Mortgage

Stonegate just grew warehouse lending by 888%

No, that’s not a typo

Stonegate Mortgage Corporation (SGM) increased its mortgage loan origination volume by 45% in 2014, increasing its total originations from $8.707 billion in 2013 to $12.635 billion in 2014.

Through the first three quarters, Stonegate’s mortgage originations were 46% above 2013’s total, but a slightly weaker fourth quarter pulled down that figure slightly.

In 2014’s fourth quarter, Stonegate’s origination volume decreased 5% to $3.369 billion from $3.537 billion in originations in the third quarter, but the 2014 still significantly outpaced 2013’s fourth quarter, rising 41% from $2.382 billion.

"The decline in interest rates toward the end of the fourth quarter resulted in significant increases in principal payoffs and a negative fair market value adjustment to our mortgage servicing portfolio,” said Stonegate’s chief executive officer, Jim Cutillo. “Based on industry estimates, our originations segment was able to continue its growth in market share during the quarter by approximately 10 basis points.”

Additionally, Stonegate reported that its servicing portfolio, as measured by unpaid principal balance, ended the fourth quarter of 2014 at $18.3 billion, an increase of 3% from the third quarter of 2014, when the company held $17.7 billion in UPB. 2014’s fourth quarter also rose 54% over the fourth quarter of 2013, which had UPB of $11.9 billion.

A big increase for Stonegate’s business was in its mortgage loan funded volume through the company's warehouse lines of credit provided to its correspondent lenders.

The company reported that it grew its warehouse lending 44% to $472.4 million in the fourth quarter of 2014 from $328.2 million in the third quarter of 2014. That also represents a whopping 888% increase from $47.8 million in the fourth quarter of 2013.

Despite all of those positives, Stonegate’s revenues still decreased 58% to $26.5 million in the fourth quarter from $63.1 million in the third quarter and decreased 39% from $43.8 million in the fourth quarter of 2013.

And Stonegate posted a net loss for both the fourth quarter and for the year. The net loss for the fourth quarter of 2014 was $21.4 million, or $0.83 per diluted share, compared to net loss of $1.7 million, or $0.07 per diluted share, in the third quarter of 2014 and net income of $2.1 million, or $0.08 per diluted share in the fourth quarter of 2013.

Stonegate’s net loss for the full year 2014 was $30.7 million, or $1.19 per diluted share, compared to net income of $22.6 million, or $1.32 per diluted share for the full year 2013.

But Cutillo said that the company is ready for a strong 2015.

“Our outlook for 2015 continues to be positive as we expect to continue to grow our market share gains and execute on our strategic initiatives, while maintaining a strong balance sheet and liquidity,” Cutillo said. “While the housing market has not recovered at the pace that most economists expected, Stonegate has made investments that we believe will allow us to take advantage of the current conditions and future conditions in the housing finance market."

One of those initiatives appears to be selling off some of the company’s mortgage servicing rights portfolio.

In its earnings release, the company disclosed that last week it entered into a letter of intent to sell approximately $3 billion in Fannie Mae and Freddie Mac MSRs to an “unrelated party.” Stonegate did not identify the buyer, adding only that the transaction’s expected closing date is March 31.

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