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Boardroom view.


We decided to poll some mortgage executives about some hot topics grabbing headlines of late, including surging refinance activity, banks pulling back warehouse lines and the seemingly endless trend of lenders moving into wholesale.

Surprisingly enough, we actually found some mortgage companies who are not doing wholesale production, and on top of that are aggressively expanding retail branch networks. A further surprise - we found some modest-sized mortgage companies who have not directly experienced problems with shrinking warehouse lines - although they were keenly aware that banks are skittish now about this area of their business. But on the topic of refinancing, everyone we talked to said refis are hot and heavy and it is causing more than normal runoff in servicing portfolios.

Fran Seabrook, executive vice president and chief operating officer at PaineWebber Mortgage Finance, Inc., Columbia, Maryland, said during the last few weeks in September and in early October his company saw a "definite spike in refi activity." He said that while at mid-year refinancings were running at about 15 percent of their overall application volume, the late September/early October spike in refinancings sent that percentage sharply upward. The more recent refinancing surge prompted the percentage of applications for refis to jump up to between 35 and 40 percent of applications.

As far as runoff goes, Seabrook said the refi surge in the spring did result in a heavier than normal runoff and although he hadn't seen the evidence yet of heavy runoff from the recent refinancing binge, he said, "I know it's coming."

"Normal runoff in a normal year" for PaineWebber Mortgage runs roughly at about 9 percent of the servicing portfolio due to payoffs and amortization of loans, he said. Back in the spring, that jumped up to a rate of roughly 15 percent for a month or two. Seabrook anticipates seeing similar pickup in runoff in the next couple of months.

On the credit crunch spilling over into tighter warehouse lines, Seabrook said that has not directly affected his operation, which is owned by the large brokerage firm. But he added, "What we have seen is that the banks have become more nitpicky. They are scrutinizing balance sheets and income statements more carefully. But we have a very clean balance sheet, so that hasn't affected us." However, Seabrook added, that because his mortgage company is "a pretty good-sized operation," it has not suffered as much as perhaps some smaller mortgage companies have in getting warehouse lines. "But I've got to believe some of the smaller mortgage bankers are suffering from that." PaineWebber Mortgage regularly provides its warehouse lenders with financials, but now the banks are asking more questions than they used to.

PaineWebber Mortgage services $3.3 billion in residential mortgages and $2.8 billion in commercial property loans, Seabrook said. He called the figure they anticipate for total origination volume this year "a moving target." But he estimated it looks like his company will originate "close to $600 million" this year - the budget called for around $520 million in total production.

PaineWebber does not have a wholesale operation currently, Seabrook said. The company used to have a small wholesale operation locally, in its core Mid-Atlantic markets. PaineWebber Mortgage is "studying going back into that on a small scale, but nothing is definite yet." Seabrook said his firm is "kind of old-fashioned that way" in terms of its ongoing heavy reliance on retail production. The company's philosophy is to originate and keep its own servicing, Seabrook said. They have been able to keep roughly 85-90 percent of the servicing from their production.

PaineWebber of late has been in an expansion mode, it just closed in early September on the purchase of a mortgage company based in Columbia, South Carolina, Seabrook said. The mortgage company was purchased with a servicing portfolio and branches - the parent of the company being sold was an "RTC casualty." PaineWebber Mortgage's expansion philosophy is to move into the Midwest and expand along the Eastern Seaboard and into the Southeast, Seabrook said. Another recent acquisition was a small origination-only mortgage operation based in Chicago - giving the company a base in the Midwest. Seabrook said the company will "continue to look at expansion opportunities." PaineWebber Mortgage's primary markets now are Maryland, New Jersey, Pennsylvania, Connecticut, New York, Illinois and South Carolina.

And talk about retail branch expansion plans - consider CTX Mortgage Company - the Dallas-based mortgage company owned by the country's largest homebuilding concern, Centex Corporation. Steve Deardorff, vice president of marketing, ran down the list of branches opened in the last twelve months. Totalling eleven in all, the new branches are in Fairfax, Virginia; Rockville, Severna Park and Owings Mills, Maryland; Charlotte, North Carolina; Naples and West Palm Beach, Florida; Bloomingdale, Illinois; Albuquerque, New Mexico; Phoenix, Arizona and Dallas, Texas.

Has the crunch on warehouse lines affected this mortgage company that sells all its servicing from its originations? "I'd say, not at all because of our parent - Centex Corporation - which is a very strong financial entity," Deardorff said. Part of the mortgage company's warehouse borrowing needs are met through the parent, but other warehouse funds come through traditional sizeable warehouse lines with banks.
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Article Details
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Title Annotation:developments in the mortgage banking business
Author:Hewitt, Janet Reilley
Publication:Mortgage Banking
Article Type:Column
Date:Oct 1, 1991
Previous Article:Economic trends.
Next Article:Taking stock.

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