Rocket, Home Point, UWM report sagging earnings and more news of the week
August 12, 2022 5:59 PM
Emily Elconin/Bloomberg
Rocket reports steep decline in profit in 2Q
Rocket Cos. was barely profitable this quarter, earning only $60 million of net income, compared to $1.03 billion in the first three months of the year. Its earnings call focused on new solar and home equity programs and its acquisition of Truebill, which executives said will help grow the business. On the mortgage side, it announced a partnership with Santander Bank to originate loans for its customers. Analysts are optimistic about the company's future, although it expects the rest of the year to be tough.
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Yakobchuk Olena - stock.adobe.co
Mortgage players confirm more sweeping layoffs
More mortgage professionals, from fintech startups to publicly traded lenders, announced layoffs . New American Funding confirmed it is terminating another 300 employees, letting go of 625 workers since the beginning of the year. Mortgage fintech Ribbon let go of 136 employees at the end of July. It stated that the current market conditions pressure the company to evolve. Lender Open Mortgage also announced that it cut a small number of workers in its reverse mortgage operations, even though that channel is doing well. However, the company still expects to pursue its growth plan, which included the opening of 17 new branches back in January.
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Freedomz - stock.adobe.com
Slammed with poaching suits, CrossCountry Mortgage drops its own
CrossCountry Mortgage agreed to let go of its lawsuit against Guild Mortgage. Guild denied the accusations in July, and both sides agreed to dismiss the case without prejudice. CrossCountry is also locked in a legal war with Caliber Home Loans over the latter's lawsuit in May alleging CrossCountry raided more than 80 of its employees.
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Impac's losses in 2Q grow as volume, margins drop
The company announced a loss of $13.5 million in the past three months, compared to $1.2 million in the first quarter and $8.6 million during the same period last year. Originations fell sharply to $128.1 million, of which $80.2 million were non-qualified mortgages. Business promotion expense was cut to $1.3 million; marketing spend was affected by competition for non-QM loans. Still, Impac remains committed to purchasing non-QM and second lien loans.
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Home Point slips into the red as price war intensifies
The company's net loss of $44 million followed a profitable first quarter in which it earned $11.9 million. Losses were attributed to high rates, competitive wholesale pricing and the sale of its stake in Longbridge Financial. HPC's board suspended its quarterly dividend to preserve its financial resources given the uncertain market. Executives expect its in-house servicing platform to convert to a fixed cost and lower variable costs.
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Vittaya_25 - stock.adobe.com
Closing speeds aren't meeting mortgage borrower expectations
Although clients were largely satisfied with their experience in the mortgage process, closing speeds remain a challenge for lenders. Almost half of borrowers in an Arizent report found that faster closings would have improved their experience. This is especially true for millennials and Generation Z, of which only 48% and 36% respectively, said they were satisfied with their closing speed. However, some lenders do not have the digital capabilities necessary to keep up with borrowers' expectations.
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UWM touts aggressive pricing promotion as key to future
Second quarter earnings at UWM Holding dropped 53% from the previous three months but were up 55% from a year ago. Although originations shrunk, United Wholesale Mortgage gained on sale margins at 99 basis points for the second quarter and 18 basis points higher than last year's second quarter. That provided a cushion that allows it to further drop pricing between 50 and 100 basis points in the Game On promotion announced in June. Given the positive response it received from brokers regarding its promotion, it may extend past the third quarter.
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Andrew Harrer/Bloomberg
FHFA adds fair lending reporting mandate for servicers
The Federal Housing Finance Agency announced that it would require mortgage servicers working with loans backed by government-sponsored enterprises to obtain and maintain fair lending data. The decision is in line with previous requirements to collect borrowers' language preference data and is a response to recent observations related to distressed mortgage servicing during the pandemic. The Consumer Financial Protection Bureau had noted its frustration with its inability to track language preference and race data when it studied a pandemic response from 16 large servicers last year.
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zimmytws - stock.adobe.com
Angel Oak posts 2Q loss due to non-QM market uncertainty
The real estate investment trust lost $52.1 million in the second quarter, compared with a $43.5 million loss in Q1 and profits of $2.2 million during this quarter last year. Angel Oak Mortgage does not hedge credit spread risk, and its widening this quarter created material short-term pressure on the company's book value. The volatility resulted in Angel Oak not securitizing any mortgaged during this quarter, but changing market conditions enabled it to issue one in July. Executives indicated they might not be done with third quarter securitization activity.
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Fannie, Freddie both pass 2022 stress test despite misalignment on risk rating
Fannie and Freddie would face a combined credit loss of more than $17 billion under this year's stress test scenario. Despite the losses, both enterprises are sufficiently capitalized to withstand the financial shocks of a severe recession, according to Federal Housing Finance Agency. Fannie Mae performed better than the 2022 scenario, registering $10.8 billion. Freddie Mac did slightly worse with a credit loss of $6.3 billion, compared to $5.8 billion last year
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Mortgage insurer earnings grow in 2Q
Mortgage insurers reported strong earnings for a quarter in which mortgage originators didn't do well. Key points explain the insurer's second quarter: consistent commentary by management of price hardening; significant loan loss reserve releases driving earning beats; and strong capital return levels. Insurance-in-force grew by 8% year-over-year. The growth was helped by persistency, which is the level of insurance that remains on the books 12 months later.
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Dorling Kindersley/Getty Images/Dorling Kindersley
Celebrity Home Loans drops correspondent business
The business, which operated under Cypress Mortgage Capital, has closed its doors on correspondent lending, citing its difficulties taking off during COVID. Correspondent allows the mortgage lender to expand their territory and add servicing rights without investing in brick-and-mortar. Other correspondent lenders have had their issues, with price competition causing Mr. Cooper to reduce its activity and Home Point Capital selling its correspondent business.
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Home buyer sentiment falls to its lowest level since 2011
Despite indications that the housing market is moderating, Fannie Mae's Home Purchase Sentiment Index found that overall sentiment decreased for the fifth month in a row, falling to 62.8 on a 100-point scale. Even though the share of respondents who expect mortgage rates to drop down grew, the percentage of consumers who think it is a bad time to buy jumped slightly. At the same time, from the seller's view, those who said it was a good time to sell in July decreased from 68% to 67%.
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Fitch downgrades PacWest, citing 'deterioration' of key capital ratio
The credit rating agency Fitch announced the revision of PacWest Bancorp's long-term issuer default rating from "BBB" to "BBB-" and blamed the downgrade on the "rapid, growth-driven deterioration" during Q2, down from 10.4% during the period a year ago. The decrease in capital results from high rate growth and recent acquisitions, which has put pressure on capital levels. PacWest is taking some actions to improve its capital position by selling preferred stock and slowing its balance sheet growth.
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Bloomberg News
Angel Oak Capital fined for misleading investors
The Security and Exchange Commission has fined Angel Oak Capital Advisors $1.75 million and the portfolio manager, Ashish Neghandi, $75,000 for deceiving investors about delinquencies in a fix-and-flip securitization. According to the SEC, the company failed to disclose the firm's improper use of funds while continuing to issue larger securitizations, misleading investors. Although neither Angel Oak nor Neghandi admitted or denied the findings, they have accepted the ruling.
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