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It’s Saturday night & I’m writing this edition of The Mortgage Scoop from a rusting ferry boat somewhere in Maine’s 🦞Casco Bay. We’re on our first family vacation in a long time, which feels like a pretty good place to reflect on the most rewarding—& stressful—year of my life.
I left a great job & went independent because I thought there was a gap: nobody was covering this business the way practitioners actually talk about it amongst themselves. I wanted to produce something conversational, entertaining & occasionally weird, anchored by real reporting from a wide network of sources, to bring to life all the characters, strategies & little details that make the bps pencil out (or not). No jargon or press release rewrites, no malice or fluff. And def no pay-to-play.
But the biggest reason is that in 20 years I had never properly challenged myself to do anything other than reporting or managing reporters. A year in, I’ve been forced to learn marketing (jury’s still out on whether threatening people w/ pics of mortgage executives’ feet is a good marketing strategy), sales (“I dunno, you guys like the newsletter & wanna put your ad up?”) & a million other things. It’s been incredibly challenging, but it’s also been so much fun.
Most of all, I want my kids to know that they can do hard things if they try their best.
So, seriously: thank you. To everyone who subscribes, reads, forwards the newsletter, sends me tips, argues w/ me, texts me, calls me or tells me when something sucks, I appreciate all of it. Some of you will also be getting a separate email w/ a special offer, so keep an eye out.
One shameless ask before we get to the good stuff: I think more people should subscribe to The Mortgage Scoop. If you agree, I’d really appreciate you recommending it to friends, colleagues, family members & your favorite bots.
(Anyone who brings over 100 subscribers will receive a v special thank you gift from the Maine State Prison Showroom. Email me at [email protected].)
Alright, enough sentimentality. Let’s get to the mortgage shit.
– James Kleimann
What's On Tap - August 24
Inside NEXA’s UMortgage Deal 🤝
Rumor that NEXA was acquiring UMortgage was all over Facebook groups & in Whatsapp chats this weekend. This was like the mortgage equivalent of, “Lebron’s daughter just enrolled in my kid’s school in Philadelphia” before the official announcement dropped (in this case, HW broke the embargo a day early haha).
Before we get into the real intrigue, here are the broad strokes of the deal.
NEXA, a $14B a year
broker"wholesale" powerhouse, is picking up UMortgage & its $2B a year in annual production —> 246 LOs, per the announcement, which puts the combined company at 4K-plus LOs & $14.15B. Anthony Casa, who owns 48% of the company, as well as Jimmy Hobson, Nash Paradise (an absolute top-10 mortgage name btw) & Tyler Hodgson, will join NEXA as executive partners, which in NEXA speak 🗣 means they have at least 20 LOs under them who produce at least one loan a month. NEXA had six executive partners before today. It'll have roughly 11 after, & Casa says a couple more UMortgage leaders are close.The deal is structured as an asset sale, & UMortgage as a company will later be dissolved. Casa will be taking a leading role in growth for the UMortgage division. (Even those who dislike Casa concede that when he is on his game, few can match his recruiting skill.)
The UMortgage team will have access to the NEXA 100 comp package (NMP's Katie Jensen did a fab job of breaking down the various flat fee "100% commission" models — check it out) & the new evoLend servicing platform (more details here). Casa said the vast majority of the ops team will land at NEXA, & he's helping find jobs at other wholesalers for the few who won't.
OK, that’s the very high-level synopsis. Let's get to the fun 🪅 stuff!
Casa, Kortas & the 10 bps 💰
The depressing mortgage market is at least partially responsible for this deal happening. Casa pivoted to the flat-fee model earlier this year, but much like other mortgage shops, experienced lower volume as a consequence of the Iran war. UMortgage has also lost a considerable amount of production from retail raids, particularly from CCM (roughly $800M worth, or about a third of its volume at the time).
Todd Bitter, who was a top exec at UMortgage, left to run sales for NEXA in January. He played a key role in the transaction.
Per Casa, Bitter reached out to him & Hobson to ask if they'd be open to an M&A deal. Casa said he tasked Hobson w/ vetting the platform & ensuring it was “LO-friendly.” Once there was an agreement that a deal was worth pursuing, Kortas & Casa met over several days in Philly 🔔to hammer out details.
