Home Point, after 4Q loss, expects profitability in the late 2023

Home Point Capital will soon be cash-flow positive and profitable after making significant cuts following a report on a fourth quarter loss. Funded origination volume was down nearly 60% from the previous quarter, Homepoint Capital said Thursday morning. Mark Elbaum, chief finance officer, stated that the company will realize annualized cost savings of approximately $80 million after laying off more than 1,000 employees in recent months. He said that while second quarter production will be lower than the first quarter, it’s still going be relatively low and therefore it burns a lot more cash. “Add to that the expense reduction moves we make that are fully baked in, and we’ll be able to generate cash flow positivity by the end of the second quarter. He said that the firm’s earnings from its servicing portfolio will outweigh the volume expected at a nadir during the first quarter. Home Point sold its Ginnie Mae servicing rights and netted $87.8million from the sale of approximately $6billion of the Ginnie Mae unpaid balance. The servicing portfolio unpaid balance stood at $88.7Billion at the end, a decrease of 5.8% over the previous quarter and a decrease of 30.9% over the same period last year. Although the net loss to close 2022 was less than the $93.4million it took in the third quarter last year, it is still far from the $19.3million it made in its fourth quarter last year. The Ann Arbor, Michigan-based company reported a $163.7million loss over 2022. This was a far cry from the $166.3million profit it made in 2021. Both origination activity and Home Point were well below the $20.5billion recorded at the same time last years. The lender reported $27.7billion in origination volume in 2022. This is a 71% drop from the $96.2billion in production the previous year. This figure was also reduced by half year-over-year, from 90bps in 2021 and 43bps last year. Executives said that 970 Home Point employees were fired during the fourth quarter. This left an end-of-year workforce of 830. The company didn’t disclose the extent of its recent cuts Thursday, and executives weren’t ruling out the possibility that further layoffs might occur. Willie Newman (CEO) stated that the scope of the cuts will be less than what was done in the past. We are not dependent on this focus to achieve operational profitability. “Expenses fell to $63.1million in the fourth-quarter, down from $115.7 million in the third quarter and the $152.2 million bill for the fourth quarter in 2021. Home Point’s annual costs fell 42% to $434.9million in 2022 from $752.6 million the previous year. The wholesale player also decreased its warehouse capacity to $2.8 Billion from $3.2 Billion in the third quarter. However, it is still claiming its merits in the competitive lending space. It had 9,259 broker partner to close 2022, which was more than the 1,247 broker partners it had to wrap the previous fiscal year. The stock opened at $1.90 an hour after earnings were announced and was mostly unchanged at $1.91 by mid-morning. After Elbaum’s resignation two weeks ago, the stock opened at $11.32 per Share at Home Point’s initial public Offering in January 2021. It peaked at $4.54 last May before the decline of the mortgage market. According to a Securities and Exchange Commission filing, the CFO who helped the company’s IPO is not leaving the company because of its performance or any disagreements with Home Point.