Even though Home Point Capital added over 2,350 mortgage brokers since the end of the first quarter of 2021, origination volume was down 57% on a year-over-year basis.
The company’s recent winnowing down of some business channels — selling off its correspondent business, outsourcing its servicing function and selling off MSRs, and divesting its 49.6% stake in reverse mortgage lender Longbridge Financial — demonstrate that the company is doubling down on its commitment to wholesale, President and CEO Willie Newman said during the earnings call.
The sale of the correspondent business to Planet Home Lending “provides an opportunity for us to reduce our leverage, as well as our corporate expense footprint and allows for reallocation of resources to focus on our wholesale business,” he said. “While we are now seeing others in the industry take actions to reduce capacity, which is what is required to get back to a more normalized revenue environment, we continue to operate based on current conditions and are staying focused on liquidity, costs and the greatest opportunity for future upside as we push through this cycle.”
Even with the first quarter’s market volatility remaining into the current period, Home Point provided relatively positive guidance. “We expect our volume level and gain until margins to be relatively consistent with what we saw in the first quarter,” said Mark Elbaum, chief financial officer. However, “because it is difficult to predict when excess capacity will be removed, we will continue to optimize our business and further reduce costs.”
Later Elbaum added that eliminating capacity doesn’t happen overnight because staff is still needed to handle the loans in process while not compromising on the customer experience, whether for brokers or consumers.
Home Point reported net income of $11.9 million, down from $19.3 million in the fourth quarter and well below the $149 million earned for the same period last year.
At the end of the first quarter, 8,376 mortgage brokers had signed up with its lending business Homepoint, compared with 8,012 as of Dec. 31, 2021, and 6,023 on March 31, 2021. For the first time, Home Point reported the number of brokers actively doing business with the company. For the quarter 3,603 brokers locked a loan at the company, an increase of 3.5% from the fourth quarter and up over 24% from the prior year, Elbaum said.
Most of those new brokers signing on are people already in this segment of the mortgage business, Newman added.
Homepoint produced $12.56 billion in the first quarter, of which $9.32 billion was wholesale and $2.73 billion from correspondent; the company also has a consumer direct unit primarily for servicing portfolio defense that added a minimal amount of volume. Some of those staffers have been redeployed into wholesale as opportunities to retain those customers shrink, Newman said. “This also demonstrates the commitment to our broker partners as we are now fully invested in their ability to help us retain customers as the market allows,” he added.
The first-quarter volume compares with $20.52 billion in the fourth quarter ($15.05 billion wholesale and $4.5 billion correspondent) and $29.43 billion during the first quarter of 2021 ($19.67 billion wholesale and $8.24 billion correspondent).
Home Point’s total gain on sale margin was 58 basis points in the first quarter, down 1 bp from the fourth quarter. In the first quarter of 2021, the gain on sale was 147 bps.
However, the wholesale channel’s gain on sale increased to 65 bps in the first quarter from 61 bps in the fourth quarter. That was still down from 152 bps one year ago.
With fewer originations and lower gain on sale, the segment’s revenue sank to $72.8 million from $102.9 million in the fourth quarter and $159.3 million in the first quarter of 2021.
The servicing business contributed $81.8 million in revenue, compared with $84 million for the prior quarter and $70.7 million in the previous year. Home Point is in the process of moving the servicing function to ServiceMac as a cost-savings measure.
As of March 31, Home Point serviced nearly $102 billion, down from $128.4 billion three months prior and $105.8 billion for the same day in 2021.
During the quarter, Home Point sold $37.1 billion of MSRs for a purchase price of $435 million. It is planning additional sales in the current quarter to enhance its liquidity position, Newman said.
“We’ll continue to strategically look at our MSR portfolio and the opportunity in the market and our liquidity position and be in the market as we think is appropriate,” added Elbaum.
Later in the call he said “we saw the prices are where they are with rates being up, values are higher and instead of marking up the book, we monetized it and sold it and took advantage of the liquidity opportunity.”