Raj Date, a former official at the Consumer Financial Protection Bureau, is getting ready to enter the mortgage market.
The firm he started last year, Fenway Summer, plans to announce on Monday that it has merged its mortgage venture with a start-up called Ethos Lending, allowing it to start making home loans in the next few months.
The combined firm, to be called Ethos Lending, plans to extend loans that are not eligible to be purchased by Fannie Mae or Freddie Mac, the mortgage finance giants that buy about two-thirds of new home mortgages. That focus, the firm says, will allow it to be competitive on price while serving borrowers who do not meet the qualifications for government backing.
Starting a new mortgage lender is no easy feat, but Mr. Date said the merger would allow Fenway Summer to accelerate its plans.
“We had been looking for the right platform to acquire that would essentially allow us to get into the market faster and at a better scale,†he said on Monday. “If we could wave a magic wand and accelerate our own entry by six months, nine months a year, what would it look like? It would look like this.â€
The mortgage venture is the latest career twist for Mr. Date, who worked as an investment banker before serving as deputy director of the consumer protection agency. Fenway Summer, which he started last year after leaving the government, is an advisory and venture firm, with investments related to Bitcoin, student loans and derivatives.
Mr. Date said Ethos Lending would avoid the missteps made by lenders in the run-up to the financial crisis. For one thing, it plans to focus on prime borrowers, steering clear of the treacherous subprime market, and will be “tough-minded about verification.â€
It also has plans to keep the loans it makes, rather than selling them to Wall Street. “If our borrowers don’t succeed, well, then we won’t either,†Mr. Date said in an email.
Mr. Date knows the rules well, having recently overseen policy for residential mortgages, payday lending and auto finance at the consumer agency. But he dismissed any concerns about moving through the revolving door between government and finance.
“There’s no special Q.M. loophole written in invisible ink that only I can see,†he said in an email, using the shorthand for qualified mortgage. “There is no secret key to the mortgage kingdom. We’re going to compete like I hope everyone does: play by the rules, make great credit decisions, deliver great customer service.â€
Fenway Summer first encountered Ethos Lending when its venture capital arm was approached about making an investment. Instead, Fenway saw an opportunity for a merger with the fledgling lender, enticed by its lack of liabilities from before the crisis.
Mr. Date will be chairman of the combined firm, while Mark Lefanowicz, who has been running Fenway Summer’s mortgage venture, will be its chief executive. The founder of Ethos Lending, Adam Carmel, will be president.
The lender, which will focus on so-called wholesale mortgages - delivered through brokers or through referrals from banks - plans by the end of June to start making loans that will be eligible for government backing. Its main business, nonqualified loans, is expected to start by the end of the year.
