The trailing 12-month originations at Home Point Capital’s mortgage subsidiary hit a $100 billion milestone in the third quarter, when it earned $71.2 million and rebounded from the second quarter’s $73.2 million net loss.

In addition to more than doubling its 12-month origination volume from $46 billion a year ago, Homepoint Financial generated secondary market sales of loans and servicing that boosted its parent company’s revenue to $275 million from $84.4 million in the second quarter.

However, both revenue and net earnings were down compared to $511 million and $264.1 million, respectively, a year earlier. The mortgage market was unusually strong at the time.

In an earnings call, executives acknowledged the challenge posed by margin compression in this environment, and noted that the company has been putting cost-cutting initiatives in place in response. Margin attributable to loan channels before giving effect to the impact of capital markets activity was 73 basis points in the third quarter, compared to 233 basis points a year ago and 74 basis points in 2Q21.

“During the third quarter, we were able to drive down our direct loan costs by approximately 10%,” President and CEO Willie Newman said, noting that this was achieved through workflow efficiencies and a mix of proprietary and third-party automation. Executives declined to report the company’s current cost per loan. The mortgage industry more broadly has reported running into challenges with expense management.

Home Point is taking several steps to address the shift to more normal business levels, Newman said, noting that aggressive growth of its third-party origination network is one key part of this.

“We believe we are well positioned to gain market share as rates rise and purchase transactions outpace the growth of mortgage refinancing,” he said.

Home Point ended the third quarter with more than 7,400 brokers and 650 correspondent partners, representing about a 50% increase compared to 12 months earlier, he said.

Also during the quarter, Home Point sold an $11 billion portfolio of Ginnie Mae mortgage servicing rights in line with previously announced plans. The purchase price for the sale was roughly $122 million, and the company was “pleased with the results,” Chief Financial Officer Mark Elbaum said during the company’s earnings call. The amount of servicing sold represented approximately 41% of the company’s Ginnie Mae MSR portfolio as of June 30.

Home Point plans to eventually sell all of its Ginnie servicing while remaining focused on agency MSRs. It will continue to originate the government insured or guaranteed loans typically sold into Ginnie securitizations, such as Federal Housing Administration, Department of Veterans Affairs and U.S. Department of Agriculture loans.

The company has been boosting its revenues through changes to its strategies for sales of loans as well as servicing, Elbaum said.

A positive contribution of 23 basis points came from capital markets activity in the third quarter, he said, noting that Home Point’s definition for this is determined by the period after the loan is locked and includes related activity such as hedge effectiveness.

One driver of this gain during the quarter was a shift away from cash sales in the agency market and the use of securitization as a loan outlet instead. Home Point also has been selling some loans into the non-agency market.

“This quarter’s [number] was greater because of our ability to take advantage of some of those alternative executions,” said Elbaum.





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