Homepoint Takes $44M Hit In Q2 Amid Price War With UWM

By Musashi
August 12, 2022
3 min read

Increasing Profit Margins Is The Goal Says Homepoint Management. Company Says They Are Not Afraid To Downsize Permanently

HomepointHomepoint took a $44 Million loss in the second quarter of 2022. The company had already reduced costs and sold the mortgage servicing rights for loans in their servicing portfolio.

The company reported that surging interest rates reduced volume. In addition, the company attempted to compete against aggressive pricing strategy from its rival United Wholesale Mortgage. However, it appears the boys from Detroit kicked Homepoint’s ass.

Afterwards, Homepoint said it will not engage in a price war with UWM.

Home Point Capital CEO Willie Newman conceded this to investors:

Our bias right now is towards more margins and less volume. We’re not afraid to get smaller as an organization.

The wholesale lender reported yesterday that it suffered a $44.4 million loss in the second quarter. This is a decline from the $11.9 million profit in the first quarter of 2022. However,  Homepoint had a $73.2 million loss in the second quarter of 2021.

Homepoint’s total funded originations fell to $9.3 billion in the second quarter. This is down from $12.5 billion from the first quarter of 2022. In addition, it’s also loss from $25.5 billion in second quarter of 2021. 

Homepoint’s overall revenue fell to $70 million in the second quarter. This is a decline from $158.2 million in the prior quarter and $84.4 million a year ago. Meanwhile. The company claimed expenses came in at $119.4 million in the second quarter of 2022. This is down from $136.7 million in the previous quarter and $198 million in the same period of 2021. 

Losses Still Mounted After Homepoint Sold Off Assets Earlier In The Year

In February, Homepoint migrated its mortgage servicing processing work to ServiceMac. ServiceMac is a First American company. As a result, Homepoint transferred 300 employees to ServiceMac.

In April, the company also announced it was exiting the correspondent market. Consequently, the company sold its correspondence division to Planet Home Lending for $2.5 million.

Homepoint executives also initiated a strategy to reduce its servicing portfolio. During the first quarter, Homepoint completed selling it’s mortgage servicing portfolio of single-family mortgage loans worth $257.3 million.

Consequently, the servicing portfolio totaled $90.5 billion in unpaid principal balance as of June 30, 2022. This is down 11.2% quarter-over-quarter and 27.2% year-over-year.  

The company does have $135.8 million in cash and cash equivalents as of June 30, 2022. It also had a total available liquidity of $632.3 million. However, Homepoint’s board of directors decided not to declare a dividend for the second quarter. This was to maintain a strong liquidity position. 

The company did not provide any details of a strategy for the third quarter. Management claimed they wanted to have “flexibility” with its strategy. 

Homepoint’s share was trading at $3.80 on Thursday. This is up 2.7% from the previous close. 

Also, Check Out More Articles About The Imploding Lending Industry On Lender Meltdown.

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