Real Estate Mortgage Network Inc. (REMN) is a New Jersey-based mortgage company with a great deal of talent. Led by an experienced group of industry veterans that includes seven former corporate CEOs, the firm has integrated the knowledge of these proven leaders into a team poised to become one of the leading firms in the emerging mortgage industry. Thirty-six-year industry pioneer Peter Norden is the CEO and force behind REMN. By integrating talent from his past firms, from inside what was a regionally-focused retail operation and other top industry pros displaced in the aftermath of the crash, Norden has built a team as capable as any in the industry. According to Norden, “Basically, we have pooled all of our brains, talent and years of experience together with the idea to build what we consider to be one of the premiere mortgage banking entities in the country.” What is REMN hoping to build? Norden points to his recent past for a model—his former firm, Opteum Financial Services, is a diversified mortgage banking organization having successful retail, wholesale and correspondent channels. Norden explains, “That has been my model. My model is diversity, both from a channel perspective, as well as a geographical perspective.” Opteum did business in 48 states and Norden is expecting REMN to be a national player in all three channels as well. They are well on their way. “Talent wins games, but teamwork and intelligence wins championships.” —Michael Jordan Of course teamwork is essential for an organization with so many “star” players. Joe Amoroso, national director of sales for REMN’s wholesale operation put it this way, “We recognize what each one of us is good at, and are able to leverage that, as opposed to having wasted talent sitting on the bench.” As anyone who watched Michael Jordan can attest however that sometimes you have to give your stars the freedom to be creative on their own. Amoroso describes REMN’s team concept in a similar manner saying: “The culture here is very entrepreneurial, where our managers are empowered to make decisions relative to their area of expertise. This enables us to respond quickly to changes as they develop. It works great as long, as we all share the same goals and understand what we are trying to achieve here.” But there is far more to REMN than an experienced CEO and a group of proven partners and managers. There are more than 1,000 employees working together to build one of the leading mortgage companies in the post-crash era. Approximately 40 percent of the workforce has worked for CEO Norden or one of two other partners previously. This illustrates a loyalty that so many of REMN’s employees feel toward each other. When asked about this unusual atmosphere, Norden made it clear that he believed it to be one of the true strengths and attractions of the firm. He used words such as “family,” “personal,” “balance,” “help” and “security” to describe the working environment at REMN. In the ever-so-competitive mortgage marketplace, it takes more than simply talent to excel. At REMN, intelligence is also quite apparent. REMN’s experienced and observant leaders noticed an opportunity developing in their correspondent channel. Norden recalls: “Two years ago, my partners and I got together and we all felt that the correspondent lending portion of this industry was going to change dramatically. Largely due to Basel III accounting standards and the new regulations that were coming down on the banks—the five major banks in particular, who were buying most of the product in the country. We felt that most of the correspondents would get out of the business or at least scale back. So, we felt that it was necessary that we were well-capitalized, very liquid and had the ability to securitize directly into the agencies.” Beyond the correspondent channel, Norden and his talented team also saw the opportunity to build a strong financial foundation for their firm through the development of a servicing portfolio. Retaining servicing rights on approximately 90 percent of their $5-$6 billion annual loan production today and expecting to maintain that retention rate as their production doubles to $1 billion/month by mid-2013, REMN is poised to build a healthy portfolio. REMN’s goal is to reach $20-$25 billion in their servicing portfolio within three years. When they achieve these numbers, it will provide $50-$60 million per year in steady non-market based cash-flow and capital for the firm. Norden describes it as “… an opportunity to build a portfolio with lower risks, higher quality underwriting, low coupons and low prepayment risks.” All this opportunity-seizing requires more people and more resources. On the human capital front, Norden says that REMN has grown by hundreds of people in the last two year, and has plans for the number of employees to grow by hundreds more in the next 12 months. One of the locations that will house these new employees is the firm’s recently opened, state-of-the-art, operations center in Irvine, Calif. This facility will handle operations for both REMN’s western wholesale and national correspondent divisions. While more people are a necessity during boom times like we are currently seeing in the mortgage industry, they can quickly become a headache when production volumes fall. The coming event that we know will eventually arrive, when QE3,4 or 5 is discontinued or loses its effectiveness, it will mark the end of the refinance era. A special type of wisdom can often be found in those who not only see change coming, but are prepared to meet it head on. REMN is better-prepared than most for the end of the refinance era with purchase volume representing 62 percent of their overall production year-to-date. Norden wisely states it this way: “In every company that I have ever had or built in my career, we have always made sure that purchases were our priority and not refinances. I do not believe that you can build a true, long-term business based upon refinances. We view them as gravy. We view them as relatively easy transactions that you consummate and do so very profitably and at a very high-quality level. But, the reality is that you cannot build a business around it. Because once this refi bulge ends, there is going to be very little refinance activity going forward.” Norden sees a day of reckoning coming over the next two years for lenders that are too refinance-oriented. But in typical fashion, he sees a great opportunity to bring new talent and integrate them into a platform that is properly structured for long-term stability and success. Moreover, he also believes that firms that are relatively new to retaining servicing may struggle with the liabilities and obligations that accompany it. But again, he believes REMN is poised to pick up additional servicing portfolios from these unprepared firms. A sign of business savvy is to be aware of potential threats, to analyze them and to seek to mitigate their potential damage. REMN and Norden see threats in the unresolved regulatory overhaul the industry is facing. Some thoughts of Norden on this subject include: ►“I doubt that the federal government can successfully wind down Fannie and Freddie and eliminate them. If they did, I believe it would crush the housing market.” ►“I believe the government guarantee system has to stay in effect.” ►“Without a government guarantee private equity wouldn’t touch mortgage paper anywhere near where Fannie and Freddie’s yields are.” Talent, teamwork and intelligence—all three are present at REMN. Just as Michael Jordan managed to lead a diverse group of athletes to become hardworking, smart, multi-championship teams, Peter Norden and his partners, managers and employees have built a hard-working, intelligent mortgage banking organization that will likely make the most of the opportunities present in the industry today. Norden summed it up nicely: “After 36 years in the business, I can honestly say from my own perspective, that the opportunity to build a first-class, quality, professional mortgage banking operation where one can retain extremely high-quality servicing has never been better. I have never seen an opportunity like we are looking at today.” David J. Coster is senior editor of National Mortgage Professional Magazine. He may be reached by phone at (919) 559-2171 or e-mail [email protected].