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DALLAS-KeyCorp, marking its second run at the deal in the past year, has masterminded a buyout of Malone Mortgage Co., a 16-year-old FHA lender with a $1.2-billion servicing portfolio and $200 million of multifamily deals in the pipeline. The sale, including the transfer of the lion’s share of the Ginnie Mae-backed loans, is slated to close July 1.

Co-founders Bernard P. Malone, president, and Michael Levitt, CEO, started shopping their Dallas-based commercial lending operation last year. “We weren’t selected to continue the deal, but it came back alive in February,” Gary Alex, director of FHA lending for the Cleveland-based KeyBank Real Estate Capital, tells GlobeSt.com. Alex, based in Duluth, GA, sold his company to KeyCorp last year. Unlike Alex, Malone and Levitt will only be in place through year’s end.

KeyCorp must secure certain approvals from Ginnie Mae to assume the $1.2 billion of government-backed financing and pick up the pipeline from Malone, which grew into Southwest’s “go-to” lender for largely multifamily and assisted living construction. Alex says there will be “some holdovers” to address after the July 1 closing, but he doesn’t anticipate any holdups in the takeover plan of the Malone load.

Just how much cash is changing hands isn’t being discussed, but Alex did say it’s just a fraction of the value of Malone’s portfolio. He stresses KeyCorp has retained all loan servicing rights. When the deal closes, the Kansas City, MO-based servicing group will be standing guard over a $40-billion portfolio.

KeyBank’s three FHA lending offices generate about $200 million per year in deals. “Based on the strength of the combined companies, we’re expecting to be $400 million to $500 million per year in originations,” Alex says. The combined operation won’t put KeyBank at the head of the local roster, but it will catapult it into the Top 3 in Dallas/Fort Worth and strengthen its positioning as one of the Top 10 US lenders. Alex says there’s a “five-year plan” in place to become the region’s top lender.

“Combining our FHA expertise with KeyBank’s national strength as a commercial real estate lender will provide our clients with the full-service lending institution they are looking for,” Malone says in a press release.

According to Alex, all loan originators will stay in place in Malone’s 40-employee office. He says a few overlapping accounting and human resources positions will be eliminated. Jonnie Pardue, Malone’s executive vice president, will become western regional manager. Alex, now in charge of the eastern region, also will oversee the west.

Malone’s 15,000-sf lease in Preston Commons East at 8115 Preston Rd. has at least five more years left on the term so the buyout’s also sparking talk about a consolidation of KeyBank locations. The lender leases space in Preston Commons West at 8117 Preston Rd. and 8411 Preston Rd., the operations base for KeyBank Real Estate Capital’s Todd Rodenberg, senior vice president and agency director.

Alex says KeyCorp is scouting for additional acquisitions of FHA lending operations. “We’re snooping around,” he says, adding no other contracts are in hand. KeyCorp has 36 offices in major US metros.

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