The announced $2.1 billion merger plan between The Money Store Inc., Union, NJ, and First Union Corp., Charlotte, NC, surprised many people in the subprime mortgage lending industry, who expect to see the companies complement each other’s marketing strengths in DRTV and retail.
“It’s a very smart move for both companies,” said Gene Devine, senior vice president of direct marketing and consumer sales at Eastern Mortgage Services Inc., Trevose, PA. “The Money Store is a major direct mailer and has such a large retail presence, while First Union is one of the largest mortgage lenders in the country.”
While the details of possible synergies between the two companies have not been formulated completely, said First Union spokesperson Bernadette Hearne, she speculated that the two firms would build on the strength of their retail networks and refer borrowers to each other, based on the quality of their credit histories.
“Banks like us, for example, are limited by law to A-grade customers,” she said. “We can’t do much B and C-grade lending, which is The Money Store’s specialty.”
She said there are no plans to tinker with Money Store’s recognizable DRTV campaign, which features baseball legend Jim Palmer. Money Store referred all questions to First Union.
The merger is widely seen as another example of the continuing shakeout in the increasingly competitive subprime mortgage industry, which originates loans to people with poor credit records. The emergence of more competitors is expected to drive more direct marketing activity in all media.
“Subprime lending is going to be like what credit cards were 10 years ago,” Devine at EMS said. “It used to be that Citibank and Bank on America were the only recognized players, but now people receive tons direct mail offers a week for credit cards from all kinds of banks. The same thing will happen in our industry, with a few recognized players emerging.”
