ReliaMax expands into student loan origination

Sioux Falls-based ReliaMax Surety Co. is expanding its presence in student lending.

The company was founded in 2006 to acquire Hemar, a private student loan company formed in 1986.

ReliaMax insures private student loans for capital providers but will add origination and servicing to those loans this fall.

"Those components are a new addition as we provide 100 percent principal and interest protection and further round out our solution," said Mark Payne, president. "Our clients won't have to staff up because we will design the program with them, originate and service the loan, plus provide default prevention."

ReliaMax insures $2 billion in private student loans and has assisted more than 100,000 students. The origination and servicing are expected to increase that portfolio.

"We wanted the ability to originate those loans on the front end on behalf of the lenders plus be able to service those loans while providing the default prevention, analytics, reporting and insurance," Payne said. "Origination and servicing were the final keys to the kingdom, and it was obvious we needed to add them to continue to expand our market opportunity."

Clients include banks, credit unions and other alternative capital providers, with some caveats.

"We are not targeting the money-center banks like Chase and Bank of America," Payne said. "We essentially put the lenders we work with in the asset class of private student loans as opposed to somebody coming to us who has been doing student loans for many years."

ReliaMax hopes the addition of origination and servicing will help change the opinion of the private student loan business, he added.

"The drive-by perception of the student loan space is everything is really bad about it," Payne said. "Yet we have very strong underwriting criteria and analytics, and we end up with very strong, predictable performance."

Paul Dockry, the new chief operating officer of ReliaMax Lending Services, is a 30-year veteran of the private student loan business and worked for years at Wells Fargo & Co.

"Most lenders would not get into this space because of the complexity of the student lending business," Dockry said. "It takes a different form of experience and a different layer of regulatory oversight on this specific segment of consumer lending."

ReliaMax helps clients secure a section of the private student loan market, in light of the intricacies, for the purpose of long-term customer retention.

"Many lenders that are not in this business are pretty much giving that away by letting those customers use an alternative place to finance their higher education," Dockry said. "This is one of the customer bases banks and credit unions want a relationship with because they are early on in their financial needs life cycle."

Payne shares a similar view.

"That is why these lenders should entertain the idea of getting into private student loans," he said. "Smaller institutions can't afford to let their customers go elsewhere because another, larger bank will work very hard to cross-sell and get the rest of their business, too."

A great deal of technology and new infrastructure also are needed to implement the student lending expansion.

Potential private student loan customers will come to ReliaMax and apply for a loan from their bank of choice. ReliaMax will originate that loan, underwrite the application and then disburse the proceeds to the school. Servicing continues through the life of that loan while the insurance surety arm of the company offers protection for the financial organization.

"While the student is in school and as they graduate, we will continue to help them through their repayment cycle by collecting and processing their payments," Payne said. "We just happen to be doing it with systems we are developing internally within ReliaMax."

Dockry is overseeing the development.

"We will continue to deploy a state-of-the-art technology platform that meets our customer base the way they want to transact with us," Dockry said. "A lot of the technology allows them to transact with us via the web and through mobile payments methodologies that are easier and more efficient."

Dockry has hired his management team but support positions are still needed for the expansion.

"We will be hiring the first set of staff members that will be our customer-facing team members when we launch the origination and servicing platforms this fall," he said.

Many jobs within the company feature a diverse range of skills including finance, accounting, operations, technology and customer service.

"We have over 50 people now, and by the end of the year, I see us having 60 to 65," Payne said. "We think we will double in size in the next 18 months."

ReliaMax is treating the rest of this year as an investment period before ramping up for the 2015-16 school year.

"It is our expectation to get ourselves positioned to really hit the market more diligently for the fall of 2015," Payne said.

ReliaMax also is complying with the findings of a market conduct examination last year in which the South Dakota Division of Insurance ruled that the company was transacting business in other states without the property authority.

The company was fined $25,000 and is working to resolve the issue in several states, Payne said. All are expected to be done by next year.