Big MSR sale keeps Homepoint in the black in Q4

Company turned a $19 million profit thanks to sale of $13.1B in Ginnie Mae servicing rights

HW+ Willie Newman
Home Point Capital CEO Willie Newman

Home Point Capital, the parent company of wholesale lender Homepoint, turned a $19.3 million profit in the fourth quarter, a sequential decline from the $71 million it notched in the third quarter as margins dropped and revenues fell.

The lender told investors Thursday morning that the gain-on-sale margin fell to just 59 basis points, a decline from 84 bps in Q3 and 216 bps in Q4 2020.

Revenue fell to $181 million in Q4, a decline from $275 million in the prior quarter and $454 million in the fourth quarter of 2020. Origination volume decreased to $21 billion in Q4, a slight decline from $21 billion in the prior quarter. A year ago, Homepoint originated $24 billion in the fourth quarter.

In a statement before the opening bell rung, Home Point Capital CEO Willie Newman touted the company’s quick adaptation to a rapidly changing mortgage market.

“We expanded our broker partner network to over 8,000 brokerages and made meaningful progress on key initiatives to evolve our business, including rigorous expense management, expanded capital markets execution alternatives, and building more optionality in servicing,” Newman said. “These achievements, as well as our ongoing focus on the wholesale channel, have effectively positioned us to navigate through what we expect to be a challenging environment in 2022.”

Indeed, the company’s big calls on key chunks of the business kept the balance sheet in the black in the first quarter. The sale of $13.1 billion in Ginnie Mae servicing rights generated nearly $175 million, saving Homepoint from what otherwise would have been a sizable loss. The company is exiting the Ginnie Mae servicing space.

The wholesaler also announced last week that it would move all of its mortgage servicing processing work to ServiceMac, a First American company, another cost-cutting move. By doing so, Homepoint will transfer about 300 employees to ServiceMac.

Homepoint registered $152 million in expenses in the fourth quarter of 2021, a 13% reduction from the third quarter, part of a reorganization plan put into place earlier in the year. Expense reductions came across the origination segment, corporate expenses and servicing.

For the full year, Homepoint recorded $166 million in net income, a dramatic decline from the $607 million in net income gained in 2020. Total origination volume, however, rose to $96 billion in 2021, up 55% from the 2020 mark of $62 billion. Total revenue was $962 million, compared to $1.4 billion in 2020. Total origination in the origination segment came to $751 million in 2021; the company recorded $1.5 billion in 2020.

Homepoint told investors it had $555 million in cash, MSR credit lines and other credit facilities at the end of the fourth quarter. It had a total warehouse capacity of $7.5 billion.

The company did not offer a forecast for upcoming quarters in its Q4 earnings statement.

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