Two top-20 mortgage lenders in the United States may combine forces amid the most challenging market in decades. CrossCountry Mortgage is in talks to acquire Fairway Independent Mortgage Corp., nine industry sources told HousingWire.
The talks remain ongoing and are not believed to be in the late stages, sources said.
If a deal were to be completed, it would catapult CrossCountry to becoming the fourth-largest mortgage lender in the country, behind United Wholesale Mortgage (UWM), Pennymac Financial and Rocket Mortgage.
A spokesperson for CrossCountry said the company does not “comment on rumors, speculation or acquisitions.” Representatives at Fairway did not respond to multiple requests for comment. Following publication of this story, company CEO Steve Jacobson in a LinkedIn post denied that Fairway was selling or merging with CrossCountry.
According to loan officers, former executives, recruiters and business partners, Fairway has struggled with liquidity issues and its founder and CEO Jacobson has attempted to sell the business.
The company — like virtually all large mortgage lenders — has laid off thousands of employees and imposed pay cuts to its workforce. However, it has struggled with liquidity due to a significant drop in origination volume and a lack of operational efficiencies, internal sources said.
A former top executive who spoke anonymously for fear of retaliation said that Fairway went from 10,000 employees in 2020 to around 3,500 this year. Fairway has also lost many of its top-performing LOs to major competitors, in particular, Movement Mortgage, sources said. Mortgage recruiting firm Modex pegs the company’s active LO count at about 2,600. (Jacobson wrote on his LinkedIn post that Fairway has about 5,600 workers.)
“When the market shifted, we transitioned to more of ‘How can we stay afloat?’ rather than ‘How can we innovate?’” the former executive said.
Meanwhile, CrossCountry has been arguably the most aggressive recruiter in the industry, paying big signing bonuses to attract top-producing LOs from across the country. Its strategy has sparked poaching lawsuits from some competitors.
Sources said that acquiring Fairway would be a way for CrossCountry to add loan officers at different branches across the country. However, Fairway allows its regions to operate more independently than most lenders, and sources speculated that a chunk of Fairway’s branches might pass on an opportunity at CrossCountry.
CrossCountry would likely not be interested in Fairway’s wholesale channel business, which has declined considerably over the last year. The deal overall makes sense because the companies’ cultures are profit-and-loss based, sources said.
A source also said CrossCountry raised $400 million in debt financing in 2021, which put the company in a better position to navigate a shrinking market than many of its competitors. It is also a large servicer, with about $85 billion in owned loan servicing as of the second quarter of 2023, which helps counterbalance a tough originations market. (Fairway sells the vast majority of its MSRs; it is not among the top 100 holders of owned servicing.)
Madison, Wisconsin-based Fairway, the 11th-largest U.S. mortgage lender, originated $13.37 billion from January to June 2023, down 47.6% from the same period last year, per the IMF estimates.
Meanwhile, CrossCountry produced $9.98 billion in the first half of 2023, down 55% year over year but enough to make it the 16th-largest U.S. mortgage lender.
Together, CrossCountry and Fairway would have more than $23 billion in origination from January to July 2023, a sales volume only lower than UWM ($54.18 billion; -21.1% year over year), Pennymac ($47.45 billion; -20.9%) and Rocket ($39.25 billion; -55.6%).
Correction: An earlier version of this report said Fairway doesn’t retain MSRs. Fairway sells the majority of its servicing rights, not all. At the end of Q2 2023, Fairway held $8.3 billion in MSRs, which put it outside the list of the 100 biggest owned servicers in the country.
This story was updated on Monday at 1:15 pm est to include Steve Jacobson’s denial that an M&A deal was happening.