Embrace Home Loans Finds Time Is Right for Retail
Posted 09/29/2010 by Anonymous
Embrace Finds Time Is Right for Retail
Tuesday, September 28, 2010
By Brad Finkelstein (Article Link)
Embrace Home Loans had eyed entering the retail branch business for some time, the company’s founder said, and measured its opportunity in terms of its viability.
Dennis Hardiman, who is chief executive of the Newport, R.I.-based company, said that viability is measured as Embrace’s ability to come into the channel and compete favorably. Taking advantages of the changing marketplace in the post-boom era, Embrace adopted a branching strategy at the end of last summer and added 15 branches, its most recent being in Maitland, Fla., a suburb of Orlando, in June.
The company has been in business since 1983, and has been operating a direct-to-consumer business out of a centralized location in its first 16 years of existence.
In the years before the boom, before the growth of nonconforming products such as alt-A and nonprime, “margins were quite thin in terms of a retail model,” Hardiman explained, noting the view in the industry that originators did not make money in retail but did it to acquire servicing rights, which is where the economic value was.
Then there was the product expansion, which allowed for higher margins. But as a result “people got very aggressive trying to acquire retail capacity and they overpaid for it,” he continued, adding Embrace did not want to get into that battle.
Now there is a correction, and there is a different expectation for profitability. So, retail “has the potential to be a good earner, and we think we can compete because we think the marketplace is underserved. There has definitely been a contraction in terms of banks and independents in their presence on the retail side.
“We think some of our core competencies, some of our capabilities in and around marketing, sales training and sales process can allow to us have a competitive advantage and distinguish ourselves in the marketplace,” Hardiman said.
Embrace is attracting experienced mortgage personnel to its team. The Maitland branch has over 175 years of combined experience and many of its employees have worked together for at least 10 years.
In its direct business, Hardiman said one of the key competencies is marketing, and it has been able to bring that into the retail branching side of company.
Embrace’s marketing department has developed specific materials for the “variety of different ways in which retail originators like to originate,” he said. There is also a sales training program that is attractive to loan officers. This is done in the branches through what it calls “clinics,” he explained, occasional meetings of loan officers in and around a selling topic. This is also facilitated through the Internet. Embrace is working on implementing a contact relationship management system, which will give loan officers the ability to follow up with their contacts and use the company’s marketing materials in a seamless way; they will also be able to access training associated with a particular type of origination activity, Hardiman told this publication.
Another attraction for people to join the organization is its product offerings. Embrace is a direct Fannie Mae/Freddie Mac seller, a Ginnie Mae issuer offering FHA/VA products and it also offers community development and USDA Rural Development programs. Its capital markets group allows it to achieve competitive pricing in the secondary market, he noted. Embrace’s value proposition is that it brings a breadth of resources to the originator.
Embrace also has internal customer service measures such as measuring the performance of its underwriting staff’s efficiency in managing its loan officer community and the underwriting process.