Lincolnshire’s InterFirst Mortgage closes its doors – Finance News

on Jul27

27 July 2017 | 10:30 am

A local mortgage firm that five years ago was the country’s 15th-largest home lender has closed its doors.

InterFirst Mortgage made 37-year-old Dmitry Godin, founder and CEO, extraordinarily wealthy as it sprouted from the wreckage of the housing bust and financial crisis.

At its peak in 2012, it originated $14.1 billion in home loans, according to trade publication Inside Mortgage Finance. The company employed about 500 people at one point, roughly half in its north suburban Lincolnshire headquarters.

To put that in context, that was about the same volume produced at the time by far better-known Chicago mortgage lender Guaranteed Rate.

But the wholesale lending model Godin used to grow so fast after launching his company in 2007 has become far less profitable in the age of modestly rising interest rates. The company thrived on the mortgage-refinancing boom that took place when interest rates plummeted during the recession and immediately thereafter.

UNUSUAL END

The end of the firm was unusual, given that housing market conditions are relatively benign and unemployment is low. But in an interview, Godin said he wound down his company methodically after determining that the kind of business he wanted to do wasn’t really available to him anymore.

All his lenders and vendors are paid off, he said.

“Everything has a beginning, everything has an end,” he said.

Godin was born in Ukraine and moved to the U.S. at the age of nine. His parents were refugees from the Soviet Union and settled in Skokie. He graduated from Niles North High School and later from DePaul University.

He launched a small retail mortgage brokerage immediately after graduating in 2002. Five years later, he transformed his firm into a wholesale business, making home loans brought to InterFirst (then called InterBank) by brokers all over the country. He was armed with a single warehouse line of credit from a bank.

With the housing bust already in its early stages, he found opportunity as the housing crash culled the herd of mortgage companies dramatically.

“We filled a vacuum,” he said. “We did a lot of business right away.”

And, with a dearth of competitors, he could afford to be choosy about borrowers. He lent only to those with high credit scores. Loans averaged a very conservative 55 percent of home values.

Another warehouse line of credit was added in 2009. At the firm’s peak, it had “six or seven” bank lines totaling about $550 million, he said.

Volume got so high that InterFirst stopped servicing its mortgages and sold the rights to service the loans in 2013.

After the peak year of 2012, fueled mainly by homeowners refinancing, volume gradually tapered off. InterFirst originated about $10 billion the following year, $5 billion in 2014, $3 billion in 2015 and $2 billion last year, Godin said.

SCALING DOWN

“It wasn’t an overnight decision,” he said. “We kept scaling down, and we kept looking at the market.”

With new entrants proliferating and profit margins shrinking, competitors shifted to making mortgages backed by the Federal Housing Administration. Godin stayed away, even though he sold virtually all of the loans in the secondary market.

“I have a philosophical belief that just because you can sell off the risk, you shouldn’t make crappy loans,” he said. “It was never who we were.”

So Godin, whose only public notoriety to date was purchasing the most expensive Chicago-area home of 2013 (a lakefront mansion in Winnetka), achieves a new, somewhat rare distinction in his chosen field: Leaving on your own terms.

What’s next? He doesn’t know. He’s exhaling now, spending time with his wife and kids, he said.

“I’m sure I’ll get bored,” he allowed.

He didn’t rule out a return to the only business he’s ever known and really understands. But he said he’ll be OK with it if that doesn’t happen. The conditions for his return would have to be similar to beforeā€”a financial upheaval creating opportunity. And he doesn’t wish for that.

“There’s a proverb,” he said, “that the market can stay irrational a lot longer than you can stay solvent.”



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