Home Point stock dips 17.7% after it reports $149M 1st quarter profit
Home Point Capital Inc. shares tumbled 17.7% in afternoon trading after the Ann Arbor-based mortgage lender missed Wall Street expectations despite a booming housing market.
The company reported revenue of $422 million in the first three months of 2021, more than five times that received in the prior-year quarter. But it missed analyst expectations by nearly $42 million, according to financial news website Seeking Alpha. The $1.07 earnings per share, however, surpassed expectation by 37 cents.
Home Point reported a profit of $149 million in the first quarter after losing money during the same period in 2020. It originated a record $29.4 billion in loan volume, more than two-and-a-half times the amount it originated during the first quarter last year, as historically low interest rates spurred refinancing activity and home purchases.
The results position Home Point, which originates loans through mortgage brokers who work to find home owners and buyers the best rates, as the ninth largest mortgage originator in the United States, according to Inside Mortgage Finance, a trade publication. Crosstown rivals Detroit-based Rocket Companies Inc. and United Wholesale Mortgage Holdings Corp. were No. 1 and No. 4, respectively, but Home Point’s growth outpaced the other top 15 lenders.
As the company has grown, however, expenses have increased 170% to $227 million. Still, it’s gain-on-sale margin increased 32% year-over-year.
The company did add mortgage brokers to its network after Pontiac-based United Wholesale Mortgage Holdings Corp. said in March it would stop doing business with brokers who continue to work with Detroit's Rocket Companies Inc. and Wisconsin’s Fairway Independent Mortgage Corp. Home Point has 6,023 broker partners, up 12% from the end of 2020. CEO Willie Newman said the company expects to end the year with more than 8,000 brokers, though that's still shy of its top competitors, Rocket and UWM.
“The flow is a combination of brokers looking at what happened in March and saying that they needed another scale alternative," Newman said during an earnings call on Thursday. "That’s what’s driving the interest."
The contribution margin of Home Point's originations segment was $188.8 million, two times the amount for the same period in 2020. Refinances represented 79.6% of Home Point's first-quarter mix, up from 60.7% in 2020. The remaining 20.4% came from purchases. Home Point retains the servicing for most of its loans; that segment contributed $64.9 million after losing money a year ago.
Home Point at the end of March had $443 million in available liquidity, including $219 million in cash and cash equivalents, five times the amount it had a year ago. Although it entered the capital markets this year, Home Point did not actually see an influx in money to its coffers from the IPO. The offering came from private Home Point investors, but it provides the company an opportunity to tap public investors for funds in the future.
Rocket, which includes its Quicken Loans LLC lending business, title insurer Amrock LLC, automotive retail marketplace Rocket Auto and more, on Wednesday said it made $2.8 billion in profit in the first quarter, closing $103.5 billion in mortgages. Its shares closed down 16.6% Thursday. UWM will report earnings for the first three months of 2021 on Monday.