LENDERS ONE SEES A FUTURE WITH WALMART

By DOUG

Starting in high school and continuing through his collegiate years, there were few opportunities for Justin Demola to engage in usual adolescent and student behavior like sleeping in or slacking off. Instead, during vacations and breaks, he was put to work in his uncle’s mortgage business, Walsh Securities/Equity Rewards, in Parsippany, N.J.

“I was held hostage,” said the 48-year-old Demola, who now leads the mortgage cooperative Lenders One, when asked about his upbringing. “My family was in the business and during my high school and college breaks I was working for the family company.”

In fact, as Demola describes family life, there wasn’t much of a choice when it came to a career.

“My mom worked with my uncles,” he said. “My cousins were in the business. My sisters (who are eight and nine years his senior, respectively) were also in the business like my brothersin-law. Everyone in the family was in the business.”

When he graduated from Skidmore College in upstate New York, his family pooh-poohed his Wall Street job offer, persuading him to join the family business, instead.

“My family was like, oh, just come back, you know, for a couple of months and see how it is. And so, to make a long story short, I’m still in this industry.”

“One of my first jobs,” he continued, “was using Lotus 123 to evaluate weighted average coupons and weighted average LTVs on large portfolios of loans that we were looking to purchase.”

TODAY’S CHALLENGES

While he describes himself as “groomed from day one to learn every aspect of the (mortgage) business,” today, Demola likely faces some of his most intimidating and strenuous professional challenges, ones that will put his experiences and background to the acid test.

The first is leading Lenders One, a cooperative with multiple stakeholders – more than 240 “banks, credit unions, independent mortgage banks and real estate/builder-affiliated firms” that originate between $25 to $50 billion a year in mortgages, says the organization’s website.

The second might be more daunting: Seeing to it that Lenders One aces its test with the country’s largest retailer, Walmart. The Bentonville, Ark., behemoth is testing whether its customers are apt to pick up a mortgage from Lenders One in a few, preliminary locations.

WALMART & LENDERS ONE Lenders

One worked with Walmart for nearly two years before finalizing the relationship.

“Essentially we were able to sign a master lease with them for the ability to open up locations wherever we want as long as there are vacancies and Walmart approves the location,” Demola said.

But something like this was tried earlier by another retail giant, Costco, and it stopped in 2022. So why does Demola think the outcome of his plan with Walmart will turn out better than what happened with Costco?

“The Costco offering was online only, and it was not personal with four members reaching out to the potential customer,” he said.

While Lenders One is currently in three locations, two in New Jersey and another in Orlando, Fla., the plan, Demola said, is to pilot this program in three other states, South Carolina, Texas and California.

“We chose these locations based on membership demand and concentration,” he said. “We are looking to add additional states and having the legal reviews for branch licensing done there.”

“Our initial pilot is in 10 stores,” Demola said. “The second phase of the pilot is to be in 20 more stores” over the next six to 12 months.”

As for his views on the test, he said, “We’re all very optimistic, especially in today’s challenging mortgage origination environment. Putting our members in places where borrowers or potential borrowers will be really good.”

And, he adds, Walmart is bullish. “They would like to see us in a lot more than that,” Demola said.

Actual Foot Traffic

Whenasked if the foot traffic for a Lenders One member is better at Walmart than in their own offices, he said, “The foot traffic in Walmart (millions of customers) makes it much better to originate loans than the majority of standard mortgage offices.”

But he adds caution to that statement.

“It’s too early to have enough of sample size to report on the metrics,” Demola said.

While recent statistics are hard to come by on how many customers visit one of Walmart’s 5,300 locations in the United States each week, six years ago the retail giant said 140 million Americans visited its stores in person or online weekly.

As to who’s picking the spots where Lenders One will set up shop, Demola said,

“The members are picking the locations based on the available locations provided by Walmart.”

In addition, Demola said, there is an exclusivity arrangement. “We only allow one member per (Walmart) location,” meaning that only one member of the Lenders One cooperative is allowed space in a Walmart store.

Good Customer Stats

According to one study, nearly 30% of all Walmart shoppers have an annual income between $50,000 and $99,900. In addition, the study says, more than 20% of its customers were born between 1982 and 2002.

Demola says those Lenders One members with space in a Walmart may visit their customers and potential borrowers off-site, too.

