Incenter units team up to help mortgage nonbanks offer student loans

A pair of Incenter companies are teaming up to offer nonbank mortgage firms the opportunity to earn incremental fee income at a time when origination volume is expected to decline.

CampusDoor, which is a white-label technology provider for education loans, and Incenter Mortgage Advisors are coming out with Student Loan in a Box, a product that lets mortgage lenders generate revenue from student loans without having to hold them on their balance sheets.

"We feel that there is an opportunity with the nonbank lenders, who have historically have not participated in the student lending market, to now be able to concentrate [on them because of] a slowdown in originations," said Tom Piercy, managing director of Incenter Mortgage Advisors. In the past, these nonbanks have not been able to participate in student lending, simply because most providers are portfolio lenders, or have access to securitization capabilities, he continued.

With Student Loan in a Box, the consumer is able to access the system through a white-label connection on the mortgage originator's website. CampusDoor handles application intake and processing, and manages underwriting as well as the payoff of all of the underlying student loans. IMA provides investor and servicing support. Their parent company, Incenter, is a unit of Finance of America Cos.

"This is a pathway for the nonbank mortgage lender to enter into this market by simply providing access to their consumers and earning a fee while CampusDoor processes the loan, and the investor and/or participant will fund the loan, and then own the loan going forward," Piercy said.

Besides generating fee income, Student Loan in a Box also helps mortgage nonbanks work with their existing and future mortgage clients in three ways, said Steve Winnie, the CEO of CampusDoor.

The first is by reaching out to those existing clients who got mortgages from them in the past, but now have a need to finance a college education. Then there’s the current pipeline of customers who may be seeking a mortgage but because of an existing student loan, have a debt-to-income ratio that is too high and would benefit from a refinance of that product.

Finally, there are prospective customers, for whom the mortgage nonbank can help to get a student loan while putting the company's name out in front if they need a mortgage in the future, Winnie said.

"This helps with the stickiness factor, but also nonbank mortgage lenders are facing a new competitor for those new customers and those are the fintechs who are getting into [real estate finance] in reverse," Winnie pointed out. "So, we've seen multiple fintech startups who start with a student loan product, get enough experience, and then parlay that into mortgage and real estate related products."

For example, personal finance fintech SoFi has made several plays in the mortgage market, including a 2016 partnership with Fannie Mae that offered a mortgage refinance product that allowed borrowers to use the proceeds to pay down student loan debt.

Personal lender Prosper moved into the home equity line of credit business.

SoFi's former CEO Mike Cagney founded Figure Technologies as a home equity fintech, which then moved into student loan refis.

So far, CampusDoor has had "very preliminary discussions with nonbank lenders [that] have generated a significant amount of interest, I'd even say enthusiasm," said Piercy.

"CampusDoor is already providing this function for banks who are offering this product in a very similar fashion to their existing customer base," he added, noting that banks typically keep the student loans on their books, whereas with this mortgage nonbank product, the company has created the capability for the loans to be funded by an investor.

CampusDoor concentrates on the private student loan business (as opposed to the government-guaranteed product). Private student lending is a $140 billion market, and those looking to refinance their student debt generally have $60,000 or more to repay at rates ranging from 3.5% to 10%, according to information from Incenter.

"CampusDoor has had tremendous success over the past several years, certainly because of the rate environment, as it is a debt consolidation and rate reduction product that can potentially lower an individual's debt-to-income ratio," Piercy said. "All of these loans are eligible for a debt consolidation plan, which could potentially create greater affordability and qualifications for a borrower as it pertains to the mortgage application."