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Stratmor: Mortgage M&A Deals Up In 2022

Oct 31, 2022
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Staff Writer

Stratmor Group says that we'll see more of that in 2023, too.

KEY TAKEAWAYS
  • By the end of 2022, STRATMOR anticipates that nearly 50 M&A transactions will be announced or closed.

Mergers and acquisitions (M&A) in the mortgage industry have increased in 2022 and the consolidation will continue in 2023, according to Stratmor Group’s October Insights Report. 

“By the end of 2022, we anticipate that nearly 50 M&A transactions will be announced or closed,” according to David Hrobon, Stratmor Group principal, who penned this month’s InFocus Report “Consolidation in the Mortgage Industry: M&A Strategies for Lenders.”

That number represents 50% more transactions than in 2018, the next highest year of lender consolidations in the past three decades, the report notes. 

“The strategic plans lenders were using in 2022 may not have been based on the right assumptions,” Hrobon wrote in the October report. “2022 was difficult, at best, for residential mortgage companies to prepare for and develop their annual plans. It is turning out far differently than most expected.”
 
That’s due, in part, to the changes the industry experienced this year. For instance, volume is predicted to be down 50% from 2021 levels and 2023 projections are down a bit more.

Net production income is trending toward its lowest point since 2018.
 
Hrobon says there is plenty of opportunity for both buyers and sellers, but structuring good deals is harder now than it was in previous years. Lenders that sold companies in 2018 or 2019 found they had a good amount of flexibility, but today there is almost no margin of error in M&A deals.
 
“The expectation of continued margin compression in 2023 and 2024 is driving industry consolidation. Despite this, buyers are active in today’s market and prepared to pay reasonable upfront premiums for well-matched opportunities,” Hrobon wrote in the report.
 
“Stratmor has been pointing to increased M&A activity for over a year and, in fact, that’s exactly what we are seeing in the market now,” Hrobon continued. “It is a good idea for lenders to continually evaluate their options, and a well-qualified advisor can lead a lender through the process to ensure that everything important is taken into consideration. It is never too late to take a data-driven assessment of your company’s market position.”

About the author
Staff Writer
Sarah Wolak is a staff writer at NMP.
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