Matt Joy, Princeton Mortgage
My last official post is 104 days old. It’s been way to long since I’ve taken to the blog, but now that I’m back let’s catch up.
The last time we talked I was rambling on about mortgage servicing, UWM and “whole-tailing” …well it looks like nothing has really changed in 104 days. The wholesale lending giant made an extremely aggressive move to kick off the new year and adjusted their pricing so that they could proclaim themselves “…the best lender for every loan, every time.” Now of course, Quicken Loans couldn’t stand for that, so they adjusted their pricing to oust UWM from the top spot (I mean Dan Gilbert owns 80% of Detroit he can do whatever he wants). Then of course you have the old green and white (Provident Funding) they are always going to be in the mix at the top of the rate sheets along with a few others cough cough… Princeton Wholesale.
But, even still… what did this rate adjustment do? Why do it? What was to gain? Obviously, it was market share, but both UWM and Quicken had the lion share of the wholesale market already! My take on it is simple… greed. There is the old saying… pigs get fat, hogs get slaughtered. The adjustment by Quicken was only made after the fact and really what did they care? Their retail channel generates enough cash to pump money back into wholesale and by retaining the servicing rights on these loans they can mark up the value of that asset (servicing that is) and use it as leverage to raise more capital if they REALLY needed to (which my guess is that they don’t).
Look… let’s think about what loans have been placed into these large books of servicing. Just think about 2017 until now. Rates spiked in ’17 after Trump took office shrinking the already dissipating refinance market. These servicing portfolios are FILLED to the brim with purchases at rates in the 4’s and even higher. You tell me. What do you think these portfolios are worth? What large lender with a built-in retail platform wouldn’t want a crack at these?! They’d even probably pay up for them considering the fact the Direct to Consumer model has gone away (for now at least plus that model has chewed on those Lending Tree leads like a piece of Mike Ditka’s gum these past few years) and paying for LO commissions is catching up to a lot of retail lenders. You’d almost have to think they’d be worth enough to finance a rate buy down in order to gain even more market share… yikes I hope guys are connecting the dots.
If you’re not… what I’m alluding to is that no matter what is written in the fine print the idea of “whole-tailing” which is really just using wholesale to build a servicing platform and then leverage that asset to earn more cash (or just even survive) in down markets is a necessary function of larger mortgage operations right now. Just because a company does everything to “drive” leads back to brokers doesn’t mean they aren’t using that lead to better themselves. Whether it’s selling large chunks of servicing to aggregators like Mr. Cooper or New Rez/New Penn (who will dive into those portfolios… trust me) or it’s handing that lead directly or even indirectly to their retail channel lenders are leveraging this asset in every way possible… and it’s because they have to in order to survive in this climate.
Now, this is all speculation, but it’s something to think about! I must say… either way it’s good to be back!
Talk to you soon!