Who are the NEW Builder Lenders?

Mortgage originations by the nation’s largest four banks fell 20.4% in 2011 to a combined $717 billion from $902 billion in 2010, according to Housing Wire analysis of the company’s financial statements. Excluding BofA, overall mortgage production among the big banks fell 6.3% in 2011. In 2011 Loan Production at Citigroup fell flat, while J P Morgan, Wells Fargo and BofA production fell hard from previous levels.  And to top things off, Metlife, who was making a play to become the next “Builder Lender”, announced they are out of the mortgage business and will close its mortgage doors over the next few months.

Not so long ago Wells Fargo, Countrywide, BofA, Washington Mutual, National City among others used to be key players in builder lending.  Their relationships with builders were solid and impermeable.  They offered joint ventures, marketing agreements, you name it; in exchange for the honor to be the builder’s lender of choice.  But now, they are all pretty much gone or ending relationships as we speak.  Metlife was the only large company making a big builder push recently and now they’re gone too.   Wells Fargo is still around but with a scattered builder focus.   Boy, have the times changed!  Many of the “builder teams” that closed billions of dollars in builder business are now all gone.  It appears the big lenders have bigger issues to deal with and builders don’t seem to be their priority anymore.

The interesting thing is, when the housing debacle began, the census in the business was small to mid-size mortgage bankers and brokers would fall by the wayside, cease to exist and the bigger giants and banks would take over the market.  Well, the opposite has proven true.  The giants are dropping like flies and smaller to mid-size bankers, that remain, are not only surviving, they are growing.  Why?  My thought is that they can outsmart the bigger banks, move faster, they are more efficient and have learned tricks to survival all these years.  They can sell off their mortgage securities in smaller quantities and they didn’t get stuck with so much junk in the portfolio.  All the while, they have discovered new business opportunities with builders that the bigger companies used to own.

In 2012 I am observing small to medium size firms stepping in and making lending arrangements with builders. These are opportunities they would have never had five or six years ago.  They are ecstatic to get the builder business and the volume. Even though Builder volume isn’t as much as it was in years past, it’s steady, dependable,  A+ business to have in your portfolio.

Some good reasons to work with small to mid-size mortgage companies are:

•            They usually have better operations platforms to process and fund builder business and mostly on a local level.  Many of the giants fulfilled out of regional or national centers, which is mostly a nightmare.

•            With a return to a first time homebuyers’ focus, lower home prices and higher FHA loan limits, it puts an extra premium on FHA/VA lending which has been the traditional strength of the small to mid-size players.

One more thing; even if you are a Builder with an “in house lender” located in another part of the country or who gives you mediocre service, make sure to have a secondary local lending arrangement that knows how to do builder business. Two reasons for this:  One, you don’t want your loans going to astray to different lenders, that can be a nightmare to track.  Two, having a secondary local lender will assure you capture the deals that fall through the cracks, declined deals and for those clients who want local service.  In this market, EVERY deal counts!

So when looking for a lender of choice, don’t skip over your local, small mid- size mortgage bankers.  They are capable of giving you great service in this market, where the giant’s seem to be falling fast.    

By Shirleen Von Hoffmann President of Home Builders Edge® and Vortex Sales Solutions®  ©2012