On the heels of its merger with loanDepot.com, Leif Thomsen talks about the rising cost of producing loans, regulation hurdles and what's ahead for the two companies.
Leif Thomsen started Mortgage Master Inc. in his basement in suburban Boston shortly after arriving from his native Denmark in 1988. After working for a small mortgage company, he set off on his own, originating mortgages for local banks despite a limited command of English.
Today the company he founded is one of the largest privately owned, nonbank originators in the country and employs more than 700 people, including over 300 loan officers in 26 states. His company recently agreed to merge with Foothill Ranch, California-based loanDepot.com LLC, which launched in 2010 and is already the nation's second largest nonbank consumer lender.
Thomsen, now 54, along with President Paul Anastos, will continue to lead Mortgage Master – which will retain its own brand. The merger closed January 2, 2015. The newly merged company expects to rank number two among nonbank mortgage companies, with forecasted 2015 origination volume of about $25 billion. The combined company will operate 130 retail lending branches across the country, four web production centers and employ 3,700 full-time associates, including more than 1,200 licensed loan officers serving borrowers in all 50 states.
I was very intrigued. I thought there was very good chemistry and synergies. These were two very different businesses. Both bring different strengths to the table, making a potential combination a good fit. I was very lucky to have Paul, who has a lot of M&A experience. For the next six to seven months loanDepot’s team worked very closely with us to work through the opportunity. It was very clear to me as those two teams spent time together, there was a cultural match.
There was no one thing or single deciding factor. In the end it was a long list of factors. But I have never questioned the decision even once which means it must be the right decision. I believe it was meant to be.
loanDepot is launching consumer loans in early 2015, something which we probably would have never thought about. I think that will benefit Mortgage Master a great deal. I can only imagine what that will do for our loan officers, to have consumer loans to go along with a mortgage. I think that's going to be unbeatable. They also bring a deep entrepreneurial bench that will help grow the combined enterprise to a whole new level. It's very clear that Anthony wants to be the number one non-bank consumer lender sooner rather than later, and we want to help them get there.
Regulatory oversight and compliance are at all-time highs. There are a lot more requirements, so there are more controls in the process on our end to make sure we are adhering to all the regulations. You have to add resources to make that happen. The fees charged by the government have also increased exponentially. It takes longer to do loans. There are more overlays from an investor perspective.
In addition, I do believe you could see a 25% improvement in purchases in 2015 even if rates are up. Mortgage applications will rise in 2015 due to a combination of low rates, consumer confidence and an improving job market. I think there will be more people looking to purchase new homes. If this is the case, we are confident our loan officers will gain new business as they have always done in the past.
The unknown is whether young people will start buying homes instead of renting. That's the biggest question we all face. And we just don't know.
I'm really excited about this deal. If anything I am probably going to work more now. I can't wait for the new year to start.
Today the company he founded is one of the largest privately owned, nonbank originators in the country and employs more than 700 people, including over 300 loan officers in 26 states. His company recently agreed to merge with Foothill Ranch, California-based loanDepot.com LLC, which launched in 2010 and is already the nation's second largest nonbank consumer lender.
Thomsen, now 54, along with President Paul Anastos, will continue to lead Mortgage Master – which will retain its own brand. The merger closed January 2, 2015. The newly merged company expects to rank number two among nonbank mortgage companies, with forecasted 2015 origination volume of about $25 billion. The combined company will operate 130 retail lending branches across the country, four web production centers and employ 3,700 full-time associates, including more than 1,200 licensed loan officers serving borrowers in all 50 states.
First, why did you decide to sell Mortgage Master to loan Depot? Why that company, and why now?
Thomsen: I have been building Mortgage Master for 27 years and I wanted to position the company for continued success in an ever changing business. loanDepot had been courting us for a while. They said, if you ever think of selling the company, let us get the first call. So several months ago I called Anthony (Hsieh, chairman and chief executive officer of loanDepot) and within a day or so he and a team jumped on a plane and had dinner with Paul Anastos and myself. I think we talked for about five hours or so that first meeting.I was very intrigued. I thought there was very good chemistry and synergies. These were two very different businesses. Both bring different strengths to the table, making a potential combination a good fit. I was very lucky to have Paul, who has a lot of M&A experience. For the next six to seven months loanDepot’s team worked very closely with us to work through the opportunity. It was very clear to me as those two teams spent time together, there was a cultural match.
There was no one thing or single deciding factor. In the end it was a long list of factors. But I have never questioned the decision even once which means it must be the right decision. I believe it was meant to be.
What does loanDepot bring to the combined entity?
Thomsen: loanDepot has better execution from the government agencies, so the combined entity will be selling even more volume and get even better pricing. They have a huge call center that generates an overflow of leads. They also have licenses in all 50 states and as well as better access to Wall Street. In addition, the combined companies can leverage their resources to provide best in class operations while keeping costs low, which has been one of our hallmarks of success over the past 27 years.loanDepot is launching consumer loans in early 2015, something which we probably would have never thought about. I think that will benefit Mortgage Master a great deal. I can only imagine what that will do for our loan officers, to have consumer loans to go along with a mortgage. I think that's going to be unbeatable. They also bring a deep entrepreneurial bench that will help grow the combined enterprise to a whole new level. It's very clear that Anthony wants to be the number one non-bank consumer lender sooner rather than later, and we want to help them get there.
What is the biggest challenge facing the mortgage industry at this moment?
Thomsen: The cost to produce a loan continues to go up. I remember in 2003, Mortgage Master had a cost to produce a loan of about $600 or less, excluding the commission. Today, you need so many more people to close a loan. In 2003 a good underwriter could handle 10 to 14 loans a day. Now if they do four or five, they’re exceptional. There are a lot more people required to close loans in today's world, no matter how much technology you use.Regulatory oversight and compliance are at all-time highs. There are a lot more requirements, so there are more controls in the process on our end to make sure we are adhering to all the regulations. You have to add resources to make that happen. The fees charged by the government have also increased exponentially. It takes longer to do loans. There are more overlays from an investor perspective.
What is your outlook for the mortgage industry in 2015?
Thomsen: I think we are going to be on a path of conservative, steady growth in a low interest-rate environment for a while. One of the benefits of having the best loan officers in the country, is we can continue to gain market share in an unpredictable housing market. In addition, we continue to see great growth opportunities throughout the Country while maintaining our strength in the Northeast.In addition, I do believe you could see a 25% improvement in purchases in 2015 even if rates are up. Mortgage applications will rise in 2015 due to a combination of low rates, consumer confidence and an improving job market. I think there will be more people looking to purchase new homes. If this is the case, we are confident our loan officers will gain new business as they have always done in the past.
The unknown is whether young people will start buying homes instead of renting. That's the biggest question we all face. And we just don't know.
How much volume do you anticipate the newly combined company will do in 2015?
Thomsen: In 2014 we were running close to $2 billion a month between the combined entities. Mortgage Master right now is funding approximately $450-$500 million a month and loanDepot has consistently been funding over $1 billion a month. We anticipate $25 billion to $30 billion in 2015. I would be surprised if we don't do $25 billion.Now that you've sold your company to loanDepot, where do you go from here? What is your role at the combined company?
Thomsen: I'm going to do what I've always done, which is a little bit of this and a little bit of that. This is what I do for a living. Nothing is going to change in my life. I'm still going to go to the office most days. I have a four and a seven-year-old and I have a 20- and a 22-year-old who are still in school.I'm really excited about this deal. If anything I am probably going to work more now. I can't wait for the new year to start.
