Southeast Michigan's mortgage industry has been on a roll since last decade'shousing crash, grabbingmarket share from big out-of-statelenders who pulled backas some local companies stepped up. One of thelatest newcomers tothe business isafamiliar name in metro Detroit —although never beforeformortgages.
Peter Karmanos Jr. made his millionsco-founding and leading Compuware, the Detroit-basedmainframe software and services firm thatwas once Michigan's largest computer technology company. He officiallyretired in 2013and, still the owner ofthe NHL's Carolina Hurricanes,was inducted last year into the Hockey Hall of Fame. But now, at age 73, Karmanos has dived into the residential mortgage-lending business with a start-up company, Lenderful, that offershome mortgagesthrough the Internet.
"He's not the kind of guy who wants his feet to be standing still," said Harry Glanz, co-founder of Southfield-based Capital Mortgage Funding.
Based in downtown Birmingham, Lenderfulmarkets itself as anall-online mortgageplatformthat, on the surface,looks not unlike theRocket Mortgageserviceintroducedlate last year by Detroit-based Quicken Loans,theInternet-lending pioneerstartedby businessman Dan Gilbert.
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Lenderful appearsto invite such comparisons, with Google search ads announcing"rocket-speed mortgages by Lenderful" and awebsite that tells consumers"buying a mortgage isn’t rocket science, or at least it shouldn’t be."
Metro Detroit's other new mortgage shop belongs toDavid Hall, 45, theformer topsalesman and ubiquitousadman forQuicken Loans, then also commonly known as Rock Financial. Hall'sTV and radio ads made him virtually synonymous with the company's brand from the late 1990s until heleft Quicken in 2007, later joining mortgage company United Shore in Troy.
Hallleft Shore in January to starthis own mortgage firm,Birmingham-based Hall Financial, which he thinks couldgrow in size from12 to 300 employees overthe nextthree yearsas itexpands beyond Michigan.
The ventures arehappening at a time when southeast Michiganis experiencing national visibilityin the residential mortgage business.There are currentlythree areafirms ranked inthe top five nationwide fortheirspecialties in the business, with numerous smaller firms rounding out the region's sizable industry and loan-officer workforce.
Lenderfulgrew out of afirmcalled MadDog TechnologythatKarmanos startedafter leaving Compuware.
Karmanos has grand ambitions for the mortgage enterprise.This month, he told business leaders at aDetroit Economic Club luncheonthat Lenderful ispoised to grow and becomea"unicorn," a term fora successful start-up companywith a $1-billion-plus valuation.
"It’s amazingwhat you can do here in southeast Michigan," he said.
Despite its newness and small size, the Karmanos-backed mortgage venture could still represent a potentialcompetitor forindustry giant Quicken.
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Gilbert and Karmanos have regularlycrossed paths.Gilbert'soffice and Quicken's headquarters iswithin the15-story building in downtown Detroit that was formerly known as the Compuware Building.It was renamedOne Campus Martius last year after beingpurchased for $142 millionby Gilbert's corporate real estate armandMeridian Health.Compuware, which built the building for $450 million in the early 2000s,is now a tenant.
A Quicken Loans spokesman declined commentand Lenderful did not respond to repeated messages for this story, including through Karmanos' attorney.
Detroit-based Quicken Loansranked No. 2 in the country for direct-to-consumer mortgage lendingin 2015, reporting$78.5 billion worth of mortgage volume, according to industryjournalInside Mortgage Finance.Troy-based Flagstar Bank ranked No. 10 for totalvolume of mortgage originations ($29.3 billion) and No. 5 incorrespondentlending, a part of the business that can involvefunding mortgages througha line ofcredit orbuying loans in bulk that arealready underwritten.
Also based in Troy, United Shore is rankedNo. 1 forwholesale mortgage lending,which isthe underwriting of loansmade bybrokers, credit unions andbanks.Shore's wholesale division reported$12.95 billion in volume for the year.
Lenderful and Hall Financial are pursuing themortgage business with different strategies. "We have three top lenders in a 15-mile radius of each other," said United Shore CEO Mat Ishbia. "There is nowhere else in the country like that."
