Mortgage market mania vanishes before Home Point IPO
Last week was an absolute circus on the stock market when a group of amateur, retail investors on Reddit managed to be some sophisticated Hedge Funds at their own game: Short selling stocks. Basically, the hedge funds bought stocks betting for them to go down in value. The retail investors bought the same stocks in bulk, driving the prices up. And they aren’t selling to stocks so the Hedge Funds can’t complete their short.
By one estimation the hedge funds are sitting on losses of around $19 billion as of Friday, according to new data shared exclusively with Markets Insider.
However, you can RELAX, none of this will likely impact your 401K account. The events did, however, manage to cool the general market enthusiasm that gripped our spaces during the recent spate of mortgage IPOs.
For example, Ann Arbor-based mortgage company Home Point Capital planned to make an initial public offering Friday, becoming the third nationally ranked mortgage business in southeast Michigan to go public in recent months.
Home Point said it would price 7,250,000 shares at $13 per share for trading on the NASDAQ Global Select Market under the ticker symbol “HMPT.” The offering is smaller than what the company last week was aiming for, when it anticipated 12,500,000 shares priced between $19 and $21.
“It was very important for Home Point, and we really felt for the mortgage industry, for Home Point to reach the milestone of going public, so we adjusted the offering size to accomplish that goal,” Maria Fregosi, Home Point's chief investment officer, said in a phone interview Friday morning with local press.
And that’s exactly what happened.
Home Point Capital raised $94 million by offering 7.3 million shares (100% secondary) at $13, well below the range of $19 to $21. The company offered 5.3 million fewer shares than anticipated. At pricing, the company raised 62% less in proceeds than expected.
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So how much will loanDepot’s IPO really be worth now?
loanDepot filed to go public last week as well, in a deal that’s set to be much larger, and complicated, than the Home Point IPO.
The Foothill Ranch, California-based company plans to offer 9.4 million shares in the offering, while its existing backers will sell 5.6 million shares, according to a filing with the U.S. Securities and Exchange Commission on Wednesday.
loanDepot also booked $3.4 billion in revenue for the 12 months ended September 30, 2020. The shares are offered at $19 to $21 apiece, the prospectus shows.
Despite the filing, reports are at odds over how much loanDepot is actually worth, which may signal uncertainty to investors. Renaissance Capital reports that the deal puts loanDepot’s at a value of $6.5 billion while PAYMNTS is saying $15 billion. By way of comparison United Wholesale Mortgage’s IPO value the broker lender giant at $16 billion.
loanDepot CEO Anthony Hsieh would almost certainly reject the lower end of the value claim. In a letter included in the SEC filing, Hsieh gives an idea of just how valuable loanDepot is in the mortgage market, while adding, “Mortgages will never go out of style.”
“We’ve created a company that is built to serve customers throughout the entire loan transaction, from the onset of the purchase or refinance decision through loan closing and servicing,” Hsieh writes. “We now possess roughly 3% market share of annual mortgage origination volumes, which makes up part of the $11T total addressable market.”
The point is, we won’t really know until the IPO launches, but we’ll have the real answer soon enough.
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Defrauded homeowners getting refunds…. More than a decade later
Need a happy distraction? Scroll through this list of car radios through the years and see how many you recognize. Rise&Shred had a 1988 Chevy Nova that yearned for that Blaupunkt CD changer, but, sadly, it never happened.
Good news! The Federal Trade Commission is sending a third round of checks totalling more than $250,000 to victims of a mortgage modification scheme dating back to 2009. The FTC began mailing refunds in this matter in 2012. In total, the FTC has distributed more than $900,000.
First Universal Lending and its executives deceived distressed homeowners with phony claims that they would negotiate with lenders to modify their mortgages.
The FTC charged that the defendants encouraged homeowners to stop making mortgage payments, saying lenders would not negotiate unless they were at least a few months behind in their payments. After charging consumers up to $7,000 in up-front fees, the defendants did little or nothing to help them.
The concern today will be about phony CARES Act relief scams. Let’s hope we can avoid the sins of the past and that regulators stay on top of it so that impacted homeowners don’t have to wait MORE THAN TEN YEARS for a refund.
Truthfully, they are probably happy to get anything returned.
OK, that’s it for now, have a great week, everyone!
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