Homepoint’s gain-on-sale margin plummets

Wholesale lender lost $73 million amid competitive pressure and volatility in capital markets

mortgage rates, interest rates, equity

Weeks after announcing a round of layoffs, wholesale lender Homepoint disclosed a $73 million net loss in the second quarter of 2021.

Homepoint, based out of Ann Arbor, Michigan, originated $25.5 billion worth of mortgages in the second quarter, according to its quarterly earnings statement. That’s more than double what it did a year ago, but was also down from $29 billion in originations in the first quarter of 2021.

The lender’s gain-on-sale margin fell 79% from a year ago, down to just 58 basis points. That’s a far cry from even the first quarter, when Homepoint’s margin checked in at 147 basis points. Pressures are everywhere, it would seem.

“During the second quarter we were confronted with a challenging operating environment caused by significant competitive pressure and volatility in the capital markets,” Willie Newman, Homepoint’s president and CEO said Tuesday. “These challenges led to a sequential decrease in quarterly revenues resulting in a net loss of $73 million for the second quarter. We continue to execute on our core originations strategy where we are focused on growing our broker partner network, increasing partner wallet share and retaining our growing servicing customer base. In addition, we have been accelerating productivity and efficiency initiatives, and increasing our non-agency capital markets activities.”

In late June, HousingWire reported exclusively that a company-wide restructuring would result in layoffs for just under 10% of the lender’s staff. Its new regionalized staffing model, dubbed “Homepoint Amplify,” has been rolled out to broker partners across the country and will create fewer touch points and greater efficiencies.

According to the quarterly earnings statement, expenses increased 67% year over year. Newman said on a subsequent earnings call that the company decreased its direct cost per loan by 9% in Q2 due to technology advancements. CFO Mark Elbaum added that the company was profitable on an operating basis in July.

Homepoint’s origination volume was 35.2% purchase and 64.8% refi in Q1. It increased the number of broker partners by about 700 in the quarter. Homepoint’s originations segment lost $20.8 million in the second quarter while its servicing segment lost $39.6 million.

The lender, whose parent company Home Point Capital went public earlier this year, was trading at $4.66 early Tuesday afternoon, down 11.5%. It’s also facing a class-action seeking lawsuit by investors who claim it made false statements about the cost of scaling up its wholesale operation.

Rocket Mortgage, the largest lender in America, will deliver its quarterly results on Thursday. United Wholesale Mortgage, the biggest wholesale lender in the U.S. and the second-largest overall, will release its earnings on Monday. The two have been in a pricing battle for much of the year, forcing smaller lenders like Homepoint – the ninth-biggest originator in the U.S. – to drop their prices, cutting into margins.

Newman put on a brave face during the earnings call on Tuesday. “We delivered strong funded volume and broker partner growth during the quarter,” he told investors. “We continue to drive down our costs and commit to the continuation of this trend, while at the same time enhancing the partnered and customer experience.”

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