GO Companies’ one-stop shop is almost complete

GO Companies CEO Michael Isaacs and his backers are combining a recently acquired lender with equity stakes in insurance and real estate firms to launch a new one-stop shop for homes.

Isaacs, who purchased nonbank GO Mortgage from its owner in November, has been working with a group of family office investors on the acquisitions, which were funded with a mix of equity and cash. He declined to identify the other investors or otherwise disclose financial terms.

The new venture is in line with findings from a survey by National Mortgage News and Arizent last year, which predicted that the one-stop-shop trend is likely to be one of the biggest industry disruptors in the next three years.

“I think if you generate revenue from the same consumer by selling them a mortgage, house, insurance and title, then utilize technology and leverage efficiencies, you can create value while reducing the total cost to acquire and manufacture,” Isaacs said in an interview.

michael isaacs

GO Companies also owns a 90% stake in brokerage 3 Degrees Realty and has a 24.3% share in MeyMax Title, an insurance company. The final piece of the puzzle will be to roll in a 49% stake in a digital provider of homeowners insurance called QuickInsured, Isaacs said.

The company’s counsel has vetted its structure to ensure it meets regulatory restrictions on certain exchanges between real estate agents and mortgage bankers or settlement service providers that could be construed as kickbacks, he said.

Isaacs and his investment partners specifically chose to buy GO Mortgage, which was formerly known as GSF, as the company’s core lending unit because it matched specific criteria he and his investment partners sought in an acquisition target.

“They had to have their Fannie Mae, Freddie Mac, and Ginnie Mae tickets, they had to be servicing at least $1 billion dollars, have a footprint in about 35 or more states, capital markets and product development expertise,” he said, naming the three housing agencies that facilitate sales of government-related loans to the secondary market. “The only thing GO had that we weren't looking for and didn’t expect to find was a construction-lending department.”

Isaacs, who has more than 20 years of experience with mortgage banking and other real-estate companies, said the company has aggressive plans to grow GO’s $1 billion servicing portfolio through multiple loan channels to encourage retention and increase economies of scale.

“Our plan is to grow that servicing book to about $8 billion to $10 billion over the next couple of years,” he said. “ We believe that if we retain the servicing of our customers, the business relationship is stickier and they come back to us. It builds residual income and customer loyalty.”

GO’s loan channels include what it calls a hybrid direct-to-consumer operation. That channel generates leads nationally among consumers who are seeking pre-approvals but lack real estate agents. The company will use those leads to build business relationships with local agents. The lender also has a more traditional consumer-direct channel that gets leads from websites like Bankrate, Credit Karma and NerdWallet, and a distributed retail operation with local origination branches across the country. In addition, the company’s wholesale division works with correspondent loan sellers and mortgage brokers that source construction loans. GO also networks with builders who expect borrowers to finance land purchases and construction.

While Russia’s Ukraine invasion has created some uncertainty that could affect the servicing outlook, it’s also possible that private equity investors who have recently shown interest in investing in the rights to borrower cash-flows could add to GO’s alliances. Monetary policy officials at deadline were still leaning toward actions that could put upward pressure on mortgage rates and diminish prepayment risk that plays a large role in the value of servicing rights.

“A large private equity group would potentially buy servicing, market it on our platform,” Isaacs said. “We would service it for them, split the economics, provide retention services for that book and create another origination channel out of that.”

While rate-related uncertainties raise questions about whether originations will continue to grow, Isaacs said he expects that the company’s business and efficiencies will serve it well even in a scenario where lending contracts, given its scale and strong ties to referral partners.

“If everybody's volume is down, originators are looking for a better option, and when you’re our size, you can grow into a declining market simply by taking market share,” he said.