Daily Mortgage News & Commentary

Oct. 3: Rocket, UWM, Guild, AmeriHome, Caliber… don’t be the last on your block to go public; Saturday Spotlight: Planet Home Lending

Remember Jack and Rose running through the engine room of the Titanic? Nearly every residential lender is going balls to the wall (or balls out) and continuing to set production records, as are MLOs, but it’s a good idea to reward the workers under the water line. I received this note from a successful loan officer in Texas. “I make a point of giving unsolicited, fun things to our already-over-worked Ops staff members. Deliverable gifts that don’t make you look cheap when we are already making so much money and beating huge goals, and recharges the crew and lets them know they are appreciated. Companies are saving a ton of money without awards banquets, Christmas parties, President Club trips, etc. not happening… They can spend a little on appreciation. I’ve tried warm cookie delivery, sending dinner to their family via Grub Hub, a 3rd quarter bonus, Amazon Prime membership, Instacart Gift Card, 1 year Costco membership, new desk or office chair for their home office, a night at a local hotel to quarantine with spouse & order room service, and a beer/wine delivery or subscription.” Thank you for the tips!

Saturday Company Spotlight

This week we highlight Planet Home Lending, LLC. “At Planet Home Lending, we support our planet, our people, and the prosperity of homebuyers. Every single day.”

What is Planet’s business model? Planet Home Lending, LLC, is a nonbank, multichannel, mortgage lender and servicer structured to excel in all market cycles. Planet’s progressive business model and skilled leadership enables us to seize opportunities and keeps prices sharp and our methods ahead of the curve.

Our dedicated and seasoned operations team produces some of the lowest turn-times in the industry. The company’s growing servicing portfolio, now at $25 billion, helps our distributed retail branches achieve an 80% recapture rate when a borrower is looking to refinance or purchase a new home. In correspondent, we are seventh in government and sixteenth overall. We also provide sub-servicing and asset management for residential, small balance commercial, non-QM and residential transition loan portfolios for institutional investors and private clients.

What charities does Planet support? Planet With a Purpose is our dedicated company platform to support organizations focused on making a difference in our communities and to our planet. We believe giving back with both charitable contributions and by actions.

This summer, we teamed up with a grassroots movement called Farmlink, whose mission is to end food insecurity by connecting farmers with surplus crops to food banks in need. The Farmlink Impact Tour delivered more than 10 million pounds of food to communities and our employees volunteered at various locations, including Manhattan, Baltimore, and Dallas, helping Farmlink distribute food to more than one million families.

We are also in our second year of partnering with the National Forest Foundation (NFF). NFF plants three trees for every loan Planet originates… More than 30,000 in 2020 alone.

What does your company do to support growth and help people develop? Planet thrives on meritocracy. People with drive and initiative can come in at any level and rise into leadership. We have in-house and external training, formal and informal mentors, and most importantly, equal opportunity. Our culture of mentoring and promoting from within leads to terrific retention of top operations talent and continuity of leadership. On the sales side, Planet has business planning mentors, technology-driven marketing, and a robust product line.

How does Planet maintains its culture? People join Planet, stay at Planet and want to work with Planet because they connect with our openness, honesty, transparency, cross-channel cooperation, and our belief that diversity gives us a competitive advantage. When you have a company of connected people who bring their best selves to work, that culture spreads whether you are working in the office or remotely. The best compliment we receive is when new hires say they are amazed the culture is exactly what we promised it would be.

What are you most proud of? The way Planet held steady last spring when the capital markets were rocked by COVID-19. CEO Michael Dubeck kept the lock desk open, confident that Planet’s employees were smart enough and strong enough to handle what lay ahead. And he was right. While other companies shut down, Planet’s volume doubled in correspondent, branch retail and retention retail, servicing grew by 47% and sub-servicing assets under management rose 20%.

Fun fact about Planet. Women and minorities make up 63.5% of leadership (VPs and above) among the Planet Financial Group family of companies, including five of eight C-suite positions. To create a best-in-class platform, you need the best talent and you must be open to all applicants.

 

(For more information on having your firm and its charitable side featured, contact Chrisman LLC’s Anjelica Nixt.)

Company moves: follow the money

Some companies are announcing market share goals. Wouldn’t it be better to announce lofty customer satisfaction goals, and let the market share follow? Remember when the industry feared that strategic partnerships, MSAs, and joint ventures were “against the law”? Or that Amazon was going to put everyone out of business? Or that TRID would push the cost of originating a loan past what the consumer could afford? Now several lenders are providing investment bankers juicy fees by going public: see below.

Innovation in lending, dead? Nope. Trying to eliminate private MI companies? Yup. Along comes Home Diversification Corp., “a startup Fintech financial product provider,” who has the Home Diversification Mortgage which offers “millions of non-conforming homeowners the never before available benefit of a low-down payment/no PMI mortgage.” Recorded as a junior lien on the property, it “provides a new form of credit enhancement, virtually eliminating credit risk to lenders and the GSEs… It will supplant the need for tens of millions of non-conforming home buyers to purchase expensive PMI in order to qualify for financing.”

