa Rosa, Calif. While terms of the agreement were not disclosed, the companies expect to complete the transaction by year-end with full funding integration by Q1, 2010.
Funding over 10,000 loans a year in residential mortgages through a unique, ultra low margin, high efficiency business model, First Priority Financial was one of few companies surviving the industry meltdown without posting any losses or going through a single layoff. Similarly, Austin Perry has earned a reputation as a cost and customer service leader in the wholesale mortgage banking arena with a similar approach to the market, quality and cost control, Austin Perry was also among the elite few who remained financially strong while the majority of their mortgage banking peers floundered or barely hung on.
“Our success has always been based on doing what’s best for the consumer. This means operating on thin margins and delivering greater funding choices and flexibility than the rest of the industry and offering unprecedented work-flow efficiencies for originators,” explained Tim Kearns, CEO of First Priority Financial. “This mindset will never change for us and was also a driving force behind the decision to make this acquisition. The motivation to bank loans in the past was purely profit margin based and not client facing. So we stuck to brokering because it was mathematically best for our clients and loan producers. The changing lending environment makes it prudent to expand and refine banking delivery and continuing to improve upon an already fantastic brokerage channel to best serve our borrowers needs.”
When asked about the acquisition, Kearns stated that building a banking division internally is the norm but is too often fraught with growing pains for which the consumer and loan producers would ultimately pay the price. That’s why we decided to acquire an existing platform. “Choosing Austin Perry was the easy part,” said Kearns. “We have our loan originators rate the lender on every transaction. With over 100,000 transactions funded through virtually every lending source in America, we have the most thorough lender rankings in existence and Austin Perry has always been one of the top lenders.”
Kearns says that the company will take the same low margin, high-efficiency approach to banking that made it the leading broker in the nation. He makes it abundantly clear that he still believes the broker channel is frequently the best option for the end consumer and will continue to be so for the foreseeable future.. For that reason, the company will continue to focus on expanding and refining the brokerage channel in tandem with the internal banking division. This runs counter to the traditional “banker mentality,” which discourages loan originators from brokering loans.
“We are excited to begin integrating the teams and scaling the funding operation to accommodate the expected increase in volume,” said Steve Weaver, president of Austin Perry. “The cultural fit between the two companies is hard to describe, both entities have such a strong commitment to their people and clients; It’s not something you see much anymore.”
“Our goal has never changed. We’re creating the perfect mortgage company,” said Kearns. “One with an aggressively priced banking platform coupled with a loan officer’s ability to broker without bias, utilizing the most efficient paperless workflow solution in the industry."
The bottom line comes down to lowering costs and increasing options for the end consumer says Kearns. First Priority has successfully operated on gross margins that are about a quarter of the industry norm. Overlaying the same business model on the mortgage banking side of the business should result in even further savings to consumers and mortgage originators as well as smoother transactions.
For more information, visit www.lendscape.com.
