It’s not that mortgages are bad, it’s that mortgage volumes have collapsed. Also, stocks of the largest mortgage lenders plummeted after IPOs and SPAC mergers.
To wolf richter for wolf street.
The latest addition to the long line of layoffs by mortgage lenders is Citibank, which has laid off several people in its mortgage division. Well Fargo, JPMorgan Chase and a number of other banks, along with non-bank mortgage lenders, have laid off employees since the end of last year.
The biggest mortgage lenders aren’t banks. they are nonbank. Rocket Companies (which owns Quicken Loans), United Wholesale Mortgage (which owns United Shore Financial) and LoanDepot have laid off thousands of jobs. LoanDepot also exited the wholesale business. AI-powered mortgage startup Better.com was infamous for its CEO mass-laying people via his Zoom, followed by even more layoffs. Some mortgage lenders have filed for bankruptcy. Others have shut down.
Shares of the three largest mortgage lenders plunged. Rocket Companies is 82%, United Wholesale Mortgage is 75% and LoanDepot is 95%. Amid the huge hype and hype of the last two years, all three have gone public via his IPO or merger with SPAC during housing mania. all three were introduced into me implode stock.
But mortgage lenders don’t get in trouble because a homeowner suddenly defaults on a mortgage or the like.
They’re in trouble because their mortgage originations have collapsed and their earnings have collapsed. They are required to withdraw cash, which can be done cheaper at HELOC.
Mortgage applications to refinance existing mortgages fell 1% in the most recent week, down 83% from a year ago, according to the Mortgage Bankers Association’s weekly mortgage refinancing application index released today. This is the lowest level in 22 years.
Mortgage applications for home purchases fell 3% last week as the newly returned 6% mortgage rate further impacted homebuying activity. The MBA mortgage purchase index is now plummeting 23% from a year ago, nearing April 2020 lockdown lows.
The plummeting number of purchase mortgage applications has been showing up in home sales for months now. Sales of new homes plummet 30% Figures for July are on a year-on-year basis.When Existing Home Sales Plunge 20%.
But it’s not the mortgages that are getting worse…
The outstanding mortgage is holding up well. Delinquencies and foreclosures began to rise, but it was a hyper-record in the Era of Forgiveness when delinquent mortgages were transitioned to a forbearance program in which homeowners were not required to make payments and mortgages were no longer considered delinquent. from low levels.
The surge in home prices since spring 2020 has allowed homeowners to stop holding back in a number of ways, including selling their homes, paying off mortgages, and taking out extra cash. But tolerance programs are being phased out.
yes Mortgage delinquencies have started to return to normal: Mortgages 30 days or more past due rose to 1.9% of total mortgages in Q2, well below the Good Times low (red line).
Foreclosures have also started to rise, but remain well below their pre-pandemic record lows.
Mortgage Lenders: Income Collapse from Mortgage Originations.
The three largest lenders of mortgages are nonbanks. They hold the mortgages they issue for short periods of time until they have enough mortgages to sell to Fannie Mae, Freddie Mac, VA, Ginnie Mae, etc., and then securitize the mortgages and invest them as MBS. sell to the house These mortgage lenders put the mortgage buyers (and ultimately the taxpayers who insure many of these mortgages) at credit risk by not keeping the mortgages on their balance sheets for long periods of time. avoid.
However, while mortgage lenders hold the mortgage, they are exposed to the risk that mortgage rates will skyrocket and the value of low-interest mortgages will fall. This isn’t usually a big deal, but it was a big deal this spring when mortgage rates skyrocketed to record highs in the past few weeks, creating losses among mortgage lenders.
These losses occurred when earnings collapsed. Non-bank mortgage lenders derive income from net interest income (a small percentage of total income), profits from mortgage originations and sales, origination income, and service fees.
at Rocket Companysurpassed Wells Fargo as the largest mortgage lender a few years ago – revenue fell 48% in the second quarter to $1.39 billion.
United Wholesale Mortgage We underwrite and provide closing documents for mortgages initiated by brokers, small banks and credit unions. Loan originations in the second quarter were down 51% from a year ago.
IPO after merger with SPAC. The merger will be completed in January 2021. SPAC’s stock price peaked after the announcement and before the merger was completed, hitting an intraday high of $14.38 on December 28, 2020. The stock is down 75% from its December 2020 high. The chart only goes back to the merger completion date, the first day the stock traded under the new ticker. [UWMC]Since the day’s close, the stock has plummeted 68% to $3.61 (according to YCharts).
At Loan Depot, Revenue in the second quarter was down 60% from a year ago to $308 million, and a staggering $223 million compared to net income of $26 million in the second quarter of 2021. produced a net loss.
The company will go public in February 2021 via IPO at $14 per share. In his first two days, the stock hyped dramatically to $39.85 during the day, before falling 95% from its high and falling 88% from its IPO price to $1.66. (data by YCharts).
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