To free up cash, Homepoint will outsource servicing

ServiceMac, a First American company, will handle the servicing operations and hire Homepoint's former employees

Michigan-based wholesale lender Homepoint announced on Monday that ServiceMac, a First American company, will handle its servicing operations.

The decision allows the lender to focus on growing its originations business. Critically, the move reduces Homepoint’s costs, which is a topic of criticism among mortgage stock analysts.

Homepoint has over 300 employees in mortgage servicing operations, who will be laid off but subsequently hired by ServiceMac, according to a spokesperson.

“All of our 300+ servicing associates will have the opportunity to join the experienced ServiceMac team as part of this transition that kicks off next quarter,” the spokesperson told HousingWire.

ServiceMac will begin servicing loans on behalf of Homepoint in the second quarter. The Homepoint brand will still appear on all servicing communications, and Homepoint will support retention efforts through “Customer for Life” programming.

Terms of the deal were not disclosed.

Why 2022 could open more opportunities for subservicing

With production volumes flattening out and non-QM originations increasing, the need for originators to focus resources and cost on the front end of the business could lead to more subservicing opportunities. 

Presented by: Selene Finance

Willie Newman, Homepoint’s CEO, said in a statement that the partnership “elevates the customer experience and supports the scale of the combined operation.”

The decision to have ServiceMac be the subservicer follows Homepoint’s move in November to wind down its Ginnie Mae servicing business.

In total, the lender reported a $126 billion mortgage servicing portfolio in the third quarter of 2021, a strong increase compared to $74 billion in the same period of 2020.  

According to Phil Shoemaker, president of originations at Homepoint, the move is “freeing up resources to accelerate enhancements to our wholesale platform” during a transition into a purchase market.

Mortgage stock analysts say Home Point Capital, the smaller of the two publicly listed pure-play wholesalers, is in a somewhat fragile position. The company has a higher cost structure, given its lower scale, compared to its competitors, notably UWM, whose stock has also been dinged .

Goldman Sachs’ team changed the recommendation for the stocks to sell from neutral, believing that the wholesale channel gain on sale margins will remain under pressure for the foreseeable future.   

Homepoint’s management is working to lower the cost to originate a loan to $900 per loan in 2022 from $1,700 in the first quarter of 2021, largely through headcount reductions and process improvements. 

In June, the company announced it reorganized its operations and sales personnel, potentially losing hundreds of jobs.

A new regionalized staffing model, dubbed “Homepoint Amplify,” was rolled out to broker partners across the country, creating fewer touch points and greater efficiencies.

A spokesperson for Homepoint said the change in operational structure would result in an elimination of “less than 10%” of its workforce, which sources said was believed to be around 4,000 workers.  

Homepoint’s decision to outsource its servicing operations goes in the opposite direction of some competitors.

LoanDepot, for example, announced in 2021 a decision to begin servicing Fannie MaeFreddie Mac and Ginnie Mae loans in-house. According to Joe Garrett, a mortgage consultant at Garrett, McAuley & Co., a sub-servicer can take 23% to 30% of servicing revenues – and finding places to trim becomes more critical as rates rise and margins narrow.

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