UPDATE: Competitors’ woes could help Fishers mortgage firm expand

Officials at a Fishers-based mortgage company say a thinning of competition in the hard-hit industry should help the firm succeed in its plans to expand.

Stonegate Mortgage Corp. announced Tuesday that it plans to add 300 jobs by 2015. The company will move next spring from its current location near 106th Street and Allisonville Road to a 29,000-square-foot office at 9998 Crosspoint Blvd., where it plans to invest $3 million in its new corporate headquarters.

Stonegate, which was founded in 2005, handles residential mortgage work, such as processing and underwriting loans; managing escrow accounts; and purchasing mortgages from financial institutions.

It may seem counterintuitive for such a company to add jobs at a challenging time for residential housing. A report released Monday by Indianapolis-based F.C. Tucker Co. showed November home sales in the Indianapolis area dropped close to 18 percent last month from November 2009, the seventh consecutive month of decline. Year-to-date, home sales are off 10.1 percent from the same period in 2009, the report said.

But while loan originations are down, so is the number of originators. And that, said Stonegate founder and CEO Jim Cutillo, leaves plenty of opportunity for companies such as Stonegate to grow.

“At the end of the day, we’re one of the [few] survivors,” Cutillo said. “Our opportunity is greater today than it was in 2005 or 2006. There’s less demand, but there’s really not much supply.”

Cutillo also thinks the real estate market is at its bottom and is likely to rebound in coming months.

John Reed, president of David A. Noyes & Co.’s Chicago-based Investment Banking Group and a longtime observer of local financial institutions, is less optimistic than Cutillo about the pace of the housing-market rebound. But he agrees that a shakeout in the number of originators has been helpful for companies such as Stonegate.

And record-low interest rates have created steady demand for refinancing, Reed said, helping mortgage lenders compensate for some of the downturn in home sales. The number of refinancing applications nationwide last month was up about 30 percent over November 2009, according to the Mortgage Bankers Association.

“There’s adequate business, and I think it’s an ideal time for somebody to be looking to expand,” Reed said. “Weaker rivals are either teetering or they teetered.”
 
Stonegate serves 14 states in the Midwest and South. In addition to the Fishers office, the company has five retail locations, with two in Indianapolis, two in Ohio, and one in Overland Park, Kan.

The loan servicing takes place at the company’s office in Mansfield, Ohio, but Stonegate is discussing whether to move that activity to Fishers as part of the expansion.

What helped the company survive, Cutillo said, was its strategic effort to avoid subprime lending—or offering loans to those with blemished or limited credit histories. Cutillo formerly worked for major subprime issuer GMAC.

“I think it was irresponsible behavior—I also knew that it wasn’t sustainable,” Cutillo said. “I was looking to build a company that would last well beyond the subprime loans.”

That strategy initially meant a slow start for Stonegate, which saw little to no growth from 2005 to 2008. 

But the company has seen an uptick since 2008. Since then, Stonegate has originated more than $1.6 billion in residential mortgages and retained $750 million in residential mortgage servicing. The company also has acquired Mansfield-based Swain Mortgage Co., added 150 employees and attracted new capital from two new equity investors, Indianapolis-based Second Curve Partners and the Corsaro Family. Cutillo remains the majority shareholder, but he wouldn't disclose how much he has invested.

The company, which now has 162 employees, including 88 in Indiana, has begun “actively pursuing new employees and will continue hiring in 2011 and beyond,” Cutillo said.

The new positions will mostly include skilled jobs, such as loan originators and processors, IT experts and business analysts, with salaries averaging $28 an hour. Most will be located in Fishers, but some will be at the Indianapolis-area branches.

The Indiana Economic Development Corp. is providing Stonegate with $3.7 million in performance-based tax credits and $50,000 in training grants. Fishers also has offered the company a 10-year property-tax abatement of up to $760,000.