Parent company Home Point Capital to take an equity stake in The Loan Store, with Homepoint executive Phil Shoemaker to be installed as CEO when the deal closes by the end of the second quarter.

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After selling its correspondent lending business and laying off hundreds of workers last year, Homepoint plans to get out of the business of originating mortgages altogether by selling its wholesale loan business to rival The Loan Store Inc.

Mark Lefanowicz

But in announcing the deal Friday, parent company Home Point Capital Inc. said it will also take an equity stake in The Loan Store, and that Homepoint executive Phil Shoemaker will be installed as The Loan Store’s new chief executive officer. The Loan Store’s current CEO Mark Lefanowicz will serve as executive chairman of the company’s board.

Phil Shoemaker

“I am proud of what we accomplished at Homepoint and thankful for the experience,” said Homepoint’s President of originations, Shoemaker, in a statement. “I’m looking forward to the next chapter at The Loan Store where we will continue making a positive impact within the wholesale lending community.”

Terms of the sale were not announced. But if the deal closes as expected by the end of the second quarter, it will further The Loan Store’s goal to become a leading national wholesale mortgage lender offering “aggressively priced” conventional, jumbo, VA, and non-QM loans, the company said.

Although Homepoint saw its wholesale originations plummet by 68 percent last year to $22.39 billion, it was still the third-largest wholesale lender by origination volume, according to Inside Mortgage Finance.

Brandon Stein

“At The Loan Store, we’ve built an efficient platform that provides what we believe is truly a best-in-class experience for our partners,” said The Loan Store President Brandon Stein in a statement. “Combining that with the visionary leadership of Phil Shoemaker and a highly regarded sales and operations team, The Loan Store is well-positioned to sustainably scale our business.”

Homepoint said it will continue to manage mortgage servicing rights on a portfolio of more than 300,000 loans with an unpaid principal balance of $89.28 billion as of Dec. 31.

Shares in Homepoint, which have traded for as little as 99 cents and as much as $4.65 over the last year, were up 20 percent in light trading Thursday to close at $2.07. Markets were closed following the announcement of the deal for Good Friday.

Homepoint mortgage originations 2019-2022

Homepoint mortgage originations by channel (wholesale, correspondent, direct) 2019-2022 |  Source: Home Point Capital annual reports

Founded in 2015 and headquartered in Ann Arbor, Michigan, until recently Homepoint originated mortgages through three channels: Wholesale, correspondent and direct.

Through its wholesale channel, Homepoint funded loans originated by more than 9,259 mortgage broker partners as of Dec. 31. When interest rates plummeted during the pandemic, Homepoint was able to grow its wholesale loan originations by 228 percent in 2020 and another 83 percent in 2021, to a peak of $69.45 billion.

But when mortgage rates soared last year, Homepoint’s wholesale loan originations tanked, forcing the company to downsize. With other lenders also taking a hit to their business, Homepoint still managed to carve out 6.6 percent market share in the wholesale channel last year, up from 1.6 percent in 2017, according to Inside Mortgage Finance.

Although the wholesale channel has been Homepoint’s primary method of originating loans, until last year it also purchased closed and funded mortgages from a network of correspondent lenders — primarily small- to medium-sized independent mortgage banks, builder affiliates and financial institutions.

As recently as 2019, Homepoint’s correspondent channel accounted for nearly half of the company’s loan production (46 percent).

But Homepoint left the correspondent business last year, selling its correspondent lending channel (and a subsidiary, Home Point Asset Management LLC) to rival Planet Home Lending LLC. That deal was announced last April and closed on June 1, 2022.

Planet Home Lending paid $2.5 million in cash for Homepoint’s correspondent lending business, plus 2022 earnout income of $900,000, according to Home Point Capital’s latest annual report to investors. Planet Home Lending will continue making earnout payments to Homepoints based on origination volume through June 1, 2024.

Homepoint’s third avenue for originating mortgages was its direct channel, in which Homepoint refinanced borrowers already making payments on mortgages serviced by Homepoint. Direct originations peaked at $4.88 billion in 2021, before plummeting to $758 million last year.

Homepoint’s servicing portfolio 2019-2022

At the end of 2022, Homepoint owned the servicing rights to collect payments on 317,000 mortgages with outstanding balances totaling $89.28 billion, a 33 percent drop from 2021.

Short on cash at the end of the year, Homepoint sold approximately $6 billion of the company’s Ginnie Mae servicing rights during the fourth quarter, generating proceeds totaling $87.8 million.

But loan servicing will continue to “generate significant returns and cash flow over time,” the company said Friday in announcing its exit from wholesale lending.

In reporting a $163.7 million 2022 net loss on March 9, Homepoint said loan servicing was a net positive, generating $277.5 million in revenue and boosting the company’s bottom line by $121.8 million after deducting fixed costs.

Last year Homepoint signed an agreement with First American Financial Corporation subsidiary ServiceMac LLC to act as its subservicer. While ServiceMac has been collecting payments from borrowers on Homepoint’s behalf since the second quarter of 2022, Homepoint retains the underlying mortgage servicing rights.

Hiring ServiceMac as a subservicer while retaining the servicing rights allows Homepoint “to maintain a lower, more variable cost structure and provides greater flexibility when strategically selling certain non-core MSRs,” the company said.

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Email Matt Carter

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