In this hot housing market, Michigan-based wholesale lender Homepoint understands the key to originating more home loans is ensuring more sellers accept offers made by its buyers. To do that it relies on the two words sellers increasingly want to hear: “All cash.”
But how does an all-cash offer benefit a mortgage lender?
Dubbed the “Homepoint Cash Compete,” the fintech platform provides home shoppers with the cash needed to compete with investors and other more attractive offers, according to the lender. It also plans to hook prospective homebuyers by boosting their bottom line: They get to lock in lower wholesale mortgage rates that can cost the homebuyer an average of $8,000 less over the life of the loan.
Homepoint partnered with fintech mortgage company Accept.inc, which upgrades offers from qualified buyers to an all-cash bid. The firm expects homebuyers to close a cash home purchase loan as fast as 10 business days without an appraisal or financing contingency.
“All-cash offers from competing buyers or investors are the biggest obstacle that financing homebuyers face in today’s hyper-competitive markets,” Phil Shoemaker, president of originations at Homepoint said in a statement.
“By combining all-cash offers with the lower rates and fees associated with wholesale lending, independent originators give homebuyers and their real estate agents the best shot at closing deals and saving money,” Shoemaker added.
Potential borrowers who’ve been priced out of the housing market need to be able to compete with an increasingly growing share of cash buyers and investors who are beating them in bidding wars.
Presented by: Finance of America
With the lower wholesale mortgage rates and other expenses and fees, borrowers can save an average of $8,000 over the life of their loan with the Homepoint offer compared to big banks or direct-to-consumer lenders, according to Home Mortgage Disclosure Act data.
After the cash purchase is complete, the homebuyer will refinance. He or she will apply for a conventional loan and complete the underwriting process with their loan originator – turning the cash home purchase loan into a permanent traditional mortgage loan, according to Homepoint.
Homepoint Cash Compete is offered in five states including California, Oregon and Minnesota, with plans to expand. Its business strategy has focused on wholesale, originations business and reducing expenses.
Planet Home Lending entered into a $2.5 million cash deal last month to buy assets from Homepoint following a huge drop in profit in the correspondent channel last year. While the lender had $20.7 billion in volume in the correspondent channel in 2021, the gain-on-sale margins in the correspondent channel were 31 basis points compared to 234 basis points in the wholesale channel.
In a move to focus on growing its origination business and reducing costs, Homepoint announced it’s outsourcing servicing operations to ServiceMac in the second quarter. The firm has been working to lower the cost to originate a loan to $900 per loan this year, down from $1,700 in the first quarter of 2021, through headcount reductions and process improvements.
In June, Homepoint also rolled out “Homepoint Amplify,” a new regionalized staffing model for broker partners meant to create fewer touch points and enhanced efficiencies. The company expected the change in operational structure to result in an elimination of less than 10% of its workforce, which sources said is believed to be around 4,000 workers.
Homepoint is the third-largest wholesale mortgage lender in the country, originating $96 billion in mortgage volume last year, up 55% from 2020, according to the firm. The company is scheduled to report its first quarter earnings Thursday.