Lenderful offersanInternet-based platform to letconsumers shop for mortgages and getpre-approved. This sortof all-online service has been growingin popularityand iswidely advertised onTV and the Internet by non-banklenders such as Quicken and smaller but fast-growingcompetitorsloanDepot andGuaranteedRate.
Some companies that alsoadvertise all-onlinemortgageplatforms,such asLending Tree, can also sell client leads to outsidefirms that would then callthe consumertodo themortgage.
Paul Muolo, managing editor of Inside Mortgage Finance,saidthere has been a technology arms race of sortsin the mortgage industry as companies investlarge sumsdevelopingnew apps and all-online platforms. However, it'sstill to be determined whether a significant proportionof the home-buying publicwillprefer doing theirmortgage entirely online rather thanspeaking with a loan officer in a call centerormeeting in a bank branch.
"Some of these efforts are so newwe don't know how successful they will be," Muolosaid.
Quicken's new Rocket Mortgage servicewas designed tostreamline the application process and potentially offerapprovals forqualified borrowersin aslittle as 8 minutes. Its ads featurethecatchphrase"Push Button. Get Mortgage."
ARocket Mortgagecommercial during this year'sSuper Bowl generatedcontroversy onsocial media, with somecitinglast decade'shousing marketboom-and-bustand questioning whether the service might makeittoo fast and too easy for people to get mortgageswho perhaps shouldn't.
The company responded on Twitterthat its technologysimplifies the mortgageprocessbutdoes notloosen lendingstandards.
Hall Financial, in contrast, does not aimfor uber-fast onlineapprovals--at least notnow. In an interview last week, Hall said his loan officers operate undera hybrid model that involves time on the phonefollowing client leads and in-person relationship buildingwith real estate agents, home builders and financial plannersto gain business through traditionalreferrals.
Hall said he seesall-online mortgage platformsas away to generate interest and customerleads. But he feels the majoritystill preferback-and-forth interaction and advice when financing a house.
"It's the biggest financial transaction that most people make in their entire life," Hall said, "so you'vegotta get it right, you don't necessarily need to get it fast."
"In my 20 years in the businesswhat I've noticed is that so many consumers need more help, more attention, more consultation —versus less," he added.
The Detroit regionhas had prominent mortgage firms before, including the formerAdvanced Mortgage Corp. and the James T. Barnes Co. Some attribute the local industry's past strengthto theauto industry,whichsupported broad middle-class home ownership.
"Michigan, and in particular the Detroit area, has been historically a place in which many,many mortgage bankers have congregated," saidTim Ross, president of Troy-based Ross Mortgage Corp., which dates to 1949 and is among the area'soldest mortgage firms.
Mostof theold big firmsfaded away or were moved out of Michigan inacquisition deals. More recently,Southfield-based World Wide Financial Services, which did business asLoanGiant, cameunder fire in 2004forfraudulent practices and ultimately collapsed intobankruptcy.
Among the current breed, Flagstar Bank has beenamong the top 10 nationwide mortgage firms for correspondent lending for more than a decade. "It's been a pretty consistent business for us," said Flagstar CEO Sandro DiNello.
And while thehousing bust wasa disaster for many lenders and homeowners, it proveda growth opportunity for Quicken Loans and United Shore. Both companiesbenefited from consolidation in the mortgage industry and staffed up totake advantage of the refinancing boom. They have since continued to grab market share fromcompetitors, even in years when the mortgageindustry as a whole saw a revenuedip.
Southeast Michigan'snationally-ranked mortgagelenders: (data for2015)
- Quicken Loans in Detroit -- ranked No. 2 for direct-to-consumer mortgages ($78.5 billion total origination volume,all divisions)
- Flagstar Bank in Troy -- ranked No. 5 for correspondent lending ($29.3 billion total originationvolume,all divisions)
- United Shore in Troy -- ranked No. 1 for wholesale lending ($13.1 billion total origination volume,all divisions)
Source: Inside Mortgage Finance
