Shrinking wholesale lender Homepoint is closing its mortgage origination business and will sell its origination-focused assets to competitor The Loan Store, the company announced on Friday.  

Michigan-based Homepoint is “winding down” its tenure as a direct participant in the mortgage origination business and becoming an investor in the market, as the company will hold an equity interest in The Loan Store.

“After careful consideration, and in light of current market conditions, we have decided to sell our wholesale originations business to The Loan Store,” Willie Newman, president and CEO of Homepoint, said in a statement Friday. “We believe this is the best decision for our company to continue to deliver value to Home Point shareholders.”

Home Point Capital, the parent company, will manage its balance sheet and mortgage servicing rights (MSR) portfolio, which is expected to generate returns and cash flow over time. Newman will remain CEO at Home Point Capital, which expects to report its first-quarter earnings in May, according to a source with knowledge of the deal.

Arizona-based The Loan Store, also a pure wholesale lender, will be led by Phil Shoemaker, Homepoint’s president of originations. He will serve as CEO of The Loan Store and Mark Lefanowicz, the current CEO, will hold an executive chairman role. 

Homepoint is the third largest wholesale lender in the country, following United Wholesale Mortgage (UWM) and Rocket Mortgage, according to Inside Mortgage Finance (IMF). Meanwhile, The Loan Store is not listed on the ranking of the 25 top wholesale lenders or the top 100 mortgage lenders in the country. The Loan Store produced about $302 million in wholesale volume last year, the company said. (That figure could not independently be verified.)

Brad Pettiford, a spokesperson for Homepoint, said approximately 100 current Homepoint employees, including operational staffers and account executives, are expected to join the new company. About 350 people will be laid off as part of the wind down.   

The last day to lock in a loan with Homepoint is Monday, April 10. All loans in the pipeline will be done and funded by May 31. Brokers who were approved partners with Homepoint will be automatically approved at The Loan Store.

Homepoint’s struggles

Rumors that Homepoint would soon exiting the wholesale origination business began spreading in the winter as the company struggled to contain costs and originate a high volume of loans in a surging mortgage rates landscape.

Homepoint’s overall mortgage origination came in at $27.7 billion in 2022, a 71.6% decline compared to 2021. Origination volume declined to $1.7 billion in the fourth quarter.

To contain costs as business slowed to a crawl, the company cut thousands of workers. Homepoint’s headcount fell to 830 at the end of 2022 from about 4,000 in the summer of 2021.

Still, Home Point Capital reported a non-GAAP adjusted net loss of $190 million last year, compared to a $300,000 loss in 2021.

Several mortgage brokers have told HousingWire over the last two weeks that they stopped sending loans to the company and complained about the level of service, which in the past had been considered good.

“Mortgage brokers are actively pulling their pipelines, and the company it’s gonna implode no matter what,” an executive at a top brokerage firm told HousingWire last week. Two weeks ago, the brokerage executive told his brokers to stop sending loans to Homepoint.

Another broker-owner said, “We stopped [sending loans to them a while ago]. Their service levels had fallen apart when they started aggressively downsizing.”

A third broker also complained: “I cannot get a hold of anyone at Homepoint, and it has been weeks. They didn’t notify us of any particular change, but all the account executives I knew are gone and moved elsewhere.”

A source with knowledge of Homepoint’s operations said the company got much more conservative on underwriting toward the end. However, “It’s not representative of how the new shop will operate. It’ll be “common sense underwriting” at The Loan Store, the same source said.

Homepoint declined to comment.

Although the number of brokers rose in 2022, Homepoint struggled to keep its partners. It counted 3,603 active broker partners in the first quarter of 2022 but had just 1,658 active broker partners by the end of the year, according to filings with the U.S. Securities and Exchange Commission (SEC).

Like most of its peers, the company relied on its servicing portfolio to bring cash in. During the fourth quarter, Home Point sold about $6 billion UPB in Ginnie Mae servicing for proceeds totaling $87.8 million.

Its servicing portfolio totaled $88.7 billion in unpaid principal balance as of December 31, 2022, down 5.8% quarter-over-quarter and 31% year-over-year. The company said it had 315,478 servicing customers in the fourth quarter, a decline of 4.8% from the third quarter and a 26% reduction compared to the same period in 2021.