New York Mortgage Trust is one of a handful of New York-based mortgage companies taking drastic measures to stay afloat as the industry struggles with lower mortgage volume.
The company is seeking to stabilize its business following the sale last month of its retail mortgage division, the New York Mortgage Company, which represented approximately 75 percent of the company’s mortgage business. The unit was sold to IndyMac Bancorp for approximately $13.4 million in a deal that closed in early April.
In addition, as a result of the transaction, Steven Schnall, co-chief executive of New York Mortgage Trust, resigned as chief executive officer, remaining on only as chairman of New York Mortgage Trust. David Akre remains vice chairman and co-CEO with Steve Mumma, who is also replacing Schnall as president.
“We have a strong reputation and infrastructure, but lacked the scale to operate profitably and needed someone who had the scale,” Schnall said.
IndyMac is the eighth-largest residential lender in the United States, with a 4.5 percent national market share. According to Schnall, the mortgage company, which last year originated about $90 billion in mortgage loans, bought 32 New York Mortgage retail branches in 11 states.
Other New York City-based mortgage companies are looking to change their business strategy to stay afloat. GuardHill Financial Corp., for example, is making the transition from a mortgage brokerage to a banker.
There has been an increasing number of defaults among subprime borrowers, and accelerating foreclosure rates are starting to extend to Alternative A, or Alt-A mortgages, which fall between prime and subprime, often charging higher interest rates while requiring less income documentation. Approximately 26 percent of New York Mortgage Trust’s 2006 mortgage business was Alternative A loans, according to Dave Akre.
“Consolidation is going to continue at a very rapid pace,” Schnall said. “Most small to mid-size firms will be consolidated. There are more companies for sale now than I’ve ever seen. Companies are going belly-up before you can strike a deal with them.”
New York Mortgage Company now operates as a unit of IndyMac, which took on approximately 450 New York Mortgage employees under its umbrella. Separately, New York Mortgage Trust sold its wholesale lending division to Tribeca Lending Corp., a subsidiary of Franklin Credit Management Corporation.