Chantilly, Virginia-headquartered mortgage bank Prosperity Home Mortgage saw mortgage origination volume plummet by 40% last year — at a time when mortgage rates had more than doubled, home prices remained elevated and the market suffered from a shortage of inventory.
Prosperity, a full-service mortgage banker operating in 49 jurisdictions in the U.S., plans to invest in tech, reduce vendor costs and focus on realtor partners in 2023. However, the lender doesn’t expect to close more origination volume this year than it did in 2022.
“When things are a little bit slower, it is a good time to launch forward-looking but mildly disruptive process improvements, because you’re able to ingest them a little bit better,” Justin Messer, new CEO at Prosperity Home Mortgage, said in an interview with HousingWire.
“These are things we wanted to do in 2020 and 2021, but with the influx in volume, we had to focus on what’s in front of you, which is closing transactions.”
Ranked as the 41st largest lender in the country by Inside Mortgage Finance, Prosperity originated about $9.55 billion in the past 12 months, down from $15.35 billion production volume in 2021. Purchase mortgages accounted for about 82.5% of originations last year, with refis accounting for 16.1%, mortgage data platform Modex showed.
A subsidiary of HomeServices of America and owner of about 40 real estate brands across the country, the lender’s success is tied to its affiliated real estate brokerages’ business. That’s one reason why Prosperity’s focus is expanding by helping their partner real estate agents close more deals rather than prioritizing branch expansions. The Virginia-based mortgage bank sponsors 679 loan originators and has 492 branches, according to the NMLS.
“Prosperity started as a joint venture with Wells Fargo [Ventures] and Long & Foster Companies. Our entire DNA is strictly built out of purchase, and what that means is purchase is the core of every system,” Messer said.
About 70% of Prosperity’s production comes from affiliate realtors. The lender offers fixed and adjustable rate mortgages (ARMs), as well as government loans, including FHA, USDA and VA loans, according to its website.
Prosperity sees production of between $20 million and $25 million in cash-out activity in the second lien mortgage space, as well as activity pickup in FHA cash-out and traditional cash-out refis.
The lender is also capitalizing on a seller-funded 3-2-1 temporary rate buydown — in which borrowers could reduce their rates by 3% during the first 12 months of the loan, 2% in the second year and by 1% in the third year of the loan. It plans to introduce a lender-funded 1-0 rate buydown in the coming weeks.
Pensive and optimistic are how Messer described outlooks for 2023. While the executive expects to see heightened purchase activity in late spring and early summer, Prosperity is reviewing vendor relationships and cutting costs by bringing some services in-house.
“We’re at an inflection point where we had some tasks done by a vendor, [but it] makes a lot of sense for us to do it in-house at Prosperity,” Messer said.
After scaling up in 2020 and 2021 — much like the rest of the rest of the lenders — Prosperity conducted one round of layoffs last year, slashing about 4% of its team members. As of the year-end, the firm had just over 1,400 employees, according to Messer.
Prosperity anticipates seeing another tale of two halves this year, where production will be slower in the first half, with recovered volume in the latter half of 2023.
“We had a really good first quarter last year which is a little bit of a carryover (from 2021),” Messer said.
“We do think that home sales will probably slow down a bit year over year. We’re forecasting a slight decline in origination volume (…) “Flat this year to maybe off less than 10% (from 2022).”