Home-loan providers sold at the top. Their shareholders are counting the losses. Picture: BLOOMBERG
Up until 2020, there were not many mortgage stocks listed on US exchanges. The last publicly traded stand-alone mortgage company of size was Countrywide Financial, which was taken over by Bank of America in July 2008 amid mounting losses as the global financial crisis neared its climax. After that, mortgages were handled mostly by the big banks.
But virtually all at once, they went public. In a six-month period starting with Rocket in August 2020, a clutch of mortgage companies collectively valued at almost $60bn came to the stock market. For the first time since the peak of the housing boom, public-market investors were given an opportunity to share in the upside — and downside — of the residential mortgage market.
From $2.3-trillion of mortgage originations in 2019, volumes ballooned to more than $4-trillion in both 2020 and 2021. Three mortgage companies — LoanDepot, UWM and Home Point Capital — succeeded in timing their market debuts to coincide with the low in mortgage rates — 2.65% at the beginning of January 2021, as per Freddie Mac data.
Since then, the market — to put it mildly — has shifted. Mortgage rates are heading towards 6% and there is no-one left to refinance. Credit Suisse analysts estimate that only about 1% of mortgages are at least 50 basis points “in the money” to refinance — and it is uncertain, given they have not already done so, whether these borrowers will refinance at all.