Guild Holdings expects market share gains as industry originations decline

Guild Mortgage reported higher earnings in its servicing profit in the third quarter, but it also saw a significant drop in origination volumes, but not as severely as the broader industry.

Guild Holdings, the lender and servicer’s parent company, earned a net profit of $77.4 million for the financial period. $58.3 million in the second quarter. Year-to-date, mortgage players generated a net profit of $343.6 million, compared to $241.6 million in the same period in 2021.

Guild also reported a 24% decline in origination volume in the second quarter, from $5.7 billion to $4.4 billion. As a result, year-to-date total originations totaled $16.1 billion, down 42% from his $28 billion the year before.

The decline was sharp, but slower than the industry average, suggesting Guild is profiting more than its competitors, management said.

“In terms of consecutive declines from Q2 to Q3, we saw a 24% decline compared to the[Mortgage Bankers Association]average closer to 29%, so we gained market share.” Guild said in the company’s earnings call on Thursday. “Our focus on the buying business will allow us to continue to grow our market share in the buying environment.”

The company said 91% of its mortgage volume came from purchased loans, higher than the MBA’s projected 81% industry share of purchases.

Guild’s net origination income decreased 94% from the second quarter to $1.5 million from $25.6 million. rising interest ratesthe company leader said.

Margins on sales have also retreated, with management saying it expects numbers to soften further in the fourth quarter due to overcapacity, increased competition and a limited supply of homes available for sale. The GOS margin on Guild originations was 354 basis points compared to 363 basis points in the second quarter. His GOS margin for pull-through adjusted fixed volume fell to 349 basis points from 357 basis points last quarter. Guild uses historical analysis of loan closing and impact data to calculate pull-through rates based on changes in pricing and borrower behavior.

The Guild is unaffected by the industry. mass layoffsHowever, the company did not disclose the number of employees that were cut, only citing about $75 million in annual cost savings related primarily to compensation for the layoffs.

At the same time, Guild said the bank is “very well advanced” on its target for net new loan officer hires. Guild’s management also touted its readiness to make the acquisition due to its experience in the space and its consistent profitability across market cycles. Mary Ann McGarry, her CEO and director of Guild, said the phone rings “pretty often.” Acquisition Opportunityis abundant in a depressed market.

“We think it’s a great opportunity right now, and we think it will be even stronger in the first quarter of 2023,” she said when asked about the prospects for acquisitions and company selectivity. In the environment, of course, we’re going to have a lot less cash flow, so I say … we’re a little more cautious about pricing.”

The company also reported second-quarter net service income increased from $63.9 million to $96.8 million. The surge reflects valuation adjustments to his mortgage servicing rights and higher servicing fees associated with continued growth in Guild’s portfolio, which had an outstanding principal balance of $77.7 billion at the end of the third quarter. . A reduction in operating costs also contributed to the service division’s net profit, company executives said. Guild retained servicing rights to 89% of the loans sold in the third quarter.

Guild’s operating cash and cash equivalents were $162.2 million, down 33% from the second quarter. The lenders have a total of $2.6 billion in warehousing lines of credit, with unused capacity of $1.8 billion, according to the earnings call.

The company also repurchased 138,962 shares at an average price of $11.13 as part of previous board approval. Buy back up to $20 million of inventory for the next year and a half. Guild’s earnings per share were $1.27, compared with his $0.95 in the second quarter. The company’s shares opened at $8.73 a share and closed at $9.00 a share on Friday following Thursday evening’s report.

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