Reg Costs Spur Lennar to Expand Retail Mortgage Business

Mortgage & Real Estate

The mortgage unit of homebuilder Lennar Corp. has acquired a retail lender, Pinnacle Mortgage Group, as part of an effort to make up for mounting compliance costs with more volume.

Most publicly traded homebuilders have mortgage units that are mainly focused on serving their homebuyers. But Lennar wants to go beyond that. It sees that the mortgage industry is consolidating and that Dodd-Frank rules have increased compliance costs.

“Having the volume to spread a lot of the extra compliance costs is important,” says Jimmy Timmons, president of Lennar’s Universal American Mortgage Co., based in Miami.

So the unit—which primarily provides financing for Lennar homebuyers but also has a traditional retail channel based in Bellevue, Wash., known as Eagle Home Mortgage—has decided to expand.

“About a year ago, we embarked on trying to bring other people into the fold,” Timmons says.

Pinnacle operates in seven Western states. Based in Lakewood, Colo., the lender originated $800 million in mortgages in 2013. “We’re excited about the opportunity to grow our presence in California and Colorado through this acquisition,” Timmons says.

With the acquisition of Pinnacle, Universal American now has 100 branches in 26 states.

More acquisitions are likely.

“We certainly have the interest and the appetite with the right partners,” Timmons says. “We are really excited about the Pinnacle guys and what they brought the table. To the extent we can find other good partners like them, we would be very interested.”

Universal American captured 77% of Lennar customers who needed loans in 2013. It and Eagle Home Mortgage together originated 22,300 residential mortgage loans totaling $5.3 billion in 2013, up from $4.4 billion in 2012, according to Lennar’s 2013 annual securities filing.

After an orderly marketing transition of six to 12 months, the Pinnacle name will be dropped and the operation will be absorbed into Eagle Home Mortgage, according to Timmons.

Todd Henderson and Brian Rindels, Pinnacle’s founders, will remain in charge of the outfit, Lennar said in a press release Tuesday announcing the acquisition.

Universal American is a Fannie Mae, Freddie Mac and Ginnie Mae issuer. It securitizes around 50% of its loans and sells the other half to investors.

Leave a Reply