The competition for mortgage market share has become a “street fight,” with production and talent increasingly shifting toward the broker/nondelegated correspondent channel, industry executives said Thursday at HousingWire’s Mortgage Banking Summit in Dallas.
“We are absolutely, in my opinion, in a street fight,” Rich Weidel, CEO of Princeton Mortgage, said on stage.
Citing data from RETR covering 2,070 lenders, Weidel noted that half of lenders saw net production shrinkage last year, while only 57 companies across all channels grew by more than $400 million over the past 12 months. That small cohort represented only 2.8% of companies, but they captured roughly two-thirds of all production growth in the market.
With volumes plateauing and mortgage rates still elevated, Weidel said lenders are being sorted into two groups: capital winners and cost-to-produce winners.
Capital-driven players are using their balance sheets to lure originators with upfront signing bonuses in an “acqui-hire” strategy, which only works if these producers can be retained. Cost-focused competitors are attacking their per-loan expenses so they can offer originators more compensation, better rates for consumers or both.
“If you look at the data, there’s two camps: those [loan originators] that are moving toward the companies where they’re getting upfront signing bonuses,” Weidel said. “We’re also seeing them moving into the nondelegated channel; the nondelegated starts to look like the green shoots that we’re seeing in traditional IMBs, the sort of brokers becoming non-dels and mortgage bankers getting really lean and mean.
“There’s this crop of companies that are starting to operate in an entirely new cost structure, and we’re seeing the production move to that.”
Production migration
Rick Roque, senior vice president of retail growth and M&A at NFM Lending, said RETR’s loan officer tracking data confirms the trend toward nondelegated models and away from traditional bank and independent mortgage bank (IMB) platforms.
Between Jan. 1 and Sept. 9 of this year, 17,438 loan officers changed employers, moving about $6.8 billion in production. Independent mortgage bankers recorded a net loss of 97 loan officers and $1.8 billion in production over that period, while banks posted a net loss of 230 LOs and $5 billion in production.
Brokers, by contrast, showed a net gain of 327 loan officers and $6.8 billion in production. Roque attributed much of that momentum to the appeal of the nondelegated correspondent channel, which allows teams to operate with a lender-like platform while shifting much of the fixed cost and operational risk to a larger counterparty.
James Deitch, co-founder and CEO of Teraverde, described a hierarchy of costs, with banks typically having a higher cost structure than IMBs and brokers. Roque sees a correlation to this with the LO migration trends.
“The nondelegated correspondent is a brilliant strategy because you can operate as a lender, especially given the advances in technology,” Roque said. “At NFM, we have large production teams who have dedicated underwriting, closing and funding out of corporate, while non-delegate correspondents, they’ve grown to a size where UWM has dedicated their underwriters, closers, and funders to that organization.
“It’s an incredible strategy because you get all the benefits and all the execution without any of the cost.”
