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Pioneering a Unique Growth Trajectory in the Mortgage Industry

A Strategic Departure from Industry Norms: Embracing Organic Expansion

CrossCountry Mortgage, headquartered in Cleveland, has charted a course distinct from many of its rivals. Rather than engaging in mergers and acquisitions to bolster its loan origination and servicing capabilities, the company is prioritizing organic growth. This involves the systematic acquisition of mortgage servicing rights (MSRs) and the concurrent development of an in-house asset management arm, a strategy aimed at sustainable long-term expansion.

Expanding the Mortgage Servicing Portfolio: A Core Growth Driver

Ron Leonhardt, CEO and founder of CCM, revealed in a recent interview that the company's servicing portfolio is projected to reach approximately $200 billion by the close of the year, with $72 billion in MSRs already acquired within the current year. This substantial growth in MSRs is a cornerstone of CCM's strategy, designed to ensure that the company retains its loans and actively assists loan officers (LOs) in re-engaging qualified customers from their databases.

Forging an Asset Management Powerhouse: Diversifying Revenue Streams

Another pivotal strategic move by CCM was the establishment of an asset management division several years ago. This division, which currently oversees $7 billion in assets, recently secured a significant $1 billion funding agreement with Ares Alternative Credit and Hildene Capital Management. This deal is poised to unlock an estimated $20 billion in potential new non-qualified mortgage (non-QM) loans, significantly diversifying the company's revenue base.

Navigating Market Dynamics: Reinvention in Challenging Environments

Leonhardt, who founded CCM in 2003 as a former mortgage broker, shared insights into the broader mortgage market. He emphasized CCM's proficiency in thriving during downturns, consistently gaining market share by reinventing its operations. The CEO stressed the critical importance of cultivating multiple revenue streams to effectively compete with larger, consolidated entities in the evolving financial landscape.

Comprehensive Revenue Ecosystem: Origination, Servicing, and Asset Management

CCM's revenue ecosystem is built upon three interdependent pillars: loan origination, mortgage servicing, and asset management. Leonhardt views origination and servicing as equally vital, noting their synergistic relationship. While the asset management division is relatively new, having operated for only two and a half years, it has already demonstrated exceptional performance, accumulating nearly $7 billion in assets under management.

Future Horizons: Expanding Asset Management Beyond Non-QM Loans

Looking ahead, CCM plans to broaden the scope of its asset management arm beyond non-QM loans. By year-end, the company intends to introduce new product offerings such as residential transition loans, bridge financing, fix-and-flip loans, and builder financing for both residential and multifamily properties, including those with up to 30 units. These expansions will further enhance the asset management division's versatility and market reach.

Dominance in Non-QM Lending: A Niche of Expertise

CCM has established itself as a frontrunner in non-QM lending. With current lock volumes approaching an annual run rate of nearly $9 billion in non-QM loans, this segment represents a substantial portion of the company's business. Leonhardt attributes this success to a refined process that attracts top originators, positioning CCM as a clear leader in the non-QM space.

Capitalizing on Dry Powder: Fueling Non-QM Loan Purchases

The capital raised from Hildene and Ares provides CCM with an additional $20 billion in "dry powder" for non-QM loan acquisitions. This strategic funding, combined with CCM acting as co-sponsor and Ares and Hildene as retaining sponsors on each securitization, will generate management fees on assets under management and incentive fees based on securitization performance, ensuring robust financial returns.

Strategic Competitiveness: Organic Growth vs. Mergers and Acquisitions

Leonhardt elaborated on how CCM's organic growth strategy provides a competitive edge, particularly against companies engaging in large-scale mergers and acquisitions. He highlighted that CCM has built a significant servicing portfolio organically, a feat unmatched by many direct competitors. This approach allows CCM to maintain strong pricing power for its originators without the complexities of integrating acquired entities.

Attracting and Retaining Top Talent: A Cornerstone of Success

CCM has achieved remarkable success in attracting and retaining leading loan officers. Leonhardt proudly stated that the company has not lost a single top 10 LO in over six years, with retention rates for the top 250 LOs hovering around 98%. This talent retention, which accounts for approximately 40% of CCM's total volume, underscores the effectiveness of its platform and negates the immediate need for M&A deals.

Technological Advancements and Operational Excellence: Investing for the Future

CCM is committed to continuous investment in its operations and technology. The company boasts an industry-leading platform, enhanced by proprietary tech developed over the past three years. With an unmatched product lineup, in-house capabilities for construction and non-QM loans, and a growing team dedicated to marketing and operations, CCM is well-positioned for future growth, maintaining 30% operational capacity to accommodate expansion.

Embracing the AI Revolution: Enhancing Efficiency and Reducing Costs

In response to the artificial intelligence (AI) revolution, CCM is strategically integrating both vendor and proprietary AI tools. The primary focus is on leveraging AI to optimize operational efficiency and reduce the cost of origination. Leonhardt foresees AI impacting every department, from sales and operations to HR and marketing, and emphasizes the challenge of adapting to rapidly evolving technologies within the mortgage industry.