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Big Plans at First Franklin

$1.72 billion February volume reported

March 22, 2004


On the heels of a jump in production, First Franklin Financial Corporation says it intends to become the nation's third largest subprime mortgage lender.

The company reported $1.72 billion in fundings last month, a 20% increase from January. The total surpasses the $1.10 billion record reported in February 2003.

Accounting for 68% of originations was its two-year LIBOR adjustable-rate mortgage and the interest-only version of the program -- both particularly useful with purchase transactions, First Franklin said.

CEO Andy Pollock commented about the company's recent and planned activity in a phone interview Friday with MortgageDaily.com.

The top executive's statements indicate he expects total 2004 production to be less than 2003 -- which was reportedly about $20 billion. "We don't think we can exactly replicate the performance of 2004 as we did in 2003.

"It seems as if everybody in the nonconforming marketplace is anticipating greater volume in 2004, compared to 2003," Pollock went on. Citing recent industry estimates of less production this year than last he said, "I'm just wondering where all the loans will come from."

Pollock noted that broker business makes up about 95% of the company's production.

The San Jose, Calif.-based lender, which reportedly maintains 33 sales branches, plans to jump from its current position as the nation's fifth largest nonconforming lender to third largest within the next three years. Pollock said that each year they will add about four wholesale branches and around eight satellite or retail offices.

Founded in 1981, the National City Corporation subsidiary says it switched its product mix from prime to nonprime in 1994 -- about the time the industry was devastated from the effects of an abruptly curtailed refinance wave.

First Franklin sells its production on a whole loan servicing released basis, according to a recent report from Fitch Ratings. The company reportedly sold 55% of its 2003 production to affiliate National City Home Loan Services, with the remaining sold to third-party investors.

Fitch said the company has "functional managers and operational staff with long company tenure, significant experience in wholesale production, and effectively uses credit scores as the driver in its subprime underwriting processes."

Pollock credits his staff and their customer service for the company's recent volume growth. "Clearly we have superior customer service that meets the needs of our mortgage broker and borrower community."

He also attributes recent success to the First Franklin's competitively priced purchase programs that include 650 FICO scores, high LTV mixes such as 100% or 80/20 combos and alternate income documentation.

"Every homebuyer's financial situation is unique," Pollock added. "First Franklin's flexible programs help them find the solution that's right for them, whether they're first-time, self-employed or credit-challenged borrowers."

Fitch also noted in its report that First Franklin is in the process of expanding eastward from its base in California, which comprises 47% of production.

Pollock said the company has moved from the eighth largest subprime lender in 2002 to the fifth largest in 2003. "We've made an effort to move up, and target ourselves to be in the number three position within nonconforming lenders within three years."

Coco Salazar is an assistant editor and staff writer for MortgageDaily.com.

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