Cross Country Mortgage CEO reveals the organic growth strategy

Cross Country’s strategic movements

Another strategic step was to create a Division Asset Management a few years ago. This arm, which already manages $ 7 billion in assets, has recently concluded a financing agreement of $ 1 billion Ares Alternative Credit And Hildene Capital ManagementWhich represents around $ 20 billion in potential new non-QM loans. “We have set up the asset manager and the non-QM Seccuritization Platform, and we consider it an important part of our future, as a diversification of our income for the company,” said Leonhardt.

At this stage, the expansion of the business management company is not part of the CCM loans. But Leonhardt – a former mortgage broker who founded CCM in 2003 – does not exclude this in the future.

CCM also recently completed the issue of $ 900 million in debts, after previously considered but ultimately pass on the supply of high -rents in 2021 and 2022 as a result of unfavorable prices.

“We made the look on the road,” said Leonhardt. “Our inaugural offer was overwritten more than seven times; we had around 200 institutional investors. We did extremely well. Investors believe in the story and the financial composition of the company.”

The interview

Leonhardt went in the course of a recent interview with Housingwire, which was edited for length and clarity.

Flávia Nunes: Based on the recent movements of Cross Country, it seems that the company focuses on strengthening its financing structure. When did you start implementing these strategies?

Ron Leonhardt: As far as the asset manager is concerned, you see the end product, but this probably started in mid-2022. We have established the asset manager and the non-QM-Securitization platform, and we consider it an important part of our future, as a diversification of our income for the company.

The first deal was closed with Hildene; Since probably 2023 we have done 17 non-QM-Securitizations. We have the third general non-QM-Securitization platform as a whole per volume. And as you know, we are retail, so it’s not like we buy hundreds of people. It is quite important to continue and expand that. It is an important part of our strategy in the future.

Nunes: How do you see the wider mortgage landscape?

Leonhardt: If you look at the landscape now, every down market will follow an UP market. And I believe that we work very well in bad markets in my history of owning the company, and we have always taken market share. We have reinvented ourselves in these Down markets, and I consider it extremely important for having multiple income flows to compete with some of the larger companies that we have put together in the future.

Nunes: Will all these different income flows come from mortgage -related products, or can we expect Cross Country to expand to other financial products?

Leonhardt: No, our extensions are, we have maintenance. Our service portfolio towards the end of the year is around $ 200 billion and we have taken over $ 72 billion in MSRS year so far. We see our income grow a bit – we have our asset manager, our income from the service compensation and we also have our original income.

Nunes: What is currently the most relevant area in terms of income for the company?

Leonhardt: I would say that origin and maintenance are the same in my eyes because they feed each other. I believe that the asset manager, we have almost $ 7 billion in assets. We did very well because it has been open, but that is only going on for two and a half years. But again, having maintenance is extremely important, for the future of the mortgage market, in the next five to 10-year prospects.

Nunes: Is your plan to expand the asset manager for assets other than non-QM loans?

Leonhardt: We are planning to expand it with a number of different product offers that we will probably release-residential transition loans, bridge, fix-and-flip, and this will be for Resi Multifamily. We are going to do construction financing, resi and multifamily, and we offer the multi -family for a maximum of 30 units. These will be products that we will offer at the end of the year that fit in that bucket for asset management.

Nunes: What is the volume in the non-QM room for the lender?

Leonhardt: This year our current locking volume brings us at almost $ 9 billion a year Run rate in non-QM locks. It is a pretty important piece for us, a great tool to attract many good originators that do non-QM loans, because so many companies have a real broken process. We have perfected it a bit. And I think people look at us as the clear leader in non-QM loans.

Nunes: You called $ 7 billion management, how great do you imagine that the asset management becomes arm?

Leonhardt: The money collected by Hildene and Ares gives us an extra $ 20 billion in dry powder for non-QM loan purchases. When that $ 20 billion is completed, we will pick up more. The $ 1 billion in capital obligations will be created $ 20 billion, taking into account the requirements for preserving risks with regard to non-QM securitizations.

