STRATMOR: Mortgage M&A Activity Jumps in 2018; ‘Rapid’ Consolidation to Continue in 2019

A new report from STRATMOR Group, Greenwood Village, Colo., showed a big jump in mortgage industry merger and acquisition activity in 2018, with more in the offing in the coming year.

Writing in STRATMOR’s December Insights report, Senior Partner Jim Cameron noted a sharp increase in M&A activity, from 11 announced deals in 2016 to 28 transactions in the first 11 months of 2018 with more expected by year’s end.

M&A activity will increase even further in 2019, Cameron said. Industry indicators signal a down cycle, noting lenders who are well-capitalized and well-run have an opportunity to be “consolidators,” even while struggling lenders face the prospect of becoming reluctant–if not involuntary–“consolidatees.”

“These are tough times in the mortgage business,” Cameron said. “There are too many lenders chasing too few borrowers, and because rates are not expected to decline any time soon, there won’t be a refi rally to bail out lenders.”

Cameron said this “intense period” of industry consolidation will extend well into 2019. “One popular school of thought is that rapid consolidation will continue throughout Q1 and into Q2 2019 and that margins may normalize in the late spring and summer next year. But we can’t count on this,” he said. “A lack of meaningful growth in the purchase market may delay the recovery period for the industry well beyond next summer.”

In a second Insights report, The Borrower Experience: Is this Simple Mistake Costing You $200,000 a Year?, MortgageSAT data showed the steep cost of asking borrowers for the same document multiple times. The average lender doing 5,000 loans annually is losing $243,000 in lost referrals and repeat business, according to the report.

“Very few lenders have made serious strides in eradicating this costly problem,” said Director Mike Seminari.

In a MortgageSAT post-closing survey of 105,000 borrowers, STRATMOR found that borrower satisfaction dropped dramatically when the borrower was asked for the same document repeatedly. The survey was conducted from fourth quarter 2017 through the end of the third quarter 2018.

“For many borrowers, the most unpleasant part of the loan process is assembling documents and other information required by the lender,” Seminari said. “Not only is it burdensome to dig up old statements and remember old passwords, it can be stressful to share sensitive financial materials with people who are little more than strangers. It’s no wonder the borrower’s experience can take a turn for the worse when lenders have missteps in document collection.”

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