Barry Habib on how IMBs are competing with bigger lenders

Today’s HousingWire Daily episode features a crossover episode of HousingWire’s Housing News podcast. In this episode, HousingWire Editor in Chief Sarah Wheeler interviews Barry Habib, founder and CEO of MBS Highway. 

During the episode, Habib discusses how IMBS are dealing with increased competition as mortgage lenders like Rocket Mortgage and United Wholesale Mortgage are squeezing margins.

Additionally, he highlights the importance of the referral relationship in a hot purchase market, and whether or not the economy will face a recession in the years to come.

Here is a small preview of the interview, which has been lightly edited for length and clarity:

Sarah Wheeler: When we talked in January, you mentioned the squeeze that IMBs were likely to feel this year because of some of the bigger players who can really drop pricing and squeeze margins. We’ve certainly seen that with the two biggest lenders, Rocket Mortgage and UWM. So, how are the IMBs competing against that?

Barry Habib: It’s a bit of a challenge, but IMBs always do very, very well. And margins are compressing a little bit but from higher levels, so there was room to give. So that’s the good thing. You know, people hear things like margin compression, margin expansion, and it’s really quite simple. It’s just an issue of supply and demand; it’s capacity that you have when you don’t have a lot of capacity. Margins expand because the pipeline is difficult to take on more transactions, so it gives you that pricing power. We are seeing things slow down as refinances are down a little bit, and while purchases are still good, they are getting a little bit more difficult in nature just because now 25% of the market is cash buyers, which is a lot, as just a year ago, when it came in at 17%.

Habib: It gets a little fuzzy to try and get that exact because we had to shut down and we had a big resurgence in 2020. But if you figure they’re down between six and 10% from last year, it’s accounting for the fact that some of the differentials, cash buyers, and purchase applications are actually a little bit higher compared to last year. But when you take into consideration that a lot of that went into the cash buyer pool, purchases are doing well, but they’re down a little bit and that causes a little bit extra capacity, which makes those lenders in IMBs try and fill that pipeline a little bit more by dropping margins a little bit.

HousingWire Daily examines the most compelling articles reported across HW Media. Each afternoon, we provide our listeners with a deeper look into the stories from across our newsrooms that are helping Move Markets Forward. Hosted by the HW team and produced by Alcynna Lloyd and Victoria Jones.