Michigan-based lender Homepoint leadership effectively “reset the organization” amid the mortgage downturn, Willie Newman, the CEO and president, told HousingWire in an interview on Friday.
However, the company remains fully committed to the wholesale channel, a decision made around four years ago, even with competitors exiting the space and margins sinking like a stone.
“In an environment like this, there’s not as much volume as we were doing before,” Newman said in an interview during the Association of Independent Mortgage Experts (AIME) Fuse conference in Las Vegas.
“We’re not as much focused on volume and velocity as we are making sure that we improve processes, the interactions with broker partners, and ultimately to the consumers, in a way that, as we evolve from this cycle to the next cycle, we have an opportunity to grow.”
The strategy, however, brings with it lower volume in the short term. And, so far, in response to the current market headwinds, Homepoint has shrunk its workforce dramatically. The company went from about 4,000 workers in the summer of 2021 to about 1,000 in the fall of 2022.
“We feel like we’ve done what we need to navigate the environment. Obviously, conditions can change. And, you know, we’re always evaluating where we need to be positioned,” Newman said.
Over the last year, Homepoint has also sold off large chunks of the business – including servicing to ServiceMac and delegated correspondent to Planet Home Lending – which accounts for several thousand workers transitioning to new firms.
The wholesale channel, which, like other channels, has been affected by surging mortgage rates and shrinking origination volumes, has an additional challenge: a competitive pricing strategy initiated by channel leader United Wholesale Mortgage (UWM). UWM in June launched the ‘Game On’ pricing initiative, slashing prices across all loans by 50 to 100 basis points.
Amid the price war, Newman said Homepoint will focus on where the company can add value, which is the “experience” it provides in its relationship with brokers and borrowers, even though the company has “to be aware of what others are doing in the market.”
Homepoint is not in a position to engage in an aggressive price war when considering the state of its financials. Its parent company Home Point Capital reported more than $44 million in losses in the second quarter of 2022. The workforce reduction is forecast to save more than $100 million annually for the lender, according to the company.
The executive declined to comment when the company’s current “reset” will turn Homepoint into a profitable company.
Rivals such as loanDepot, Mountain West Financial, AmeriSave, Point Mortgage Corporation, Stearns Wholesale (owned by Guaranteed Rate) and Finance of America (FoA) have already exited or plan to exit the wholesale channel to focus on more profitable business divisions.
Despite the many departures, Newman said there is still sufficient capacity from a lender standpoint in the wholesale channel. “It’s really difficult in this type of environment for a company to kind of do everything well,” he said. “It’s hard to be good at everything.”
Companies exiting the channel put additional pressure on AIME’s goal to propel the wholesale channel beyond 25% market share in 2022 and beyond.
The broker channel accounted for just under 15% market share from April to June, with retail at 61% and correspondent at 25%, according to an Inside Mortgage Finance‘s (IMF) analysis of first-lien mortgage originations. Brokers originated $94 billion in the second quarter, down 16% from the first quarter, the data shows.
“The fundamentals are in place for the channel to grow significantly because it brings an advantage to consumers and it’s better at serving minority households,” Newman said. “But I think we’ll know more about it in the middle of next year because it does take a little while for originators to adjust.”