Good afternoon —
The first quarter of 2021 may be the last hurrah of 2020's origination boom. First-quarter earnings are rolling in and, as expected, lenders are still reporting record volume. But margin pressure is taking its toll and if Rocket's projections hold, less sunny days lie ahead.
Rocket had a great 1Q, originating $103.6 billion, which is more than double what it did in 1Q of 2020. And it reported net income of $2.77 billion and $4 billion in revenue, both dramatically up from the first quarter a year ago.
But…
For the second quarter, Rocket is forecasting volume could shrink to between $82.5 billion and $87.5 billion. And gain on sale margins are projected to slip to between 2.65% and 2.95%.
And it's not just Rocket.
LoanDepot reported a closed loan volume of $41.5 billion in 1Q. But net income and revenue were both down from the fourth quarter. Part of that decline was a result of the lender's IPO, but part of it, as CEO Anthony Hsieh noted, was that "Competitive pricing strategy pressure from other market participants also had a market-wide impact on margins."
Going forward, the growth strategy for lenders, big and small, will depend on taking a bigger share of the ever-shrinking pie, including the tasty wholesale piece. We'll be keeping an eye on who has the biggest fork.
Until tomorrow —
Sarah Wheeler
HousingWire Editor in Chief
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