Q3 nonbank earnings: What you may have missed

A scouring of 10-Q filings of nonbank mortgage lenders reveals a few pertinent details that escaped the attention of most in coverage of earnings in the third quarter. 

United Wholesale Mortgage

The wholesale lender reported a 32% rise in expenses, totaling $328 million for the three months ended Sept. 30, according to its third-quarter earnings. The increase was largely driven by a $46.1 million, or 34.1%, rise in salaries, commissions, and benefits compared to the same quarter the year before. That bump was primarily due to a higher average team member count in preparation for expected growth in production volume.

General and administrative expenses rose by $8.8 million, mainly due to higher costs for computer support services and professional service fees. Marketing, travel, and entertainment expenses increased by $2.3 million, largely due to UWM's investment in its broker relationships through visits and training programs, the company reported.

Rocket Mortgage

Rocket Money, the nonbank's financial wellness app, reported a slight increase in subscription revenues, reaching $65,950 for the quarter, up from $65,578 for the three months ended June 30, 2024. For the nine months ended Sept. 30, the app generated $192,119 in revenue, according to Rocket's earnings report.

Total expenses for the period were $1.1 billion, rising by $58.7 million, or 5%, from the same period in 2023. Salaries, commissions, and team member benefits totaled $607.5 million, an increase of $17.9 million, or 3%, compared to $589.6 million in the year-ago period.

Broker-related revenue was $176.9 million, an increase of $58.8 million, or 50%, compared to $118.1 million for the same period in 2023.

Guild Mortgage

Guild had a 29% purchase recapture rate in the third quarter, a 41% refinance recapture rate and a 35% overall recapture rate, compared to 27%, 22%, and 25%, respectively, for the three months ended June 30, 2024. 

The gain on origination and securitization related to its reverse mortgage portfolio was $2.4 million, up from $2.1 million the quarter prior.

Personnel expenses increased at the shop for the nine months ended Sept. 30 compared to the nine months ended September 30, 2023, due to increased headcount related to its acquisitions. Guild's number of full-time employees grew by 18% year-over-year. 

Loandepot

At the end of the third quarter, Loandepot had revolving lines of credit with eight counterparties, providing warehouse and securitization facilities with a total borrower capacity of $3.1 billion. Of that amount, $700 million was committed, according to SEC filings.

The nonbank, an active seeker of joint ventures, reported earning $4.5 million in the third quarter from these partnerships. For the nine months ended Sept. 30, LoanDepot earned $11.1 million from joint ventures.

Personnel expenses increased, while general and administrative expenses decreased at the company. Loandepot reported that personnel expenses, which includes salaries, commissions and other employee costs, rose to $19.9 million, or a 14% increase, attributable to origination volumes.  Its general and administrative costs fell by 51% to $23.5 million "related to a $19.6 million decrease in professional and consulting services as the result of a $20.0 million insurance claim receivable related to the Cybersecurity Incident," Loandepot said.

Mr. Cooper

The lender and servicer recorded legal expenses, which includes settlements and fees paid to external legal service providers, of $15 million in the third quarter, up from $8 million a year ago.

Total expenses at the firm rose to $335 million, up from $301 million a year earlier. The increase was driven by higher salaries, wages, benefits, and marketing expenses, according to Mr. Cooper. The rise in salaries, wages, and benefits in 2024 was mainly due to variable compensation tied to higher origination funding volumes. Marketing and professional service fees also grew in 2024, primarily due to increased marketing costs.

Finance of America

Legal expenses, which include settlements and fees paid to external legal service providers, were $0.7 million for the three months and $2.8 million for the nine months ended Sept. 30, 2024.

Total expenses decreased $42.5 million, or 14.2%,  primarily due to decreases in salaries, benefits, and related expenses as well as decreases in general and administrative expenses due to a reduction in average headcount and continued cost-cutting measures associated with the restructuring of its business.

Rithm

Newrez's joint ventures, which the nonbank has a 49.5% stake in, brought in a revenue of almost $4 million in the third quarter of 2024, earnings show.

General and administrative expenses increased by $72.3 million year-over-year, primarily driven by Newrez's push to expand into servicing via acquisitions. 

Better

Better repurchased $3.2 million (8 loans) and $3.6 million (11 loans) in unpaid principal balance of loans during the three months ended September 30, 2024 and 2023, respectively, related to its loan repurchase obligations.  

Technology expenses totaled $7.2 million in the third quarter, up $0.9 million, or 14%, from $6.3 million in the same period last year. The increase was mainly due to higher costs for software vendors needed to support system infrastructure.

Marketing and advertising expenses grew to $12.1 million in the third quarter, up 139% from $5.1 million spent on marketing the year prior. The increase is due to a focus on growth to drive volume which started at the end of the first quarter in 2024, Better wrote in its 10-Q filing with the SEC.

Pennymac

Pennymac's spend on technology slightly decreased to $37 million in the third quarter, down from $39 million the quarter prior.

Expenses related to compensation increased in the third quarter by  $14.4 million to  $171 million. "The increases were primarily due to an increase in stock and unit-based compensation during the quarter ended September 30, 2024, primarily reflecting increased performance attainment expectations, and increased incentive compensation during the nine months ended September 30, 2024, reflecting higher loan production volume."

All mortgage lenders with servicing portfolios took a hit in Q3

Rocket Cos.

Rocket reported a $481 million net loss in the third quarter, driven by a massive decline in the valuation of mortgage servicing rights. Driving the top-line loss was an $878.3 million loss in the change of fair value of MSRs, wiping out $373.8 million in servicing income.

Guild Mortgage

Guild reported financial setbacks in the third quarter, driven by the impact of fluctuating interest rates on its servicing portfolio, but its origination segment held strong. The company reported a significant loss of $145.8 million in value adjustments to its mortgage servicing rights, compared to a gain of $2.1 million in the prior quarter, due to rates dropping in August.

Mr. Cooper

Profitability waned for Mr. Cooper in the third quarter on a $126 million negative adjustment to servicing valuations, net of hedges, which detracted from other business.

Pennymac

Servicing pretax income slipped in the red to a $15 million loss, an improvement from last quarter's $60 million deficit but far below a $101.2 million profit the same time a year ago. A massive $242 million hedging gain was mitigated by a $402 million fair value change in mortgage servicing rights, as lower market interest rates affected Pennymac's holdings. 

United Wholesale Mortgage

The company reported net income of $31.9 million, inclusive of a $446.1 million decline in the fair value of its mortgage servicing rights. But that was offset by a gain of $226.9 million gain on other interest rate derivatives.

Rithm

The company Tuesday reported a $227.5 million net loss in its Newrez origination and servicing segment, including a $682.6 million change in fair value of mortgage servicing rights. That compares to a $208.7 million profit for the segment in the second quarter.