For most of its history, New American Funding (NAF) has focused on organic growth, but earlier this month, the company acquired Draper and Kramer Mortgage Corp. to enhance its presence in the Midwest and along the East Coast. HousingWire Editor in Chief Sarah Wheeler sat down with New American Funding CEO and Co-founder Rick Arvielo to talk about the acquisition, the company’s strategy for the rest of 2024, and what differentiates NAF in this market.
Sarah Wheeler: Market conditions have fueled a lot of M&A activity recently. What made Draper and Kramer a good fit for NAF to acquire?
Rick Arvielo: What’s interesting about our growth is that we are the 13th largest retail IMB in the country, but we’re only in about a third of the United States. Coming out of COVID, we saw our competitors getting very active, either buying companies or extending huge signing bonuses. We felt it made more sense to wait and get through the trough, so we weren’t active at all with an acquisition strategy. We feel now is the time and are looking for strategic opportunities in markets where we just don’t have a presence. Draper and Kramer fit well with that initiative. They are a great company with an awesome culture in markets we just don’t have much of a presence in, so it made sense.
SW: How does this acquisition fit in with New American Funding’s overall strategy?
RA: We have always done really well growing organically. We recognize that loan officers have a choice, and when they choose to join a company on their own, it just seems to work better. This is a unique market, though, and there are a lot of awesome regional lenders with a great culture that are just, unfortunately, struggling right now. I’d like to think that they would do well becoming part of the NAF story. And when the geographies make sense, we’d love an opportunity to speak with them.
SW: Are you planning more acquisitions?
RA: The short answer is yes, for the reasons previously mentioned, but Patty [co-founder and CEO]and I are of the mindset that any target must be the right fit. We have never wanted to grow just to grow. We look at culture and synergies, and if our vision aligns with theirs, we hope we will have opportunities to combine forces and grow together.
SW: What are some of the decisions you made during this current mortgage cycle that positioned NAF to be on the buying side instead of looking to be acquired?
RA: One thing that most don’t realize about NAF is that we consider ourselves a legacy family business. We started as a five-man broker shop in Southern California. We grew with a call center model for the first 10 years and only got into outside distributed retail 11 years ago. From the moment we started, competitors would talk about us, saying “they’re for sale” or “they’re going public.” We have always said from the beginning we will never go public, take outside capital, and have no interest in selling.
We are a family business, and a lot of our family works here. Plus, this industry is evolving, so as an entrepreneur, what better situation could I ask for than to collaborate with our family, decide on the vision to chase, and work hard together to implement that vision? It is very rewarding, and we have no interest in getting off the ride.
SW: What differentiates New American Funding in this market?
RA: We joke that we’re kind of control freaks and feel we have invested in the right things. We want to retain customers for our loan officers for life, so we don’t sell the loans we fund or the servicing rights. We service our loans and do a lot of unique things to keep our LOs and their referral partners top of mind after the transaction closes, like including the picture and contact information of both the LO and their real estate agent on the mortgage statement.
We also like to build our own technology and develop tools and products that give our LOs an advantage in the field and enhance the experience with our customers. That’s why we started NAF Cash. That allows us to turn our clients into cash buyers, which will be very relevant as the housing market heats up.
Beyond that, our NAF leads technology allows our in-market LOs to easily connect to the borrowers that are starting their journey online. We have many tools like that already in place or, in the works, that will give our LOs an advantage and enhance the client experience. It’s all to help ensure that they come back to us for their next loan or refer their friends and family.
SW: Housing affordability is hitting first-time homebuyers harder than ever. Those borrowers have been core to New American Funding’s mission, so how is NAF helping those borrowers in this market?
At NAF, we are really focused on helping the underserved. I believe we’re among the highest percentage of lending to Black and Latino homebuyers out of the larger lenders. We’re always looking for what we call mirrors — LOs of color to serve clients in their communities. It is important to be in lockstep with the cultural differences of these homebuyers, and following through on that strategy is just the best way we can think of to accomplish that goal. You can see in our numbers that it’s working. It’s also good business. We like it when we can be good by doing good.
