As the mortgage industry wound down from explosive origination volume seen in 2020 and 2021, consolidation activity has ramped up.
Thus far, two groups of industry stakeholders are emerging: those that have enough capital and see the depressed market as an opportune time to grow market share and companies that can no longer stay afloat.
As a result, merger and acquisition activity ticked up. In 2022, 42 transactions closing during 2022 eclipsed the previous record of 33 deals of this kind in 2018, according to consulting firm STRATMOR Group. The consultancy predicted 60 transactions in 2023, most of which would be between nonbank lenders.
So far, deals have been struck in all sectors of the industry, with brokerages, lenders and servicers merging or scooping up competitors.
Stakeholders in the industry looking to acquire others keep an eye out for similar cultures and whether a company dominates in a particular region that the stakeholder is trying to expand into.
David Hrobon, principal at STRATMOR, explained that “each deal is unique but there are some generalities relative to the nonbank buyer motivations” such as larger IMB’s frequently having “lower borrowing costs and better secondary market execution than their smaller peers.”
“For most [lenders], market share growth is simply calculated by product of the acquisition. Their primary motivation is to add loan volume (scale) that will help them offset their fixed expenses and return to an acceptable level of profitability,” he said.
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