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trust) in 2005, but in reality, it was viewed more as a merger. I owned a huge amount of Bimini and was the number two shareholder of the company. I ended up retiring in June of 2007 when I really decided I didn’t want to be in the origination business any more.

“I view any mistakes that I have made as a lesson and just move forward and hopefully learn from it.”

wholesalers were out of business and if there’s one thing that I knew, it was the ins and outs of the mortgage business. I had been through similar business situations in the past, and although I was hesitant to return to business on a larger scale, I think the opportunity now in this business is greater than I’ve ever seen it in my entire career. Nearly 80 percent of the originators who were in the business just five years ago are now gone. There is not a lot of competition and there is very little capital in the mortgage origination companies out there, and from a mortgage servicing perspective, you could potentially build a servicing platform with the tightest underwriting standards we have seen in our entire lives. Servicing, to me, is absolutely worth gold. We effectively took over the Security Atlantic platform, and by putting it all together, we ended up with an entity that has roughly $30 million in capital and you are simply not going to find many independent companies with that kind of capital base.

mark for margins that I’ve ever seen. I have not really had any pressure to reduce those margins because there’s just no company that can offer the support for service levels that REMN does. There are certainly the four big aggregators out there, and they may be priced substantially better than us, on any given day. But if you cannot get a loan closed there in a timely fashion, price doesn’t make too much of a difference. We’ll get the loans closed and that’s how REMN is built. The biggest problem we are encountering now from a cost perspective is that you need to have so many more underwriters underwriting the same number of loans. This is where you increase your overhead. We used to do six loans a day for a full-time underwriter and now we’re at three-and-ahalf per day because everyone’s underwriting standards and guidelines are so much more complex. Do you have any comments on dealing with third-party originations (TPOs) as opposed to the direct channel? From a TPO perspective, the cost to originate the loan is dramatically less than the cost to originate a loan on the retail side … there is no question about it. As far as investor acceptability, it has been difficult. At this point, everybody is very happy with the quality of the paper, and I don’t really see an issue in any way shape or form. With the Ginnie Mae portfolio we have, we do not look at it loan by loan and pick and choose what we’re retain-

“…I think the opportunity now in this business is greater than I’ve ever seen it in my entire career.” In a retail scenario, it’s more difficult to put your foot down with the sales force because a good salesperson in the retail space can go to 10 other shops and do well. They don’t have that and you have a lot more flexibility to be tighter on the wholesale side than on the retail side. When I really think about it and think about the pressure I get when I put through something that I really want to … to tighten the noose on retail is extremely difficult to do without causing ramifications. On the wholesale side, it really isn’t difficult to do—you just do it. In viewing the continued on page 16



What is the current state of REMN’s warehouse lines? We have all the warehousing we need now. If anything, we are now turning banks away because we do not need additional warehouse lines. The only thing we are looking at now and are being approached pretty heavily about is servicing portfolios. About one year ago, we received our Ginnie Mae approval, and during this time period, we’ve actually kept about $850 million so far that we’ve retained.

What are you looking at in terms of cost per loan of originations compared to previous years? Are we almost at an all-time high in the cost per loan area? We are currently probably at the mark of highest cost per loan we’ve ever seen, but you are also at the highest

ing and what we’re not. It has nothing to do with that whatsoever and the weighted average FICO score of our FHA paper is 705. The quality of our paper is exceptional, and I feel that in order to build a quality shop, you have to originate quality paper. We make prudent decisions. We’re not doing loans for FICO scores under 620 and jacking up margins … we have no interest in loans of that nature. It’s all about building a quality shop both on the production side and on the servicing side as well. Building your company is about building a base to get an IPO done. I do think the opportunity is there to build and I find the TPO side interesting because again, there are not a lot of players that provide the level of service that we do. With our previous company, SouthStar, that was really the story. SouthStar was successful not because they were priced competitively in the market, but because they could actually get a loan closed within 24 hours. This is the same mentality on the TPO side at REMN. I believe that, at this point, TPO underwriting and criteria are actually tougher than on the retail side. It’s really interesting, and one of our investors even came and said this to us which surprised me. During an audit, they said that they prefer the TPO business to the retail market. That was the first time I’ve actually heard anybody say that in the last couple of years. The reason is that every retail shop that he goes into, they can’t put things through as they did in the past. It is very difficult to change a retail loan officer’s mentality relative to what you can do and what you cannot do. On the wholesale side, because you’re not dealing with the loan officer directly, you can dictate what you will take and what you won’t take and that mortgage broker can go wherever they want to, but you are dictating what you will and won’t take.


Our intention is that we’d like to retain about 50-60 percent of our overall production. Basically, the aggregators aren’t really paying us what we consider to be fair value for the servicing. Obviously, it’s a major cash issue if you retain all of that servicing and we’ve been fine in managing it. We’re really managing to cash, but we continue to explore situations where people are offering us $50-$150 million in capital to retain a larger percentage of servicing. So we are looking at deals like that to see whether or not they make sense, but I think the opportunity to build an origination platform and servicing platform now is probably the best I have ever seen it. 

Back when you had an interest in both SouthStar and Opteum, how did you operate both companies as they each competed for market share? From Opteum’s perspective, the company was really an all-day shop and not a sub-prime shop. We did very little sub-prime at Opteum. The only sub-prime Opteum did was what Joe [Amoroso] did, which was not a big piece of our overall business. I would say our sub-prime volume might have been three percent of our overall volume on a monthly basis … it wasn’t really what we were doing. Opteum was doing prime business, but we were predominantly an all-day shop, so we never really competed with SouthStar. I was once part of the public company and was allowed to keep my interest in SouthStar, but it was held in a blind trust and I could have nothing to do with it. I got off the board of SouthStar. I had really nothing to do with its ownership or the day-to-day operations of SouthStar. I had a blind trust that owned the stock and that was all I had so that’s how it was segregated from my perspective once it was a public company and everybody was okay with that. At the end of 2007, a friend of mine who had a small hedge fund approached me to do something with him creative on the distressed mortgage side. That sort of piqued my interest and we realized there were a lot of hedge funds out there buying distressed mortgages. As they were buying distressed mortgages, their whole platform was to buy $1 billion worth of mortgages at 0.60 cents on the dollar, and flip it for 0.70 cents on the dollar within a week, make a 10point spread, and then move on to the next deal. All the buyers that were buying all the paper had no one to sell it to, and most of them got stuck with the paper, so we wanted to come up with something different. The theory we came up with was to acquire a small mortgage originator that did not have any legacy that had warehouse lines, agency approvals and multi-state licenses. I knew Doug Rotella, who owned Real Estate Mortgage Network (REMN), for nearly 20 years. I talked to Doug and he needed the capital, and we ended up effectively acquiring REMN.

Discuss the purchase and growth of Real Estate Mortgage Network (REMN) into what it is today? Initially, we put capital in on a preferred stock basis without taking any ownership or voting stock. We did it through a warrant structure, basically so that the states were okay and we didn’t take control. I just gave Doug [Rotella] capital to use and the theory was we would refinance a lot of the paper that we were buying at 0.40 cents on the dollar. Soon thereafter, the agencies changed pretty dramatically as to what you could do and could not do, and it was no longer easy to refinance a lot of that paper. Many of our old employees heard that I had bought this little originator, which I didn’t actually take ownership of until March of 2010. We didn’t exercise our options or get state approval until March of 2010. Many of my former employees wanted to come back again to join us at REMN, and we viewed it as a huge opportunity because most of the