Weighing the pros and cons of the P&L business model in mortgage

When interest rates are elevated and there is a housing inventory drought, origination shops need to adapt and run a slim, well-oiled operation to survive. What might be holding some lenders back from running a profitable business is the model they implement. Specifically, some industry stakeholders warn about the profit and loss model – if it is run incorrectly. Bill Dallas, industry veteran and former president of Finance of America, has pointed out that lenders most hurt by the low-origination environment have one similarity: net branches, a.k.a. the P&L model. "It's very bloated, very fat, and that's killing them all," said Dallas, in an interview with National Mortgage News. "They have a manager and they have office space. That part of the business is really what's killing retail."

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Mr. Cooper sues vendor over costly servicing incident

Mr. Cooper wants ACI Payments to further pay up for its servicing mistake two years ago which impacted borrowers' bank accounts for a combined $2.3 billion. The Greater Dallas-area servicer, under its Nationstar Mortgage name, is suing the vendor in a Texas federal court for unspecified damages. The subsidiary of ACI Worldwide in June paid a $25 million fine to the Consumer Financial Protection Bureau for illegally charging borrowers in April 2021. Contractors for ACI caused the incident that month when they used Nationstar's confidential customer information in quality assurance testing, which inadvertently triggered mortgage payment withdrawals at borrower's banks.

Lender empathy may prolong industry pain, Stratmor says

Inertia and empathy among lenders hoping they can weather their way through the current slowdown will result in prolonged instability for the mortgage industry, according to a new report from Stratmor Group. Many companies in the mortgage industry still have more employees than necessary given current origination volumes. Companies are still overly reliant on past processes, which don't reflect the market of today, and cannot maintain current staffing levels if they hope to see profitability, the report said. "We've seen multiple companies with staffing way out of balance, not because they chose that but because they refused to make a decision," said Garth Graham, senior partner at the advisory firm, in the report.?

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CrossCountry Mortgage CEO sells Florida home for $30M

CrossCountry Mortgage's CEO sold his lavish waterfront mansion in Fort Lauderdale for $30 million. Ronald Leonhardt Jr. was able to pocket a $7 million profit on the property, which he bought in 2021 for $23 million, according to Redfin. The house located in Harbor Beach was officially sold Sept. 19. Previously, the mortgage magnate tried selling the property in July 2021, two months after it was purchased, and then once more in March 2022. The CrossCountry CEO previously flipped two other properties in South Florida. In 2021, Leonhardt sold a pair of waterfront Hibiscus Island homes for $27 million.

Mortgage performance improvements could end soon, Black Knight warns

Mortgage performance improvement could be reaching an inflection point as continued slowing in the annual pace of change might mean delinquency rates are near cycle lows, Black Knight said. August's rate of 3.17% was 4 basis points lower than July's 3.21%, but this was higher than 2.79% one year ago. But that current delinquency rate is still a full percentage point lower than the average for August between 2015 and 2019, the Black Knight first look report noted. Black Knight noted concern that the year-over-year improvement in August was just 0.77% — but in January 2022, it was over 43%.

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