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Short-Term 'Pain' In Wholesale Price War

Mike Savino
Sep 15, 2022
Homepoint logo.

Home Point Financial executive says rate battle "not sustainable"

It’s been a tough summer for the wholesale channel, with many lenders downsizing or leaving the channel altogether. 

A top executive at one of the nation’s biggest wholesale lenders thinks that suffering will continue as long as wholesalers are engaged in a price war. 

“What you’re seeing is a lot of the multichannel lenders – they need to remove costs, you know, and the fastest way to to do that is through wholesale,” Home Point Financial President of Originations Phil Shoemaker said. 

Homepoint is among the companies that have made cuts — the company laid off more than 900 employees around the beginning of the month. 

“Homepoint, the way we’re looking at it, the actions we took is unfortunate,” Shoemaker said. “As hard as they were, we think they’ve positioned us to successful navigate what the market is.”

Competitors like loanDepot, AmeriSave and Mountain West Financial have given up on wholesale altogether. 

In an interview for The Principal, the Mortgage News Network’s daily podcast, Shoemaker said Home Point remains committed to wholesale despite the recent troubles. He said the cuts were needed to keep the company going. 

“What really matters in lending is liquidity preservation, making sure that you’re protecting your cash,” he said. 

That’s why he thinks cuts in wholesale could continue. He said a a price war is forcing some lenders to opt for retail, where cost control is easier, as the economy heads toward a recession and origination slows. 

“Short-term there’s going to be some pain and you might see certain lenders tap out,” Shoemaker said. 

He declined to name individual companies, but United Wholesale Mortgage in June announced it cut its rates across the board. 

Shoemaker said the price war “is not sustainable,” but also noted the lack of origination is making it hard for companies to wait things out. 

The MBA said mortgage applications have fallen for five straight weeks. 

“The reality of the situation is this, it’s really this simple – there are not enough loans to support the capacity that lenders have built up,” Shoemaker said. 

He said Homepoint remains committed to wholesale because the company believes it’s what consumers will want. He said Home Data Disclosure Act data shows consumers benefit from the options and competition wholesale provides. 

Even though lenders are leaving wholesale, he thinks others competitors will emerge in the channel once business picks back up. 

“The whole point is there’s optionality,” Shoemaker said. “There needs to be multiple lenders in wholesale for wholesale to ultimately be successful over time.” 

He thinks origination will eventually pick up, but it could take time for market conditions to change and for buyers to come back. 

“There’s going to need to be a reset from an affordability standpoint, and I would say look, this year is clearly a tough year,” he said. “I don’t think it’s going to get any easier next year.” 

Sep 15, 2022
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