Merrill Becoming Mortgage Player

More than 75,000 loans closed in 2004

January 27, 2005

By PATRICK CROWLEY

That’s an increase of more than 50 percent since 2000, when Merrill Lynch first got into the home lending business.

According to the company’s top executives, it’s an area poised to grow as the firm continues to hire hundreds of brokers a year and scouts for acquisitions in the retail brokerage industry.

“We have put the foundation for diversification in place in each business creating core capabilities we can build on in 2005 to deliver differentiated growth, achieving scale and stronger market position,” said Ahmass Fakahany, Merrill’s executive vice president and chief financial officer, according to written transcript of a conference call he had with stock analysts.

“Regional expansion opportunities will also grow in importance,” Fakahany said. “While the environment has taken a turn for the better, we recognize that in this uncertain geopolitical and economic landscape, things can change quickly.

“But our strategy and execution discipline will not,” he said. “We remain focused, but agile in resource allocation and execution.”

In an interview with Dow Jones Newswires, James Gorman, president of Merrill’s private client group, reportedly said that 90% of the company’s 14,100 brokers sold mortgages last year.

Each broker reportedly averaged six mortgage loans, which comes out to about 75,000 loans, according to a MortgageDaily.com calculation.

That number pales in comparison to residential mortgage originator lenders like Wells Fargo & Co., which closed nearly 2 million loans in 2003, according to data posted by the Mortgage Bankers Association.

But in 2000, when Merrill first started making home loans, only 40 percent of its brokers averaged six mortgage loans a year, Gorman said.

And last year’s 75,000 loans was an increase over 2003, when Merrill Lynch Credit Corp., the company’s mortgage lending arm, closed 64,589 loans for a total of $19.1 million, according to the MBA rankings — even as production for the mortgage industry as a whole fell sharply in 2004 from the prior year.

That placed the company 26th among the nation’s top mortgage originators.

Those numbers are expected to grow for Merrill in the near future.

Gorman reportedly told Dow Jones that Merrill expects to add 600 to 700 brokers each year for the next three years.

Under a scenario using Gorman’s 6-loans per broker average, the company could make nearly 13,000 loans through its new hires alone over the next three years.

Merrill hired 621 brokers last year, Gorman said in a speech to equity analysts, according to synopsis off his presentation posted on the company’s Web site.

Patrick Crowley is a political reporter and columnist and former business writer for The Cincinnati Enquirer. Email Patrick at: pcrowley@enquirer.com