Who's who in wholesale: a profile in growth.

Author:La Malfa, Tom
Position:Wholesale mortgage lenders - Cover Story

Wholesale lenders continue to push volume levels toward the heavens. This growth side of the business brought in a whopping $212.8 billion in 1992. Last year's volume giant was Countrywide Funding--but this year, Countrywide is neck and neck with wholesale powerhouse Prudential.

EVERY YEAR FOR THE PAST SIX, OUR company, Wholesale Access, has gathered, analyzed and shared volume data on the production of wholesale loans with Mortgage Banking readers.

The purpose of this article is to examine the most recent data to determine what it suggests about current trends and developments in mortgage lending. Throughout the article, the terms "wholesale" and "wholesaling" are defined as purchased or acquired loans--loans not originated by the employees of the company purchasing or acquiring them.

Wholesale contrasts with direct, or retail, origination, where the person taking the loan application from the borrower and the people processing the loan are the funding lender's employees. So, if the person who took the application and began to process the loan is not an employee of the ultimate lender buying the loan, then it's wholesale.

Figure 1 lists alphabetically the 84 firms that Wholesale Access tracked for 1992 and 1993. The 1992 data represents actual dollars funded, while the 1993 volumes are projected figures. The column on the right shows the change from last year to this year. Wholesale activity by the 84 companies combined rose an estimated 27 percent as volume rose from $212.8 billion in 1992 to a projected $270.9 billion this year. (It will be considerably higher when the actual numbers for 1993 arrive.) Growth rates ranged from negative numbers to two-fold increases, reflecting projections made late in 1992 for the 1993 business year.

Figure 2 lists alphabetically the 84 firms with their 1992 wholesale volume. Individual volume amounts ranged from $200 million to $26.3 billion. The data includes purchases of service-released, closed and table-funded, residential first mortgage loans. Loans were acquired from originators individually, through flow delivery arrangements, or in groups, depending on the type of commitment extended to the originator by the wholesaler.

Table-funded loans are closed and sold individually against best-effort or mandatory delivery commitments. They close in the wholesaler's name with funds from its warehouse line. Closed loans are sold one at a time, through flow arrangements called assignments of trade (AOT), coissues and concurrent transfers, or in groups. Loans close in the originator's name. (See "Wholesale Commitments" in the September 1992 issue of Mortgage Banking for a detailed review of the various types of wholesale transactions.)

The dollar volumes in Figure 2 include loans produced using any of these secondary market transactions. Block or bulk servicing transfers were not included in the figures. These transactions were removed as they involve transfers of servicing, not loans.

When we collect each firm's production numbers, they are separated into table-funded (or concurrent-funded) and closed-loan categories. We compile the prior year's actual funded volume and the current year's projected funding volume as estimated by the management of the individual companies. In the case of companies regulated by the Securities and Exchange Commission, actual year-to-date volumes were compiled for the nine months through September and then annualized.

Obviously, Figure 2 does not include every wholesaler. Indeed, Wholesale Access has identified more than 400 firms that actively generate loans on a wholesale basis. Thus, no attempt is being made to provide an exhaustive listing of all the firms in the business. Our firm does that elsewhere.

Conspicuously absent from the figures are the three giant California-based thrifts--Home Savings of America, Great Western Mortgage and World Savings. Home Savings of TABULAR DATA OMITTED America is expected to inaugurate a wholesale program in early 1994, while Great Western recently set up its wholesale command/operating center in Texas. World Savings, on the other hand, incorporates wholesale production in the retail category. They claimed $6.5 billion in retail for 1992, and zero in the table-funded/mortgage-broker category. As a result, the company was not included in our roster, even though it most definitely is a wholesaler because it table funds loans from brokers. Several other firms do this as well. Noticeably absent from this article's rankings too, were Banc One Mortgage, TABULAR DATA OMITTED First Nationwide Mortgage, Firstar Mortgage, ITT Bowest, Keycorp Mortgage, Mellon Mortgage and Principal Financial Mortgage. They either asked not to be included or failed to respond to requests for data.

1992's largest firms

Figure 3 ranks the largest 50 wholesalers for 1992. To be included, a firm had to produce more than $1 billion last year. Thirty-two companies actually purchased $2 billion or more, while another fifteen chalked up volumes of $3 billion or better. Rank ordered by volume, the 15 largest wholesalers were: Countrywide Funding Corporation (Pasadena, California), Prudential Home Mortgage Company, Inc. (Clayton, Missouri), Fleet Mortgage Group (Providence, Rhode Island), Chemical Residential Mortgage (Worthington, Ohio), North American Mortgage Company (Santa Rosa, California), BancBoston Mortgage (Jacksonville, Florida), Norwest Mortgage, Inc. (Des Moines, Iowa), Commonwealth-United Mortgage (Houston, Texas), Plaza Funding (Santa Ana, California), GE Capital Mortgage Corporation (Raleigh, North Carolina), Express America Mortgage (Phoenix, Arizona), The Mortgage Authority (Bloomfield Hills, Michigan), Courtesy Funding (Riverside, California), New America Saving Bank (McLean, Virginia) and Loan America Financial Corporation (Miami Lakes, Florida).

Express America is the new name for WESAV's (or Western Savings Bank) wholesale operation. Similarly, The Mortgage Authority and Courtesy Funding are the wholesale divisions of Source One Mortgage and Directors Mortgage respectively. New America FSB was formerly known as The Franklin Group.

Gone from our prior lists are GMAC/RFC, RAC (Ryland Acceptance Corp.), Shearson Lehman Mortgage and...

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