The downturn in the mortgage lender market may be shorter than previous cycles, largely due to the recent rounds of layoffs imposed by non-banks.
“While it is true that many non-banks came into this downturn with a large war fund of cash and capital, this has been more than offset by the impact of warehouse covenants and investors, causing lenders to move quickly to reduce costs decline,” Jim Cameron, Strathmore Groupand seniors, wrote in a report published this week. “In short, although this downturn is very painful, we may get through it faster.”
Non-bank companies have more than 60% market share of mortgage industry production – and are more likely than banks to move quickly to reduce capacity. Based on recent data from the Mortgage Bankers Association (MBA) and Stratmor, Cameron said non-bank turnover rates for processors, underwriters and closers were typically in the 35% to 50% range in the first half of 2022, compared to 18% to 22% for banks.
According to Cameron, the recent downturn has seen the biggest and fastest rate hike in modern history – and the steepest drop in volume and revenue the mortgage business has ever seen.
So far, the shrinking market has reduced mortgage companies’ total production revenue by 2.7% quarter-over-quarter and 18% year-over-year, to 396 basis points in the third quarter, according to a report by analyst group at. Keefe, Bruyette & Woods, Inc.
Looking ahead, the analysts say that industry profitability is likely to remain challenging, with seasonal weakness in the fourth quarter of 2022 and the first quarter of 2023. According to the analysts, the recovery, which will take time, will depend on the speed at which the industry is willing and able to cut capacity.
This week’s round of layoffs mainly includes non-bank lenders.
Home Point Financial Corporationthe parent company of the pure wholesale lender home point, about 100 employees in four states were laid off on Nov. 17, according to WARN notices filed by the company.
The company sent pink slips to 49 staff in Texas, 30 in Michigan and 10 in Florida. No WARN Notice has been published in Arizona, but the company has confirmed that a document has been filed with the state’s employment department.
“I can confirm that last week we made some reductions and made WARN notices in four states, affecting about 100 people in total,” a spokesperson for the company wrote in an email to Housingwire.
In Florida, where the WARN Notice provides more detail, the company cut positions related to the foundation, such as a document coordinator and two senior loan coordinators. Funding staff, including a warehouse funder and a warehouse specialist, were also laid off.
None of the employees are represented by a union, and the layoffs included both remote and personal employees.
The latest layoffs are in addition to the 913 Pointe Baile employees who were cut in early September. In total, Home Point reduced its workforce from about 4,000 workers in the summer of 2021 to about 1,000 by the fall of 2022.
In the past year, he has also sold a large part of the business – including sub-servicing with ServiceMac and delegated correspondent to Planet Home Loans – which equates to thousands of workers moving to new businesses.
based in Illinois Interfirst Mortgagelegally called Chicago Mortgage Solutions LLCpink slips issued to employees this month amid forecasts that housing sales are expected to decline more next year than in 2022.
While Interfirst Mortgage did not respond to requests for comment, closer processor, business analyst and loan officer, processor, business analyst and loan officer positions were among the jobs affected by the layoff, according to LinkedIn posts by former employees.
“Since the mortgage industry is not so favorable, another version of the mortgage industry happened last week,” said a former employee on LinkedIn. “Unfortunately, I was one of those employees affected by the exit along with some wonderful colleagues and friends I met along the way.”
“The mortgage business is a cyclical business..We all knew this when we signed up,” another former employee wrote on the social media network. “I have been working for the same company for 27 years and I hope to be back again maybe in a different capacity.”
Founded in 2001 as a retail originator, Interfirst Mortgage expanded into wholesale in 2008 and added a correspondent channel in 2011. After origination volume fell nearly 86% to $2 billion in 2016 from $14.1 billion in 2012, the company decided to close its business in 2017. However, it relaunched three years later with a proprietary loan origination platform that allowed Interfirst to eliminate upfront fees and cut interest rates.
Last year the company raised $175 million, led by Stock Lane, to finance new technologies. Since resuming operations, Interfirst has also hired teachers and first responders to be foreign officers. Instead of offering OA commission splits, they paid a salary between $44,000 and $68,000 per year.
The company has 30 active loan officers with four branches across the country, according to mortgage technology Methodical. A picture of its operation explains Intefirst’s struggling business. The lender made a total of $953.2 million year to date, down from $2.14 billion in 2021.
About 95% of its volume this year came from refis, with buybacks accounting for less than 4%. Originations in October 2022 fell more than 95% year-over-year to $10.7 million.