Ann Arbor based University Bancorp owns 100% of University Bank and University Bank owns 80% of Houghton, Michigan-based Midwest Loan Services, which specializes in mortgage subservicing.

At September 30, 2003, Midwest Loan Services, was subservicing 13,896 mortgages, an increase of 66% from 8,372 mortgages at December 31, 2002. Year-to-date during 2003, Midwest originated 719 mortgages, an increase of 177% from mortgages originated in the first nine months of 2002. As of October 31, 2003 Midwest’s volume of mortgages subserviced was up 89% year-to-date. Midwest expects to end the year subservicing over $2 billion in mortgages, which would be more than double the year-end 2002 level. About 95% of Midwest’s mortgages are subserviced for credit unions. The rapid growth of Midwest is due to both increases from existing credit unions and additions of new credit unions. Midwest is currently subservicing mortgages for 64 credit unions that have over 1.6 million members. “Since the average American relocates on average every 9 years, our credit unions’ members represent a pool of over 175,000 new mortgages per year. Even with recent higher mortgage interest rates, we are just scratching the surface of our existing potential customer base,” stated Midwest President, Ed Burger.

Midwest Loan Services is in final negotiations with Lehman Brothers to expand its mortgage origination capabilities for credit unions to include jumbo and non-standard mortgage loans. This would allow Midwest to offer a complete range of mortgage products on a private label basis serviced in the name of the credit union for the life of the loan to its customers. Midwest believes that this would be the first total solution of this type in the credit union industry. Lehman Brothers predicts that this program will generate over $8 million in revenue to Midwest over the next five years on a total portfolio of $11 billion in subservicing.

Website: www.midwestloanservices.com

Growth of Midwest Loan Services. (PDF)

History of Midwest Loan Services:

Midwest specializes in the origination, servicing and subservicing of mortgage loans primarily for the credit union industry. Most of their servicing and subservicing portfolio is comprised of residential mortgage loans sold to Fannie Mae, Freddie Mac and other private residential mortgage conduits.

Midwest was founded in mid-1992. The President of Midwest Loan Services, Ed Burger, was previously the manager of D&N Bank's mortgage servicing operations, which had over 20,000 loans with a balance of $2,000,000,000 in mortgages serviced for its own account. When D&N Bank ran into financial trouble and sold its mortgage servicing rights to increase its capital base, Ed prepared a business plan for the management of D&N Bank to go into mortgage subservicing for other financial institutions using the employee skills and resources that had been developed in D&N Bank’s servicing operation. When his plan was turned down and the servicing staff let go, he sought out another local bank as a partner and initially, Midwest Loan Services was an 80% owned subsidiary of Houghton Financial, the parent company of Houghton National Bank.

In late 1993, Houghton Financial was sold to MFC Financial in Marquette but MFC Financial was not interested in the subservicing business. The withdrawal of his partner forced Mr. Burger to find a new partner. Bay Mortgage, a California-based mortgage brokerage firm purchased 67.7% of the company, with Mr. Burger retaining 33.3%.
On December 1, 1995, University Bank acquired 80% of the common stock of Midwest Loan Services by buying out Bay Mortgage and purchasing some of Mr. Burger’s shares. Mr. Burger retains 20% ownership of Midwest Loan Services. Since that time Midwest Loan Services has grown rapidly and now services over 15,000 loans representing nearly $2 billion in mortgages. Midwest Loan Services is currently the largest non-governmental employer in Houghton, Michigan.