Although fourth quarter mortgage originations
"In addition to affordability challenges, seasonality and competition also impacted volumes and pricing," the report from Shaima Ahmadi, assistant vice president, North American financial institution ratings, said. "However, on an individual company basis, those with omnichannel organization models continued to grow originations in [the fourth quarter] as they were able to capture a higher share of the market versus those with less diverse channels and refi heavy models."
The top mortgage lenders benefited by undertaking business restructuring and making strategic shifts in order to capture more purchase business, Ahmadi said.
A shift underway that might not be going well is taking place
"Despite market share gains, when excluding forward organizations in 4Q22, FOA's reverse mortgage origination volume was down a significant 56% YoY in 4Q23," Ahmadi pointed out.
"Meanwhile, Rithm Capital Corp. has made
The Mortgage Bankers Association's fourth quarter industry profitability survey found that independent mortgage bankers and bank mortgage subsidiaries, both public and privately held,
Furthermore, servicing was a net financial loss for the group of $24 per loan, while operating income for this function, which excludes amortization, gains/loss in the valuation of servicing rights net of hedging gains/losses, and gains/losses on bulk sales, was $108 per loan.
Mortgage servicing rights proved to be a double-edge sword in the fourth quarter. Companies reported fair-value losses on their MSR portfolios — a requirement of mark-to-market accounting that is
The publicly traded nonbank lenders tracked in the Morningstar DBRS report had a 6% increase year-over-year in their portfolios. But that ranged from a 14% gain at Mr. Cooper, which was
FOA actually had a larger percentage increase at 38%, but that was primarily reverse servicing picked up in the AAG deal, and among the nine companies listed, it has by far the smallest portfolio.
Even though its portfolio is now smaller,
"Given where mortgage rates currently are, borrowers have little incentive to refinance," Ahmadi said. "However, some companies indicated that they expect a meaningful rebound in refinance activity when
For the group losses narrowed as improved gain on sales margins were partially offset by lower origination volume.
Gross gain on sales margins, inclusive of fee income, net secondary marketing income and warehouse spread, was 334 basis points in the fourth quarter, up from 329 basis points three months prior, the MBA survey reported.
"We would expect margins to remain under pressure in 1Q given the negative impact seasonality typically has on both 4Q and 1Q," Bose George, an analyst with Keefe, Bruyette & Woods said in an April 1 note on the survey. "Industry profitability is likely to be flat to down in 1Q as
Several public companies also reported major one-off expenses, including Pennymac Financial Services, which
Meanwhile, Mr. Cooper's
Ahmadi also noted that the nonbanks had higher leverage ratios year-over-year for the fourth quarter, as debt levels increased slightly but was primarily caused by financial losses eroding company equity.
"During [the fourth quarter], nonbank mortgage companies were active in the high yield market,
Both Rocket and Pennymac Mortgage Trust were able to reduce their leverage ratios. But FOA's debt-to-equity ratio increased to 97.8x compared with 49.7x one year prior, while Ocwen's was at 27.2x, versus 22.9x over the same period.