First New England Mortgage, which recently created a new Home Equity Division in order to serve the growing sector of home equity financing, is located at 180 Wells Ave. in Newton.

In the last several years, mortgage lenders have spent some of their time creating new products, such as interest-only and 40-year mortgages, in order to bring in new customers and generate more revenue. However, one local company is sticking to the basics and focusing on an old-fashioned mortgage product, creating a separate company division to do the business.

First New England Mortgage, which is one of the largest brokers in the United States and provided more than $1.4 billion in financing last year, has launched a Home Equity Division in order to serve the growing sector of home equity financing.

“FNE is launching this Home Equity Division to expedite the closing process of home equity financing,” said David Black, president of FNE, which is located at 180 Wells Ave. in Newton. “We will be underwriting homeowners’ loans in this division, streamlining the approval process to give consumers a quicker turnaround time.”

According to Black, the company had been “giving away” second mortgages to make a first mortgage deal go through in the past.

“We never made any money on them,” he said.

But things are about to change. With the new division, Black said he is “looking for different channels of new revenue.”

By putting loans into a group of $500,000 to $1 million, the company can sell the loans in one large group and make more money. And as more people use equity in their home to finance other life expenses, such as cars and boats, the home equity market has become more lucrative, Black said.

“There is just so much equity,” he noted.

New FNE employee Chris Kelley will manage the Home Equity Division, while a current FNE employee will act as an underwriter.

“This division offers consumers the opportunity to work one-on-one with a loan officer to customize equity loan solutions that are best suited to each individual,” Kelley said. “Since FNE will function as a wholesale lender, we will be able to offer very competitive rates.”

Black said the division will issue its own rate sheet and be able to lock rates.

“It is the first in-house product we’ve had,” said Black.

Because it is the first in-house product, Black said he had to invest in a new loan origination system. FNE also needed an in-house rate-lock desk, which allows lenders to issue rate sheets and track the rates. Before the division was established, FNE sold off loans quickly, but now it will need to service loans until they are sold. Black said FNE will hold loans between 30 to 90 days.

While FNE is dividing its home equity business into another section of the company, Black said he isn’t sure he wants to call it a specialized division. Instead, he said it is simply part of the business.

‘Stick With It’
Robert Rocklein, vice president of sales at First Call Mortgage in Andover, said it is typical for companies to look for new ways to solicit revenue when business gets slower. When lenders are busy with high-profit refinance loans, Rocklein said it is common to put the home equity lines on the back burner.

Although he has known of companies that have created separate divisions to focus on one particular type of loan, Rocklein said he is doubtful that it brings in a substantial amount of profit.

“I wouldn’t think it would be that profitable,” he said. “I don’t know if it makes sense to break it off.”

However, Rocklein said there could be a better level of efficiency if the home equity loans are taken off the desks of the mainstream loan officers.

At First Call Mortgage, Rocklein said, there are no separate divisions and home equity lines are simply included in day-to-day business.

“It’s just part of our overall operations,” said Rocklein.

He also pointed out that some companies may appear to have a specialized division within the company, but are simply advertising a particular loan to consumers.

Saying he is unsure if a specialized division is necessary, Rocklein admitted that the industry is moving into a good timeframe to offer home equity loans. He said those loans should hold steady in the marketplace.

“It will chug along, it will maintain itself,” Rocklein said. “But I don’t see a major boom [in the future].”

Meanwhile, James F. Flynn, president of Hopkinton-based Marathon Mortgage, has found success with a specialized division within his company. Marathon Connections, which has been in existence for five years, is an arm of the mortgage company that sends lenders into corporations to provide on-site lending service and discounts to employees.

When a mortgage company devotes a specific group of employees to a particular area of mortgage lending, Flynn said, there is generally more efficiency. He said concentrating and identifying one type of loan is better than trying to “be all things to everybody.”

There can be drawbacks, however. The disadvantages to having a specialized division can come down to money, Flynn said. If the division is a separate line item on a company’s budget, he noted, it has to be able to carry itself.

Over the years, Flynn added, most companies have found a way to carve out a specialty.

“Everyone seems to have a little niche they try to go after,” Flynn said.

Flynn said mortgage companies have had to get involved in specialization in order to bring customers in the door. Banks, he said, already get mortgage customers because those consumers usually have an existing account with their bank. Mortgage companies, however, need to find a way to get consumers’ attention.

As FNE prepares for the first days of its new Home Equity Division, Black said it is important to focus on what the company does best.

“Whatever you do well, you stick with it,” Black said.