Mortgage

In the midst of the milestone quarter, Dwelling Level ensures extra margin compression

The last twelve months at Home Point Capital's mortgage subsidiary hit a $ 100 billion milestone in the third quarter as it earned $ 71.2 million and bounced back from a second quarter net loss of $ 73.2 million .

In addition to more than doubling its 12-month issuance volume from $ 46 billion a year ago, Homepoint Financial generated secondary loan and service sales that increased its parent company's revenue from $ 84.4 million in the second quarter to $ 275 million US dollars rose.

However, both revenue and net income declined compared to $ 511 million and $ 264.1 million a year ago. The mortgage market was unusually strong at the time.

In a conference call on the results, executives acknowledged the challenge of margin compression in this environment and noted that the company has taken cost-cutting initiatives in response. The margin attributable to the credit channels before taking into account the effects of capital market activities was 73 basis points in the third quarter compared to 233 basis points in the previous year and 74 basis points in the second quarter of 21.

"In the third quarter, we cut our direct borrowing costs by about 10%," said President and CEO Willie Newman. Executives declined to disclose the company's current cost per loan. The mortgage industry in general has reported that it has encountered challenges in managing expenses.

Home Point is taking several steps to address the shift to more normal business levels, Newman said, noting that aggressively growing its third-party network is an important part of that.

"We believe we are well positioned to gain market share as interest rates rise and purchase transactions outpace mortgage refinancing growth," he said.

Home Point ended the third quarter with more than 7,400 brokers and 650 correspondents, up about 50% from 12 months earlier, he said.

Also during the quarter, Home Point sold an $ 11 billion portfolio of Ginnie Mae mortgage service rights under previously announced plans. The purchase price for the sale was approximately $ 122 million, and the company was "pleased with the results," said CFO Mark Elbaum during the company's conference call. The amount of services sold was approximately 41% of the company's Ginnie Mae MSR portfolio as of June 30.

Home Point plans to eventually sell all of its Ginnie service while continuing to focus on the agencies' MSRs. It will continue to make the government insured or guaranteed loans that are normally sold to Ginnie securitisations, such as: B. the Federal Housing Administration, the Department of Veterans Affairs and the U.S. Department of Agriculture.

The company has increased its revenue by changing its strategies for selling loans and for service, said Elbaum.

A positive 23 basis points contribution came from capital markets activity in the third quarter, he said, noting that the definition of home point for it is determined by the period after the loan was frozen and includes related activities such as hedge effectiveness.

A driver of this increase during the quarter was a move away from cash selling in the agency market and instead using securitisations as a credit instrument. Home Point has also sold some loans to the non-brokerage market.

"The [number] of this quarter was greater because we were able to use some of these alternative executions," said Elbaum.

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