BarclaysAmerican Mortgage Corporation
BarclaysAmerican Mortgage Corporation
5032 Parkway Plaza Boulevard
Charlotte, North Carolina 28217-1962
Fax: (704) 357-7625
Wholly Owned Subsidiary of BarclaysAmerican Corporation
Total Assets: $500 million
SICs: 6162 Mortgage Bankers
BarclaysAmerican Mortgage Corporation is one of the largest home loan servicers in the United States. The company is a unit of BarclaysAmerican Corporation, which is in turn a subsidiary of the giant British banking empire Barclays PLC. Mortgage servicers act as middlemen between borrowers and investors. They generally receive fees for collecting monthly loan payments and then passing them along to investors as securities. They often perform other administrative services such as insurance payments and tax management. In the mid-1990s, BarclaysAmerican serviced somewhere in the range of $30 billion in mortgages.
BarclaysAmerican Mortgage Corporation was formed in 1984 as a way for BarclaysAmerican Corporation to break into mortgage lending, an area into which it had sought to expand. The new firm was based in Charlotte, North Carolina, where the headquarters of its parent company were also located. Lee Shelton was named company president. Barclays’ move to create a U.S. mortgage company came at a time when a number of large companies, including General Motors Acceptance Corporation (GMAC) and American Can Co., were moving into the once sparsely populated field. BarclaysAmerican hoped to take advantage of its high name recognition among home buyers, to whom it would market itself directly and more aggressively than traditional mortgage brokers.
By 1985, BarclaysAmerican Mortgage had five offices, all located in the South (Virginia, South Carolina, Tennessee, and North Carolina). That number was tripled later in the year with the acquisition of Northwestern Mortgage Co., a subsidiary of Northwestern Financial Corporation, also based in the Charlotte area. Northwestern Mortgage brought with it a mortgage servicing portfolio worth approximately $600 million.
Besides the South, six other regional “hubs” across the United States were identified as targets for the company’s expansion. BarclaysAmerican Mortgage continued to grow both in size and geographical scope through the second half of the 1980s, primarily by acquiring smaller mortgage servicers. The company ranked 98th in size among mortgage companies in the United States by the end of 1987 according to a survey by American Banker. Over the next year, BarclaysAmerican’s mortgage servicing portfolio grew to $2.8 billion, and it moved up in rank to 77th by the same annual survey.
By the middle of 1989, BarclaysAmerican Mortgage had doubled its number of offices to 20, including branches in Florida, Kentucky, and Ohio in addition to its initial core states. During the one year period ending in June 1989, the company nearly tripled the size of its servicing portfolio with several acquisitions. The most significant of these was the $28 million purchase of Merrill Lynch Realty Inc.’s mortgage servicing portfolio, which represented the rights to manage about $989 million in mortgage loans. That acquisition lifted the value of Barclays-American’s portfolio to about $6 billion.
As the 1990s began, BarclaysAmerican Mortgage continued gain ground on its larger competitors. Interestingly, this ongoing expansion was taking place at a time when its ultimate parent company, Barclays PLC, was more or less withdrawing from the consumer banking business in the United States. This withdrawal included the sale of BarclaysAmerican Financial, its consumer finance unit, to Primerica Corporation. Nevertheless, BarclaysAmerican broke into the top 20 among U.S. mortgage servicers in 1990, after ending 1989 ranked 54th according to American Banker, with a portfolio totaling $6.7 billion. Several more purchases contributed to this ascent. One such deal was the acquisition of $1 billion in servicing rights from ComFed Bancorp, a company with headquarters in Lowell, Massachusetts.
However, the relationship forged around 1990 with Norwest Mortgage Inc. of Des Moines, Iowa, proved most vital to establishing BarclaysAmerican as a major powerhouse in the mortgage industry. That year, BarclaysAmerican signed a three-year contract that brought the company most of the servicing rights on new loans made by Norwest. The arrangement benefited both companies immensely. Norwest could concentrate on lending, its major strength, while leaving the servicing to BarclaysAmerican, a specialist in that area. The Norwest deal represented a coup for BarclaysAmerican, in that the company essentially stole a major customer from GMAC, the former servicer for much of Norwest’s new loan business.
With a steady inflow of servicing business from the rapidly growing Norwest, BarclaysAmerican’s own growth accelerated even more. In the second half of 1990 alone, the dollar value of the company’s servicing portfolio grew by 56 percent, to $17 billion. The new rush of growth also enabled BarclaysAmerican to become the second largest issuer of Government National Mortgage Association (Ginnie Mae) securities, after finishing 1989 ranked 31st. The Ginnie Mae securities were often issued as part of a transaction begun by a government-insured loan originated by Norwest. The loans would then serve as collateral for the securities, and BarclaysAmerican would retain the servicing rights on the loans after issuing the securities.
In 1991, Shelton resigned from BarclaysAmerican in order to take part in a newly-formed mortgage firm in Columbia, South Carolina. Michael Prior, an executive vice-president at the parent company’s New York office, was selected to take over as chief executive officer of the mortgage subsidiary. By the middle of that year, the company’s mortgage servicing portfolio had grown to about $20 billion. In addition, a shift had begun to take place in the balance between government and conventional mortgage servicing. As much as 95 percent of Barclays American’s business had been government servicing in 1987. By 1991, government servicing accounted for only 40 percent of the company’s total.
BarclaysAmerican’s rank among U.S. home loan servicers rose to 12th by the end of 1992. The value of the company’s portfolio by that time was about $28 billion. In early 1993, Prior left the CEO spot at BarclaysAmerican Mortgage to take a position at the New York office as managing director of global services. He was replaced by David Beal, who had served as president of Norwest in the early 1980s, when that company was the nation’s number two mortgage servicer. The change in corporate leadership at BarclaysAmerican was accompanied by further strategic moves, as the company began preparing to work more closely with Barclays de Zoete Wedd (BZW), another arm of the sprawling Barclays empire. The plans called for BarclaysAmerican to step up its production of high-balance mortgages. BZW would then pass the loans on to investors in the form of securities.
BarclaysAmerican unveiled a new product in late 1993—a home loan that could be transferred to a subsequent buyer of the home. Under the new program’s terms, a new buyer could assume the mortgage as long as he or she met the same financial conditions as the original homeowner. The main advantage of this type of assumable mortgage was that a buyer could lock in at a particular interest rate, a major benefit in the event of a hike in lending rates. The company’s initial assumable mortgage deal was a 30-year fixed-rate assumable mortgage. Its interest rate was slightly higher than that of conventional home loans. This sort of arrangement also benefitted the servicing company. Since an assumable mortgage tended to have a longer life, greater servicing fees were generated over time. The value of the servicing rights for these loans was therefore increased. Consistent with earlier announced plans, the program was to be securitized through BZW.
Adams, Jerry, “Barclays Takes Aim at Mortgage Market with Web of Regional Lending Offices,” American Banker, September 24, 1985, p. 6.
“Boardroom View,” Mortgage Banking, March 1991, p. 9.
Cline, Kenneth, “Barclays Unit Charts Steady Growth in Mortgage Servicing,” American Banker, May 25, 1990, p. 10.
Roosevelt, Phil, “Barclays American Buys Merrill’s Mortgage Rights,” American Banker, June 28, 1989, p. 2; “With Norwest Deal, Barclays Unit Surging,” American Banker, January 30, 1991, p. 6; “A Top Banker Returns to Lead Barclays Unit,” American Banker, January 29, 1993, p. 9.
Saft, James H., “Barclays Offers Assumable Loan,” American Banker, November 12, 1993, p. 11.
—Robert R. Jacobson