S&L;’s Demise Is Mortgage Firm’s Gain : Lending: The company that emerged from the rubble of Imperial Savings is now the second-largest publicly owned mortgage banking firm in nation.
From the ashes of the Imperial Savings failure has risen American Residential Mortgage Corp., Imperial’s former mortgage banking subsidiary and now the second-largest publicly owned mortgage banking firm in the United States.
The San Diego-based company, which has been independent since 1990, originates loans in 48 branches in 18 states, then sells the loans in bundles to investors, retaining the rights to service the loans for a fee.
The company plans to grow quickly in coming years. From a loan-servicing portfolio totaling $8.4 billion June 30, the company believes it may expand through originations and purchases of servicing rights to as much as $25 billion five years from now.
To finance that growth, American Residential Mortgage went public in August with a successful, 3-million share stock offering that raised $39 million. In fact, nearly a dozen mortgage banking companies have gone public over the past year, said Gareth Plank, senior vice president and analyst with Mabon Securities in San Francisco.
As have other mortgage banking firms, American Residential Mortgage benefited from the savings and loan industry debacle. In reaction to the S & L failures, federal regulators tightened accounting procedures and boosted capital requirements to the point that it is unprofitable for banks and S & Ls to compete in certain areas of the mortgage business.
In fact, one of the big modes of growth for American Residential Mortgage and companies like it has been to buy mortgages that regulators have forced the S & Ls to rid themselves of.
Specialized companies such as American Residential Mortgage frequently can offer mortgages at lower cost because they operate more efficiently, passing that advantage on to borrowers in the form of lower mortgage rates, said Gary Gordon, a stock analyst with PaineWebber in New York.
Because of those competitive edges, such mortgage banking outfits are grabbing a bigger piece of the U.S. mortgage origination market, Plank said. Independent mortgage bankers last year originated more than 50% of the $800 billion in mortgages taken out, contrasted with 22% of the $134-billion market in 1980, Plank said.
However, he struck a cautionary note by pointing out that American Residential Mortgage and other mortgage bankers are benefiting from the current “refinancing craze” that has been spurred by the low mortgage rates now available.
When rates bounce back up, new loan origination volume is bound to recede, Plank said. By that time, the mortgage banking market may be so crowded with new players that profits will be more difficult to turn.
PaineWebber’s Gordon agreed: “As soon as the refinancing boom ends, the volume will slow a lot, no question. If business slows, then competition gets tougher, so there is a chance there could be nasty competition.”
If the pattern for the first half of the year holds up, American Residential Mortgage will originate more than $4 billion in mortgages this year, the second-highest loan-origination volume of any non-bank, non-S & L mortgage banker in the country, Chairman and Chief Executive John M. Robbins said Monday.
The company ranks 23rd nationwide among loan originators if banks and S & Ls are included in the rankings.
The company started out in 1983 as a subsidiary of Imperial Corp. of America, the parent of Imperial Savings. ICA sold the mortgage unit to First Nationwide Savings of San Francisco in 1988, the year before ICA failed--in part because of its misguided foray into junk-bond investments and away from bread-and-butter operations such as mortgage origination.
In 1990, a management group that included Robbins, Executive Vice President James P. Gilcrest and Vice Chairman Matthew Shevlin bought the company from First Nationwide.
Approximately 300 of its 1,000 employees work in the company’s corporate offices on Torrey Pines Mesa.