(Editor’s note: Trading one’s own home equity for the Case Schiller index may not suit everyone. Some argue that a borrower can do that with a second mortgage too, just by investing the proceeds of your second mortgage in with a Case Schiller contract. Questions about the mortgage protection feature and how it enables a low down payment, and guaranteed diversified national home price appreciation should be addressed to the company.)

There’s a lot of capital out there chasing deals. There’s a lot of capital out there chasing yield. Combine that with senior management who’d like to take some chips off the table and realize some of the fruits from their hard work, and want to bolster their capital, and you have…

This week $60 billion Signature Bank (NASDAQ: SBNY) priced $375 million benchmark-sized subordinated debt offering with a 4% coupon and 10-year maturity. But enough about depository banks… it’s the rise of the non-banks which many regulators believe are under-capitalized. Not for long?!

Caliber is planning to go public, according to a report by the Wall Street Journal. Lone Star Funds has plans to take its Caliber Home Loans mortgage banking empire public, filing an S-1 statement with the Securities and Exchange Commission. Attaboy CEO Sanjiv Das, a former Citigroup executive, who the S-1 indicates received $20.54 million in total compensation last year.

That would make four actual or rumored mortgage banking IPOs this year: Quicken, United Wholesale, Loan Depot and Caliber. But wait, there’s more! Two IPOs made their initial public filings this week: AmeriHome, Inc. (bookrunners: Credit Suisse, Goldman Sachs, J.P. Morgan, and Wells Fargo) with an initial filing size of $100 million, and Guild Holdings Company, Ticker GHLD (NYSE) with bookrunners Wells Fargo, BofA Securities, and J.P. Morgan, also with a filing size of $100mm.

As we know, AmeriHome is “A leading U.S. residential mortgage producer and servicer focused on driving profitable growth across market environments.” And Guild is a “A growth-oriented mortgage company that employs a relationship-based loan sourcing strategy to execute on its mission of delivering the promise of home ownership in neighborhoods and communities across the United States.”

 

The interesting thing about the mortgage banking IPOs is that the multiples are poor. Rocket is trading at 21.87 expected to earn $3.36 this year, which means it is trading with a P/E ratio of 6.5. PennyMac is expected to earn $15.87 this year and is trading at $57. That is a P/E under 4. The winner of the low multiple derby goes to Mr. Cooper, who is expected to earn $8.12 and is trading at $22.64, which means it has a P/E of 2.8. Industry vet Brent Nyitray observed, “I understand mortgage banking is highly cyclical and all, but the Street is treating these stocks as if prepayment burnout will begin in January. Given the Black Knight estimate of the ‘refinanceable’ universe, it will take years to work through that backlog.”

Better Mortgage is discussing raising more money. Recall that in mid-2019 Better Mortgage Corp., which operates as Better.com, said it raised $160 million in a Series C fundraising round, one of several other rounds. Now Better.com is nearing a deal to raise more than $100 million in new funding that would value the company at about $4 billion, up from about $720 million last year

Quontic Bank Acquisition Corp., the parent company of Quontic Bank announced the pricing and closing of a private placement of $8.0 million aggregate principal amount of fixed-to-floating rate subordinated notes (the “Notes”). “Quontic’s net proceeds from the offering will be used for general corporate purposes, including the ability to increase community development mortgage loan production. The capital will also allow Quontic to accelerate its mission to digitally transform to become an API first bank and fund potential future strategic opportunities to develop new innovative banking products and services.”

United Wholesale? United Wholesale (here’s a peak at its inner workings) plans to merge into the SPAC Gore Holdings IV (ticker: GHIV, NR) in a reverse IPO of sorts. The company has become the third-largest mortgage originator in the country, and believes that it has moved ahead of Wells Fargo, dominating the broker channel in particular. It hopes to have a net income in 2021 at $1.7 billion (on $4.7 billion of gross revenue) which would put the stock at 9.5-10x earnings.

Loan Depot filed to go public. Recall that “LD” planned to go public about 5 years ago, and scrapped the plan at the last minute. Initial estimates would value the company at somewhere between $12 and $15 billion. Like Quicken, it looks like Loan Depot is going public with a dual voting class structure.

Zillow purchased Mortgage Lenders of America in November 2018, and has plans to launch Zillow Homes in January 2021 for sellers who want cash offers. Perhaps will soothe over some hurt feelings between businesses. Launching a brokerage is a major milestone. Future: one-stop shop for buying, real estate, mortgages. View of where consumer is going in the future: simplistic. Becoming an active real estate company.

Quicken Loans, the nation’s largest home lender, in late September entered into a $1.5 billion borrowing facility with Barclays Bank, according to a new 8-K filing with the Securities and Exchange Commission. The money will be used for originating Fannie Mae/Freddie Mac loans.

