Mortgage lenders maneuver to gain market share
Contrary to behavior by many of the too-big-to-fail financial institutions, other mortgage companies are expanding their origination lines to capture a bigger piece of the market.
Quicken Loans Mortgage Services, a division of Detroit-based Quicken Loans, began originating loans two years ago, ballooning from nothing to $750 million in loans in April as a wholesale and correspondent lender.
QLMS originated more than $2 billion in 2011, contributing to Quicken Loans overall total of $30 billion in mortgage originations throughout the year and strengthening its top 10 position as an originator, according to Inside Mortgage Finance. QLMS, calling its growth "explosive," predicts it will originate $8 billion to $12 billion in mortgages in 2012.
“The changing landscape of the mortgage in general creates an opportunity for well-run mortgage companies to gain a bigger piece of the market because there’s only so much lending capacity that exists today," says QLMS Vice President Tod Highfield.
“The wholesale community is getting healthier," Highfield says. "Bank of America backing out of the space to a large degree created somewhat of a void in the marketplace. That’s created an opportunity for both QLMS and Quicken Loans in general to gain market share.”
Charlotte-based QLMS provides mortgage services to community banks, credit unions and loan brokers across all 50 states. “The changing landscape of the mortgage in general creates an opportunity for well-run mortgage companies to gain a bigger piece of the market because there’s only so much lending capacity that exists today,” Highfield says.
And some are doing it while earnings are in the red.
Irvine, Calif.-based Impac Mortgage Holdings (IMH), through its subsidiary Excel Mortgage Servicing, increased originations, which boosted the bottom line of its mortgage and real estate service segment. Impac just reported a net loss in the first quarter.
Even though its first-quarter net income shrunk, Bethesda, M.D.-based multifamily lender Walker & Dunlop’s (WD)revenue rose to $34.4 million, driven by increased loan origination volume and growth in servicing fee income, up from $29 million a year earlier.
QLMS, meanwhile, is moving into a new 20,000-square-foot office — more than double its current location — by the end of June. The company has 32 account executives who create partnerships with financial institutions from around the country. The 800 partners will originate loans, submit them to QLMS, which then processes the loans, which are then closed under Quicken Loans’ name.
Increasing regulatory requirements and the expenses associated with them are higher than ever. Quicken Loans is taking a wait-and-see position on the Consumer Financial Protection Bureau's proposed lending rules.
“So far what I’ve seen is that the CFPB is looking out for the consumer so most of what I’ve seen appears to be reasonable, but we’re going to have to wait and see what the final rules are,” Highfield says. “We have a spirit of cooperation with the CFPB so we’ll give them our opinion.”
Among its new rules, the CFPB is proposing a requirement that creditors reduce interest rates when consumers elect to pay discount points, which are fees — expressed as a percentage of the loan amount — paid by the consumer to the creditor at the time of loan origination.
The mortgage industry in general isn’t an easy business, Highfield says, and only companies that are well-positioned and efficient will survive and thrive.
“You have to be damn good at what you’re doing or you're not going to be successful and that’s why you’ve seen certain companies move away from the mortgage industry because they haven’t been able to figure that out,” he says.