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Guild Mortgage ended up in the red in 2023 as rising mortgage rates put a damper on lending but helped the company pursue a strategy of growing its market share through acquisitions.
Guild’s parent company, Guild Holdings, reported a $39.1 million 2023 net loss Tuesday, with mortgage originations dropping by 21 percent from the year before, to $15.3 billion. While 2023 revenue declined by 44 percent, to $655 million, Guild shaved expenses by just 6 percent to $701 million.
But having generated $329 million in profits in 2022, the San Diego-based lender said its balance sheet and liquidity remained healthy as it pursued its growth strategy.
With $120.3 million in cash and cash equivalents as of Dec. 31 and unutilized loan funding capacity of $1 billion, last month Guild announced it had reached a deal to acquire Utah-based direct lender Academy Mortgage. Guild says the deal will boost its loan originations by 25 percent and make it the eighth-largest nonbank retail mortgage lender in the U.S.
It was Guild’s fifth acquisition in the past 18 months, including deals to acquire First Centennial Mortgage, Cherry Creek Mortgage and Legacy Mortgage in 2023.
“By being disciplined and focusing on maintaining a robust capital position, we have effectively pursued complementary and compelling acquisitions and team additions to position us for growth when the cycle turns,” Guild Holdings CEO Terry Schmidt said in a statement.
Shares in Guild Holdings, which over the past 12 months have traded for as little as $9.45 and as much as $15.06, were down 8 percent from Tuesday’s close of $14 in after-hours trading following the earnings release.
Guild Mortgage originations down 21% in 2023
In addition to $14.96 billion in in-house mortgage originations, Guild also brokered $268 million in mortgages, typically for products it doesn’t offer in-house. Along with reverse mortgage originations, that business helped bring total 2023 loan originations to $15.3 billion.
While that represented a $4 billion drop from 2022 mortgage origination volume of $19.3 billion, Guild’s strength in purchase mortgage lending helped cushion the blow of rising interest rates last year.
Purchase loans represented 93 percent of Guild’s in-house mortgage volume in 2023, compared to 81 percent for the industry as a whole, according to lender surveys by the Mortgage Bankers Association.
“We have continued to leverage the strength of our platform to grow market share as we execute on our strategy that is focused on the purchase market,” Schmidt said. “We are proud to be a lender of choice in the communities across the country that we serve by providing creative solutions for homebuyers seeking to finance their homes in this higher rate environment.”
In addition to originating mortgages, Guild also acts as a loan servicer, collecting payments from borrowers on behalf of investors in mortgage-backed securities.
Guild’s mortgage servicing rights portfolio grew by 8 percent in 2023, to $85 billion, generating $246 million in loan servicing and other fees, up 10 percent from the year before.
But falling mortgage rates in the final quarter of 2023 forced Guild to write down the value of its mortgage servicing rights, largely due to the heightened risk that some borrowers it services will refinance and end up with another servicer.
In Q4 2023, markdowns to the fair value of the company’s mortgage servicing rights totaled $134.7 million, driving the company’s $93.1 million net loss for the quarter.
“As we look forward, we are encouraged by the market stabilization that is emerging, but anticipate a more muted environment in the near term, particularly in the seasonally slower first quarter,” Schmidt said.
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