A rising variety of non-bank mortgage lenders going public was inevitable

While Rocket Cos. In the past few weeks, as the first of more and more non-bank mortgage companies to go public, the trend is due to a development in the business that began after the great recession.

The last two to go public are AmeriHome Mortgage and Caliber Home Loans, both of which have filed filings with the Securities and Exchange Commission.

"I think a better way of putting it is that it took a long time," said Henry Coffey, an analyst at Wedbush Securities. "Look at what's going on [in the mortgage business], two important things happened. You've made all of this investment in technology, compliance and efficiency, and in Rocket's case, marketing to build really viable, efficient and compliant businesses. "

These companies have also performed well as market share has shifted between banks and non-banks, he stressed. A decade ago, the six largest authors were banks. Now Rocket is the biggest mover, and other non-banks are occupying three of the next six slots, he pointed out.

Rocket's IPO has opened many eyes to the mortgage business in the institutional investing community, Coffey said. "A confluence of events" also makes these companies attractive because they want to raise capital via the IPO, for example "the next generation of potential buyers who flock to the market" and trigger a "second wave" of purchase origins after this year projected refinance-driven volume of $ 3 trillion.

In addition to Rocket, United Wholesale Mortgage will go public through a merger with a special purpose vehicle.

There are also reports thatkreditDepot is slated to go public in 2015 after a failed attempt. However, as of October 2, no new filing for LoanDepot will be available on the SEC website. The last submission was the withdrawal of the registration declaration for 2016.

Caliber in its current structure was founded by Lone Star Funds in 2013 when two companies it controlled, Caliber Funding and Vericrest Financial, were merged.

Lone Star Funds then bought Cobalt Mortgage in 2014, First Priority in 2016 and Banc Home Loansin in 2017.

The percentage of caliber Lone Star would like to sell is not disclosed until the price is determined on the deal.

After the IPO, Caliber intends to list its common stock on the New York Stock Exchange under the ticker symbol HOMS. Credit Suisse, Goldman Sachs, and Barclays are acting as book-running managers for the offering.

Lone Star will receive all of the proceeds from the IPO. At the same time, there will be an offering of "mandatory convertible preferred stock" with proceeds for Caliber slated to purchase common stock of Lone Star.

For the first six months of the year, Caliber made $ 279.3 million, compared to a net loss of $ 59.4 million last year. Revenue for the first half of this year was $ 1.13 billion compared to $ 427.5 billion for the same period in 2019.

While the market valuation for mortgage services rights this year was higher, $ 320 million compared to $ 295 million a year ago, Caliber's profit from sales was much higher at $ 1.1 billion compared to $ 41 million.

The caliber comes from compliant, government, and non-government loans. In 2019, $ 1.5 billion of those loans were sold to Lone Star. No loans are currently being sold to Lone Star, the registration statement says.

The total volume for the first six months of the year was $ 36 billion. For the whole of last year it was $ 61 billion, compared to just $ 18.3 billion in the first six months of 2019.

Caliber executives were unable to discuss the IPO.

AmeriHome produced $ 44 billion in 2019. It produced $ 26.9 billion in the first half of this year compared to $ 418.6 billion in the same period last year. Net income for the first six months was $ 275 million, compared to $ 102.7 million a year earlier.

Income from sales for the first half of this year was $ 339 million, compared to just $ 84 million last year.

Just like Caliber, AmeriHome in its current form dates from 2013; Previously, Impac Mortgage Holdings had majority-owned the company for two years, largely because of its secondary market approvals. After Impac had received this separately, the stake in AmeriHome was no longer needed and was sold.

As of June 30, AmeriHome was servicing nearly $ 80 billion, while Caliber had a portfolio of $ 134.4 billion.

AmeriHome officials also pointed to the dormant period during which they couldn't talk about an IPO.

Companies go public not just to make big bucks for their current owners, Coffey said, but to "find a way to put real capital into the business."

And some of the forbearance and default concerns for mortgage servicers can be addressed by those companies that have more capital, he said.

The non-banks have reset the standard for market leadership in the mortgage business. "Perhaps people should wake up to the amount of technology, shelf life, and returns, both good and bad cycles, and rate these companies better," Coffey said.

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