One announced Friday, for example, points to different tacks nonbanks might take in reconsidering their third-party origination loan-channel mix. These channels tend to be strong origination sources but also become competitive and operate on thinner margins when rates have risen, creating considerations related to scale and focus.
Another recent acquisition agreement highlights the likelihood that some banks cut back on single-family lending. Depositories will have to consider the extent to which the rise in rates and
A third planned acquisition highlights the question of whether the consumer demand that outweighs supply in the housing market will help single-family rental and other business-purpose lending bear up despite rate pressure on investors. In this case, a real estate investment trust is showing interest in expanding in at least one sector within it.
Interestingly, all three deals involve cash considerations, suggesting that the past two banner years for mortgage lending have left a lot of players in a good financial position to cope with waning margins.
What follows are more details about these transactions and how the companies involved are positioning themselves relative to trending market conditions.
Planet Home Lending seeks scale in deal to buy correspondent assets
Under the terms of the deal, Homepoint’s publicly-traded parent company will receive $2.5 million in cash plus an earnout based on origination volume during the two years after the deal closes, according to a Securities and Exchange Commission filing. It’s slated to close in the second quarter of this year.
“In a rising rate environment where other correspondent lenders are pulling back, we’re reinvesting our funds to seize opportunities,” said Michael Dubeck, president and CEO at Planet Home Lending, in a press release.
The transaction is aimed at helping Planet scale up and operate more efficiently in both originations and servicing as it adds to volume in both business lines.
The acquisition will be “additive, not duplicative,” Dubeck said in an interview, noting that thanks to the recent expansion of the liquidity available from a mortgage servicing rights facility and subordinated debt, the company’s see potential to significantly grow originations.
“It was very fortuitous that this opportunity came up shortly thereafter,” he said of the planned acquisition. “It will support the increased volume.”
Personnel from Homepoint will join Planet as well, said John Bosley, president of lending. Technology is being acquired as well, Dubeck said.
For Homepoint’s corporate parent, the sale of the assets is aimed at allowing the company to refocus on funding loans sourced through the broker channel, which has grown more competitive as rates have risen, and includes some originators that prefer working with more monoline lenders
“We made this decision strategically and purposefully, as part of our continued effort to prioritize our focus and resources around the wholesale channel,” the seller said in an emailed statement.
Community First to refocus as it stages sale of mortgage unit
To be sure, the deal was driven in part by a unique consideration Community First had, which was that its acquisition of the
However, an interest in concentrating more on other lending products also was a catalyst in the agreement struck to sell the mortgage origination and technology unit to Primis.
“This sale will allow the bank to focus its resources on expanding commercial, real and small business lending offerings in communities we serve,” said Richard Burleson, president and CEO of Community First, in a press release.
The cash purchase of 100% of SeaTrust’s stock is on track to close on May 31 subject to satisfaction or waiver of customary conditions, according to Community First.
Redwood deal aims at opportunity in business-purpose lending
Redwood is positioning the pending acquisition to complement its earlier purchase of
Bridge lending has performed better than other segments of the BPL market recently, Redwood Chief Financial Officer Brooke Carillo noted in the earnings call.
“While fee income from bridge was higher in the quarter, the single-family rental pipeline was more heavily impacted by…interest rate and spread volatility,” Carillo said.