The mortgage industry is seeing increased consolidation activity as loan volumes, which exploded in 2020 and 2021, begin to taper off.
So far, two groups of industry stakeholders are emerging: those with sufficient capital who see the market downturn as an opportunity to gain market share, and those who are no longer viable.
The result has been an increase in merger and acquisition activity: 42 deals closed in 2022, beating the previous record of 33 such deals in 2018, according to consulting firm Stratmore Group. The consulting firm predicts that 60 deals will close in 2023, most of which will be between non-bank lenders.
So far, deals have been struck across all segments of the industry, with brokerages, lenders and service companies merging or acquiring competitors.
Industry stakeholders looking to acquire other companies look to similar cultures and whether the company has an advantage in the particular region they are looking to expand into.
Strathmore principal David Flobon explained that while each deal is unique, there are some general trends when it comes to the motivations of non-bank buyers, including that larger IMBs often have “lower borrowing costs and better secondary market trading than their smaller peers.”
“Most [lenders]”Market share growth is simply calculated through acquisition performance. Their primary motivation is to increase loan volumes (size) which will help offset fixed costs and return to acceptable profitability levels,” he said.