GreenPoint's nonconforming Niche.

Author:Lutz, Warren
Position:Cover Report: Secondary Market - GreenPoint Mortgage Corp. - Cover Story

Novato, California-based GreenPoint Mortgage did a whopping $26 billion worth of lending last year. That is a huge amount for a nonconforming player, and the mortgage company's executives say that is just the beginning.

THE REFINANCING MARKET HAD BEEN GOOD TO NOVATO, CALIFORNIA-BASED GreenPoint Mortgage. So good that, when the market showed signs of decline, President and Chief Executive Officer S.A. Ibrahim and two of his colleagues sat down to eat at a Chinese restaurant and started brainstorming new products.

In minutes, they had the outline of a new business scribbled onto a paper napkin: GreenPoint Express. Based on electronic loan deliveries, it would allow GreenPoint to deliver conforming loans at lower cost. In weeks, it was up and running. "That proved to me that we had the capacity in this company to start new businesses from scratch and run with them," Ibrahim says."

Things have been going like that for GreenPoint Mortgage, a division of New York-based GreenPoint Financial Corporation, which in the past five years has emerged as the mortgage industry's leading specialist in the nonconforming loan market. But while GreenPoint's bread and butter is its alternative-A and no-documentation lending business, it's no w targeting the prime and aforementioned jumbo markets--and virtually doubled its loan volume this past year as a result.

"What they want to do is be kind of a one-stop shop for mortgage brokers," says Scott Valentin, senior analyst, thrift research group, with Arlington, Virginia-based investment banking firm Friedman, Billings, Ramsey Group Inc. "They want a suite of products [so] they can sell them everything." Yet this company's fearless pursuit of uncharted waters does draw questions. Chief among them: How big can a niche market player get?

From coast to coast

According to company officials, GreenPoint Financial's roots go back to 1869 and a section of Brooklyn called Greenpoint, where large numbers of immigrants and blue-collar workers lived. As the area grew, local shopkeepers and small-business owners--many with little or no credit history--needed a bank and the ability to borrow money. GreenPoint Bank filled that role, providing loans with little or no income documentation and just an inspection of the borrower's assets.

GreenPoint Bank eventually became one of the largest thrifts in the New York City area and remained primarily a local institution until 1994, when the company was taken public. That same year it purchased 60 New York-area retail branches from Home Savings of America FSB, Irwindale, California, as well as BarclaysAmerican Mortgage Corporation, Charlotte, North Carolina, a national no-doc mortgage company. In 1997, it bought the Columbus, Georgia-based servicing operations of Riverside, Rhode Island-based Citizens Mortgage Corporation, leading up to the 1999 purchase of Headlands Mortgage Co., Larkspur, California.

Worth $473 million, the Headlands deal was pivotal by all accounts. It gave GreenPoint entry to both the western states and the alt-A market, which Headlands had built up to $6 billion in volume. What's more, Headlands had developed a quality secondary shop that would later prove essential for GreenPoint's plans for growth. And it was the perfect companion to GreenPoint's no-doc business, thus bridging the gap between no-doc and agency loans. While the bulk of Headlands' business was in California, GreenPoint now had a presence on both coasts and set out to build a nationwide specialty powerhouse.

"The first charge we had was to create a blueprint that built on both companies," says Ibrahim, who moved his family from New York following the acquisition to become head of GreenPoint Mortgage. After taking the bulk of its business model from Headlands, GreenPoint "focused on making it seamless so no one cared who came from the Headlands side and the GreenPoint side," Ibrahim says. "We've created an entity that is very different, much more complex and much more profitable than those entities were, or could have become, on their own."

At the time in December 1998, the mortgage industry was booming. Housing prices were going up, mortgage rates reached epic lows and more homeowners were trading up to bigger homes--including self-employed...

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