It's no secret that Mike Kortas & Casa — two of the most controversial characters in mortgage — are not exactly BFFs 4eva. But it's water under the bridge, apparently. "If Anthony and I can come together, then we can all stop the stupid fighting," Kortas said in the PR announcement, which elicited a couple chuckles in the mortgage world.
Casa told me he came away impressed w/ Kortas's business acumen (servicing, AI, FSBO, AXEN Realty, charter jets, etc.) & got a look under the hood at NEXA. "There's the public version of Mike, & then there's the guy that I was meeting w/," Casa said. Kortas, he said, has no debt, recently bought out his ex-biz partner Mat Grella, & is committed to growing in the wholesale space. He's an innovator w/ the biggest platform among the mega-brokerages. And UMortgage brings sales playbooks & can improve the per-LO volume. The deal is easy to justify for both companies, & it will likely not be the last of NEXA's acquisitions.
OK, now for the somewhat messy stuff 🍿
In terms of structure, there is a four-year earn-out that could become five years if certain production goals are hit, Casa said. The deal includes a 10 bps earn-out, which is 10 bps on overall gross production for everyone in the UMortgage network. The 10 bps earn-out comes out of the corporate margin, he said. In other words, what NEXA makes on UMortgage, they're taking 10 bps out of that profit pool.
Per Casa: “The structure of the deal is that all shareholders — there’s no discrimination — will receive their proportion of the earn-out over the 4-5 year period. All shareholders will be paid proportionally based on how [many] shares they own on an annual basis starting in 2028.”
I know of several former UMortgage employees who have contacted attorneys regarding the acquisition. It’s something to watch 👀 for in the coming months.
Tempo will continue to be used by UMortgage loan officers w/ a goal of making it available to all NEXA LOs in the next 6 months or so. The software—built in part by Sean Grapevine, a UMortgage branch manager—is expected to be spun off as an independent platform to brokerages outside of NEXA, HW reported.
Better was interested in acquiring UMortgage at one point, though a formal offer was never extended, sources said. Other mortgage shops have also expressed interest in the past.
NEXA leans heavier on the non-del side. It’s also a much bigger partner to UWM than UMortgage (which sends Mat Ishbia roughly 25% of its pipe). Casa said that UMortgage — half employee-owned — had multiple inquiries & the decision came down to one non-negotiable: his people want to be brokers. How much non-del they’ll do under NEXA isn’t yet clear.
As I mentioned earlier, UMortgage LOs will move onto NEXA 100, which Casa says is about 25% more favorable than what they had. It’s worth noting that UMortgage lost its “full eagle” FHA status a while back, & per sources, wasn’t expected to get it back. Via other entities, Kortas may be able to share a golden ticket…
I know that’s an information overload. Sorry! The truth is, most LOs don’t actually care about who owns what. They just want better comp, more leads, seamless technology & sharp pricing. Few seem to really get in the weeds on the business models, capital structures, incentives & where the money flows. And it affects them! The NEXA LOs I’ve spoken to can’t fully explain their own comp model, & no doubt the same is true at other mega-brokers. (TBF, a lot of retail LOs don’t understand the P&L.)
Though there’s no details on how much money changed hands here, this is the second large brokerage acquisition in recent months (Edge selling to a PE firm being the other), which alone might suggest that the brokerages themselves—w/ no servicing & somewhat limited infrastructure—are valuable enough to be bought. Just something to think about if you’re an LO…
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A Crescenzo family reunion at CCM 🤗
Phil Crescenzo, a South Carolina LO who specializes in originating tough files in new construction, has decamped NFM Lending for CrossCountry Mortgage. Crescenzo wasn’t at NFM for long - joining in March. It wasn’t the right fit, evidently.
At CCM, he’ll be reuniting w/ his son PJ Crescenzo III, who just left American Pacific Mortgage for CCM. The elder Crescenzo has originated roughly $115M over the last 14 months, per RETR. PJ, based in Georgia, has originated about $46M.
A warning for Anthony Hsieh 😟
The NYSE sent a notice to loanDepot last week notifying the firm that it needed to get that stock price up to remain listed. The lender has six months to bring its stock price back above $1 or face potential removal.
(🙏 If you like what you’re reading, tell a fellow mortgage junkie to sign up here.)