Homepoint profits $12M in Q1 after selling operations and assets

Wholesale lender sold $434.5M in mortgage servicing rights in Q1 2022

Home Point Capital, the parent company of wholesale lender Homepoint, continues to turn profits based on the selling of operations and assets as management adjusts the company to the shrinking mortgage market.

The wholesaler reported on Thursday morning it notched a $12 million profit from January to March, a sequential decline from the $19.3 million in the fourth quarter of 2021 and $149 million in the first quarter of 2021.

Willie Newman, Home Point Capital CEO, told analysts the industry built up the capacity to handle $4 trillion in originations during the past few years, which had lowered to $2.5 trillion, as refinancing volumes dropped off.

“The dramatic increase in interest rates coupled with record-low inventories puts further pressure on the purchase origination market,” the executive said. “We have taken actions to navigate through the industry-wide dislocation months in advance.” 

One of the company’s strategies is to reduce its servicing portfolio. During the first quarter, Homepoint completed sales of mortgage servicing rights (MSRs) of single-family mortgage loans comprehending $434.5 million.

According to Newman, the company will continue to sell MSRs in the second quarter, which “enhances both leverage and liquidity positions.”

Consequently, the total servicing portfolio totaled $102 billion in unpaid principal balance as of March 31, 2022, down 3.6% quarter-over-quarter and 20.5% year-over-year. Homepoint had 349,261 servicing customers at the end of the first quarter, a sequential decline of 11.9%.

In a February cost-cutting move, the wholesaler also migrated its mortgage servicing processing work to ServiceMac, a First American company. By doing so, Homepoint transferred about 300 employees to ServiceMac.

Homepoint is also downsizing its origination business. In April, the company announced the exit of the correspondent channel by selling its division to Planet Home Lending for $2.5 million.

“This recently announced sale also provides an opportunity for us to reduce our leverage as well as our corporate expense footprint and allows reallocation of resources to focus on our wholesale business,” Newman said. The company had 8,376 broker partners as of March 31, 2022.

Homepoint’s total funded origination reached $12.5 billion in the first quarter, down from $20.5 billion in Q4 2021 and $29.4 billion in Q1 2021. Gain-on-sale margin rose to 61 basis points, up from 58 bps in Q4 2021 and 125 bps in Q1 2021.

Revenue fell to $158 million in Q1, a decline from $180.5 million in the prior quarter and $422 million in the first quarter of 2021.     

Homepoint registered $137 million in expenses in the first quarter of 2021, a 9.8% reduction from the previous quarter, due mainly to an 18.9% decline in origination segment direct expenses.

However, analysts highlighted during the call the increase from $35 million in Q4 2021 to almost $40 million in Q1 2022 in the corporate expenses. Executives said corporate expenses are less flexible than the others, but they expect them to be reduced due to the deal with ServiceMac.

The company did not offer a precise forecast for upcoming quarters in its Q1 earnings statement. 

Mark Elbaum, chief financial officer, told analysts the market volatility and competitive pressure the industry faced in the first quarter has persisted for the second quarter of 2022. “We expect our volume level and gain-on-sale margin to be relatively consistent with what we saw in the first quarter.”

Homepoint’s share were trading at $3.26 on Thursday around 2:00 PM EST, down 0.45% from the previous close. 

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