For all that executives of Homepoint did say on Thursday’s earnings call, it was what they wouldn’t discuss that drew the most attention.
A week after United Wholesale Mortgage threw a bomb into the wholesale channel by issuing an ultimatum to brokers that has divided the community, Willie Newman, the CEO of Home Point Capital, the parent company of wholesale lender Homepoint, didn’t want to get into it.
“I’m not going to comment on what others are doing,” Newman told analysts and investors on the earnings call, the first one since the company went public in late January. He did note that Homepoint built its business to be “differentiated” from its competitors but also “aligned” with its network of broker partners, now numbering over 5,500.
Newman did offer up one interesting nugget on the divisive matter: Homepoint has experienced a sharp uptick in new broker partners since Mat Ishbia issued the ultimatum last Thursday, in which the UWM CEO and president said brokers who worked with Rocket Pro TPO and Fairway Independent Mortgage couldn’t work with UWM.
“What we’re basically hearing from the broker cohort is that, by and large, they’re looking for another large source,” Newman said. “We’ve definitely seen as I mentioned an increase in inbound and there’s a lot of concern about not having the level of choice that they’ve come to appreciate prior to the announcement of last week. So I think for us that certainly is a positive – we feel like we’re very well positioned to be that that next choice if it does turn out that they only have one of the two largest other lenders to work with.”
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Homepoint, the third largest player in the broker channel, disclosed strong numbers for the full year of 2020. The Ann Arbor, Michigan-based lender generated mortgage origination volume of $62 billion for the full year, including $24 billion in the fourth quarter. Homepoint roughly tripled origination volume in 2020 from 2019, executives said on the call. Homepoint’s market share in the wholesale channel for the fourth quarter impressively rose to 8.2% from 7.3% in the prior quarter. And executives say that share will grow in the months and years to come.
But there are obvious signs of a slowdown, and executives artfully – and sometimes not – dodged analysts’ questions on expected future performance, and how the competitive space in the broker channel is changing in light of what happened last week.
The disclosures to the Securities and Exchange Commission show that Homepoint’s revenue fell to $455 million in the fourth quarter, from $510 million in the third quarter. Net income also dropped to $184.5 million from $264 million in the prior quarter. And tellingly, gain-on-sale margin during the fourth quarter checked in at 176 basis points, down from 278 basis points in the third quarter.
Analysts and investors wanted to know more about the gain-on-sale margins. Several focused their questions on the forecast for the first quarter, which ends in less than three weeks.
Executives held back.
“We are not giving guidance on first quarter,” Newman said. “I will tell you that in January and February, we had record funding volumes each month and the broker approvals continued at a strong pace, consistent with where we ended up in 2020. Obviously, we continued to grow servicing customers and UPB, which provides us a natural hedge in a rising rate environment and certainly with rising rates. And with some of the actions of the competitive set there, there is pressure on margins, but in January, February, they were above normalized levels.”
Home Point Capital’s CFO Mark Elbaum later told analysts and investors that margins should be above 2019 levels, which averaged 90 basis points. Once again, he declined to offer up specifics.
As of 10:30 a.m. EST, Home Point Capital’s stock (HMPT) had fallen to $11.38 a share, a drop of about 1.56% from Wednesday.
The company also announced on the call that it had hired Fannie Mae‘s chief risk officer, John Forlines. Forlines follows Andrew Bon Salle, who joined Home Point Capital as chairman after leading Fannie Mae’s single-family business.
