A California-based subprime wholesaler looks to expand into retail through a branch recruitment campaign — a move that could increase its employee count by as much as 50.
“We’re trying to grow our company,” Christian Trausch of Brea-based CJ Mortgage told MortgageDaily.com. “We don’t currently do any retail. We’re basically a wholesale lender.”
With its new retail operation, generating 50 new jobs “would potentially be a fairly easy mark.” according to Trausch, CJ’s vice president of wholesale lending.
He noted that if his company, which currently lends in seven states, had 10 different offices sign up for its new retail program next year and each one created three jobs, “you’re looking at 30 employees right there, plus what we have to hire internally to support this business. So 50 could be realistic.”
The company’s new retail program will start in California and then expand into Colorado, Indiana and South Carolina, four states where it currently does wholesale lending and where state laws permit net branches, he told MortgageDaily.com. CJ Mortgage, he said, also is looking to doing retail business in Montana, where an application is currently pending, and to doing wholesale and possibly retail lending through a net branch in Washington State.
“We’re waiting for a legislative change in Washington [State],” he explained. “If that goes through we’ll be adding Washington next year. But we have to wait till the end of the year because they’re changing some of their laws. Whether that will be a retail operation or not depends on how they change the law.”
The company also currently does wholesale lending in Arizona, Nevada and Oregon, three states where net branching is not allowed, he said.
Rather than establish its own retail branches, the company is seeking existing broker offices to sign up as exclusive CJ Mortgage lenders, or for brokers to leave their current employers and establish their own offices that would originate loans only for CJ Mortgage, Trausch said.
“What we’re looking to do,” he said, “is create kind of franchise offices, where they’re owned and operated by individuals but where we can be a funding conduit and provide direct lending capabilities for those offices that sign up.
“We haven’t put a finite limit on the number of [retail] offices,” he added. “We can handle quite a bit. I don’t think it’s going to be a problem handling as many as we get.”
The company would provide all the processing, underwriting, document preparation and funding for the loans originated by the retail offices.
Starting its new retail business “as a partnership rather than going out and start branches on our own,” Trausch admitted, will have “a lower cost for our company. But it also will offer a lot of benefits to brokers who now will be able to be direct lenders.”
The retail business will be completely separate from the company’s wholesale business, he explained.
“We don’t want to compete with our existing brokers,” he said. “We want a complete firewall between our wholesale business and any sort of retail that we do. By doing it as a net branch, we can keep it as a complete separate entity where we’re not creating any conflict of interest between our existing customer base. That’s a huge factor because we have a reputation as a wholesale lender to maintain.”
The “slowdown in mortgage lending” has nothing to do with the company’s move into retail lending,” Trausch maintained. “Our thinking is more that through franchise agreements we can get more of a dedicated referral source as opposed to brokers who just send us one file. So we’re trying to get a more dedicated source of file flow.”
CJ Mortgage offers what he termed “some of the toughest subprime products available in the industry.” In addition to low credit scores and unverifiable income, borrowers can currently be in foreclosure or bankruptcy, or have unlimited late payments, judgments, charge offs and collections.
“The majority of files that we fund on a wholesale basis,” he said, “currently are files that have been turned down by other subprime lenders. So we’re really aggressive as far as what we lend and what we do. So on the net branching side of it, it would be an appealing offer not only to everyone out there but to the people who do mostly subprime business. That’s really our target market — people who really need to get tough loans done.”