CCM will act as the co-sponsor, and Ares and Hildene will be the persistent sponsors for every securitization. We receive a management allowance for the control of the assets and incentive costs for the performance of the securitizations.

Nunes: can CCM look like one Rithm Capital In the future, more than other origin and maintenance of competitors?

Leonhardt: Our core strategy is retail, but we believe that having these two different income flows will really feed our origin of the retail trade and is really good for the founder. It’s all about how to acquire the loans. We do not do a correspondent or wholesaler; We produce all our own loans. But again, this also gives us a lot of price strength to the founder.

Nunes: How competitive can you be at the price if you have this structure?

Leonhardt: We have already been extremely competitive. If you look at the companies that have had many problems since 2022, I would say that the majority of them have no maintenance or other income flows.

I feel that we are extremely competitive. I don’t think there is anyone who is the clear rock bottom there. I would say more in the coming years, we believe that we will shift our focus from origin of income to the maintenance of income, which means that our main objective to do that loan is really for the income of the service costs. The ambition is to have 75% of the maintenance of reimbursements, and we think we will probably be there in the next 24 months.

Nunes: How does this strategy distinguish the cross country of competitors, especially those who have recently experienced themselves Mergers and acquisitions Such as Rocket, Mr. Cooper, Bayview and Guild?

Leonhardt: If you look at those deals, and if you look at what we do, it is very to each other. We are the largest retail financier in the country and we grow a pretty substantial service portfolio.

If you look at my direct peers with whom I compete, nobody is close to us in maintenance. If I look at it, you place a huge origination team together with a very scaled service platform. And I’m talking about Mr. Cooper and Rocket, and I am talking about Bayview and Guild – again, we didn’t have to take over. We just did it organically.

Nunes: Does CrossCountry still look at M&A transactions with smaller competitors, such as Amcap?

Leonhardt: We always look at mergers and acquisitions. I don’t think that our criteria fits, or would have been well together so far, so we keep exploring that. We feel good. Our branch network has done excellent work to help us grow. So at the moment we do not feel that it is something that we have to do. It is more, it would be more opportunistic in nature.

Nunes: How aggressively has CCM been in terms of hiring and retaining loose?

Leonhardt: We have had good success with attracting and retaining Top Los. If you only look at some of the loose that we have hired over the past two to three years, we have not lost a top 10-lo in the last six years. I believe that our preservation of the Top 250 in the past six years is around 98%, and that is good for around 40% of our total volume.

But when you see these big names moving companies, they come here. We have had good success in that. That is why it is really not necessary to force mergers and acquisitions.

Nunes: How did Cross Country MortGage invest in its activities?

Leonhardt: We have the best platform in the industry. We have introduced the work in a Down market for the past three years to expand our own technology.

Our product setup is unparalleled by someone under one umbrella. Everything is done in the house, whether it concerns construction loans, non-QM loans. We have more than 50 institutional investors in our securitization board and we continue to expand that. We have grown our marketing team in the last three years instead of reducing it. We pour money in all different departments. Processes still have 30% capacity. We always want to ensure that we have enough room to grow in it; It comes down to our advantage. We tick the box in every department.

Nunes: How does the company invest in technology in the midst of the AI ​​revolution?

Leonhardt: We use some AI tools supplier, but we have also developed a whole series ourselves. I would say that our focus is more on the operating side, to continue and lower our costs to arise. We investigate throughout the organization, every department and how we can improve that department with AI.

I believe that I just find out how you will use and use certain technologies in the mortgage world in the mortgage world. It changes so quickly that boys who developed what they thought was that their own technology was only two, three years ago, I hear these guys: ‘Oh, I have developed this own technology. It is not relevant. It’s not native. ‘

I think that is probably the biggest challenge: finding out how everything will shake with the use of technology and AI in the mortgage industry. There seems to be several usage scenarios in our company, from sales to activities to HR to marketing. It will touch every department.