New Rocket referral network for agents next year. Rocket has looked at bringing real estate agents in as originators. I am sure their eye is on regulator interest in anything like that. And don’t forget about Rocket Homes! And Rocket Companies shares shot higher by 7.6% on Thursday after the company inked a new deal with popular real estate listings platform Realtor.com. Homebuyers shopping on Realtor.com will now see advertising from Rocket Mortgage for pre-approved mortgages, allowing Realtor.com users to connect directly to a Rocket mortgage application.

Those who listened in to the earnings call last month, or maybe it was August, as the months fly by, know that roughly 60 percent of Rocket’s business comes from Direct to Consumer (40 percent from mortgage brokers or other partners like credit unions and real estate agents). This helped Rocket set a record production number in the second quarter. 4.7 percent of its servicing portfolio was under some type of forbearance plan at that time. Its goal is to close $40 billion per month, 25 percent market share by 2030, although expect to do about $80 billion in the 3rd quarter. Quicken views its brokers as key to its distributed retail model and pretty much offers up vanilla product which fits the manufacturing model. The focus is not on competing on price, which in turn has helped Quicken Loan’s margins.

Quicken Loans is focused on retention of existing servicing customers (it’s less expensive to keep a customer than obtain a new one, right?). Rocket has numerous revenue sources, but the majority comes from Quicken Loans. The forecast market share increase will come from retention (above 80 percent of the customers they can and want to retain, and who will be profitable) of its existing customer base, and growing its servicing portfolio. Quicken Loans sells off the servicing of those customers that don’t fit the profitability model. Very little of the MSRs are hedged.

All of this capital is not confined to our shores.

Out of Richmond, VA and Beijing came news this week from Genworth Financial, Inc. and China Oceanwide Holdings Group Co. Ltd that Oceanwide has “reached a general agreement with Hony Capital on the key commercial terms and conditions of its $1.8 billion offshore financing plan to complete the acquisition of Genworth, and that Oceanwide has provided satisfactory information regarding its funding plan for the portion of the funds being sourced from Mainland China.”

“While Oceanwide has made significant progress towards finalizing its financing plan for the proposed transaction, however, it has not reached a final agreement with Hony Capital on all terms and conditions due to the logistical challenges presented by the global pandemic, including travel restrictions and mandatory quarantine requirements. These challenges have significantly lengthened the time required for Oceanwide and Hony Capital to hold in-person discussions to finalize these terms and conditions. As a result of these delays, the parties also today announced that they have agreed to a 16th waiver and agreement of each party’s right to terminate their previously announced merger agreement. The 16th waiver extends the previous deadline of September 30, 2020 to no later than November 30, 2020.”

Taiko Aichi Capital, a private wealth management company headquartered in Tokyo, reports that in a funding round led by private equity firm Permira, Paris-based Mirakl has raised $300 million giving the e-commerce start-up a company a valuation of $1.5 billion, its U.S. chief executive officer and co-founder confirmed in an interview. Thomas Henderson, Taiko Aichi Capital’s Director of EMEA Wealth, reported: “With its valuation exceeding $1 billion, this funding round makes Mirakl a newly minted unicorn.”

(Easily changed for either party; this version was decided by a coin toss so no complaints.)

A union boss walks in from the factory next door and is about to order a beer when he sees a guy at the far end of the bar wearing a TRUMP “Make America Great Again” cap with two beers sitting in front of him.

The union boss doesn’t need to be an Einstein to know that this guy is a Republican, so he shouts over to the bartender so loudly that everyone can hear, “Drinks for everyone in here, bartender…but not for the Republican.”

Soon after the drinks have been passed out, the Republican gives him a big smile, waves at him then says, “Thank you!” in an equally loud voice.

This infuriates the union boss.

After a few minutes, the union boss once again loudly orders drinks for everyone except the Republican. As before, this doesn’t seem to bother the Republican. He nods and smiles, and again yells, “Thank you!”

A few more minutes pass and the union boss orders another round of drinks for everyone except the Republican. Just as before, this STILL doesn’t seem to faze the Republican who continues smiling and again yells out, “Thank you!!”

Frustrated that he can’t seem to get the guy angered, the union boss asks the bartender, “What is wrong with that Republican? I’ve ordered three rounds of drinks for everyone in the bar but him, and all the dummy does is smile and thank me. Is he nuts?”

“Nope,” replies the bartender. “He owns the place.”

Visit www.robchrisman.com for more information on our industry partners, access archived commentaries, or to subscribe to the Daily Mortgage News and Commentary. If you’re interested, visit my periodic blog at the STRATMOR Group web site. The current blog is, “Do Lenders Care About Forecasts or Predictions?”

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(Market data provided in partnership with MBS Live. For free job postings and to view candidate resumes visit LenderNews. This newsletter is designed for sophisticated mortgage professionals only. There are no paid endorsements by me. For up-to-date mortgage news visit Mortgage News Daily. For archived commentaries, or to subscribe, go to www.robchrisman.com. Copyright 2020 Chrisman LLC. All rights reserved. Occasional paid job & product listings do appear. This report or any portion hereof may not be reprinted, sold, or redistributed without the written consent of Rob Chrisman.)