The current housing landscape is a tough one for mortgage lenders. In particular, the near-halt to refinancing activity has been incredibly damaging to mortgage firms, as refinancings made up the majority of U.S. mortgage originations throughout the last two pandemic years.
Many firms—including Better.com, PennyMac Financial Services Inc., Wells Fargo & Co., and Rocket Mortgage—have laid off staff this spring.
Some lenders are considering selling themselves to stay afloat, industry executives and advisers told the Wall St. Journal.
Steve Stein, a former executive at mortgage company Stearns Lending, told the Journal that partnering up is a potential strategy. Stein and former Stearns Chief Executive David Schneider launched an advisory firm to help lenders looking to stay afloat explore this option, the article said.
Some lenders are selling servicing assets, while others are offering lower rates or cutting fees. In March, mortgage lenders made $2.36 in profit on every $100 of a loan, the smallest amount since 2019, according to the Urban Institute, when in 2020, that number was as high as $5.99, the article said.
Originations at the 50 largest lenders were down 41% in the first quarter from a year earlier, the article said, citing Inside Mortgage Finance. The Mortgage Bankers Association expects volume to decline 37% in 2022, largely due to the drop in refinancings.
Nonbank mortgage lenders are likely going to experience the worst of it, the article said—they don’t have multiple business lines and they don’t take deposits, meaning they have to rely on short-term loans.