Home News How the 55% plunge in mortgage originations is hitting nonbanks: Fitch

How the 55% plunge in mortgage originations is hitting nonbanks: Fitch

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Major U.S. banks have already cut headcount and operations related to mortgage originations amid soaring interest rates and a cooling of the soaring housing market in 2022.

An even more pessimistic picture is emerging for nonbank lenders, who rely heavily on their ability to make new loans to produce financial results, especially in the face of cash shortfalls, according to a Fitch Ratings report. So it is for players.

Fitch’s team, led by Champa Bhattacharya, director of non-bank financial institutions, said “smaller players such as real estate tech startups Reali and Sprout Mortgage have closed, and First Guarantee Mortgage Corporation has filed for bankruptcy law 11. I applied for the article,” he wrote. in a new report.

“LoanDepot plans to exit the wholesale channel, sell the $1 billion pipeline and refocus on the consumer/retail channel.”

From Rocket Mortgage to Loan Depot, take a closer look at how mortgage originations have dropped by about 55% at major non-bank lenders.
Based on Q2 volume on a year-over-year basis.

non-bank lenders grown into a powerful force Despite the role played by Countrywide Financial and other subprime mortgage lenders in the collapse of the housing market and the global financial crisis of 2007-2008, the U.S. mortgage market over the past decade has been sluggish.

Fitch said this year’s decline Mortgage originations “continue to exceed” expectations, including the highest mortgage rates since 2006, and “are likely to fall short of published industry estimates.”

Fitch’s team warned that “revenue losses from lower production volumes outweigh cost savings.” “Lower sales margins due to intense competition are putting tremendous pressure on the wholesale channel, and margins are also being squeezed by higher repurchase fees.”

0% increase in house prices

like stock

and bonds
The mortgage market has been plagued with volatility this year as the US Federal Reserve (Fed) pledged to keep inflation down to 2% by raising interest rates and shrinking its balance sheet.

Against this backdrop, researchers at BofA Global predict that house prices will rise by 0% in 2023, with “downside risks,” and that the next two to three years will see change. No, but we predict it could go up 10%. -15% while under stress.

read: “No housing market is immune to falling home prices”: Home prices are already falling in these pandemic boomtowns.

Fitch said the impact on the housing market is likely indicative of industry consolidation by nonbank lenders and the exit of weaker players, but the team believes that major players with access to capital are “struggling in the current market.” We anticipate that it will be able to weather the situation and gain market share.

Phil Shoemaker, Homepoint’s president of origination, said in a statement to MarketWatch that the company’s 100% wholesale lending business should be profitable. Because they have a price advantage that they can offer to consumers.

Rocket Mortgage, United Shore, PennyMac, Finance of America Mortgage and Provident did not respond to requests for comment. A Loan Depot spokeswoman declined to comment.

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