“That depends on what the borrower wants,” he said. “There is nothing prohibiting them from meeting off-site, which is common for business.”

As for how mortgage originators affiliated with Lenders One for this program are compensated, Demola said, “That’s up to each individual member strategy/policies and applicable employment law in their states.”

Of course, that Lenders One is able to set up shop in Walmart prompts scrutiny. For example, what does one of the country’s most successful businesses get in return?

Demola provided his view of the relationship.

“Walmart is only leasing us space,” he said. “They’re the landlord, we’re the tenant. They’re not making any money on a per unit basis or anything like that. They are a complete landlord, and we’re paying them monthly (for the space).”

When asked if there was anything

140 Million special or unique about the arrangement, Demola said, “One of the things they did to vet us was ask about how we can help create value for their customers, whether it’s on the cost side, the service side or on the education side.

“We’re going to give the Walmart customer the best deal we can give them for their particular situation,” he added. “We’re also going to educate them and given an exceptional level of customer service.”

AND WHAT DOES THAT MEAN?

“One of the things Walmart requested is homebuyer and credit education for their consumers,” Demola said. “So that’s part of what we’re doing. We’re working with them (Walmart consumers) to understand credit and the way credit reporting works, how to purchase a home, how to save for a home and how to maintain a home.

“This is boots on the ground, face-to-face, true personal relationships to help them get into homes,” he said.

But as Michael Moebs, who 40 years ago started Lake Forest, Ill.-based Moebs Services, a financial services consulting firm, and has worked with Walmart executives, sees it, there’s another reason the retail giant is interested in working with Lenders One.

“Walmart’s thrust has always been cost reduction,” Moebs said. “They’re costconscious and they want to bring this (the cost of a mortgage) down.”

When told about Moebs’s view on the Walmart arrangement, Demola demurred.

“I can name 15 different characteristics that affect pricing of a mortgage transaction, so it’s very hard to say specifically, yes, there’s going to be a cost advantage to a (Walmart) consumer. It may be. It may not be. I’ll tell you if go to Quicken, you’re not getting the best rate. But their service, their technology, their marketing and their advertising gets them some of their deals.

“I know I’m being a little cagey on it, but there’s a lot that goes into a mortgage transaction,” Demola continued. “So, while it’s about cost for Walmart’s regular products, mortgages do not necessarily fit into the same bucket as the hard goods they sell.”

Measuring Success

But how will Lenders One measure success with Walmart?

“It’ll be based upon the number of mortgage applications and closings and, like any business, our members need to make money,” he said.

Demola did mention that consumers in some Walmart locations may need more help than at others, which has been explained to those companies making up the Lenders One cooperative.

“These may be higher touch transactions,” he said. “This is not someone calling in one time, giving an application and closing 30 days later.

“This could be three, four, five, six or 10 conversations (with the same person) over a six- or 12-month period,” he continued, “before someone is ready to pull the trigger and be mortgage-ready.”

Demola says they’ll need to know the consumer demographics of each Walmart store.

“Obviously, Orlando may be a little different than somewhere in the middle of Texas,” he said. “We’ll probably have some FHA and USDA loans come through the system.”

No Details

Whenasked if the contractual details with Walmart allowed the cooperative to only place Lenders One locations in their stores, Demola refused to answer the question, saying, “I’m not going to discuss any details on the deal.”

As to how the arrangement with Walmart and Lenders One came about, he said, “Walmart had an [request for proposal] out there and we were brought together by a third party,” which he wouldn’t disclose.

Walmart would not return phone calls and emails inquiring about its relationship with Lenders One.

DEMOLA’S BACKGROUND

In 2000, after his tenure with the family business, Demola started his own mortgage origination business, The Hills Mortgage and Finance Company, which he sold in 2017 to MLB Mortgage, briefly serving as the chief operating officer of the merged organization. It was at MLB that he learned about Lenders One.

He joined Lenders One in May 2019 as its vice president for sales and became its president just under two years later, in February 2021.

As for the challenges he faces now, Demola said, “There are a lot of different stakeholders. We have our members, who have one set of priorities. We have our shareholders. We have our employees. And, ultimately, it’s about navigating to make sure we’re creating value for everyone.”

Is he forcing his children, now in high school, into the mortgage business?

“My younger one has a numbers brain but keeps saying she wants to be an attorney. My older one wants to be a special ed teacher,” Demola said.