Key Takeaways:
– CrossCountry Mortgage is in talks to acquire Fairway Independent Mortgage Corp.
– If the deal is completed, CrossCountry will become the fourth-largest mortgage lender in the country.
– Fairway has struggled with liquidity issues and its CEO has attempted to sell the business.
– Fairway has laid off employees and lost top-performing loan officers to competitors.
– CrossCountry has been aggressively recruiting loan officers and paying big signing bonuses.
– Acquiring Fairway would allow CrossCountry to add loan officers and expand its branches.
– CrossCountry would likely not be interested in Fairway’s wholesale channel business.
– CrossCountry raised $400 million in debt financing in 2021, putting it in a better position than competitors.
– Fairway originated $13.37 billion in the first half of 2023, down 47.6% from the previous year.
– CrossCountry originated $9.98 billion in the first half of 2023, making it the 16th-largest mortgage lender.
– Together, CrossCountry and Fairway would have over $23 billion in origination, ranking below UWM, Pennymac, and Rocket Mortgage.
HousingWire:
Two top-20 mortgage lenders in the United States may combine forces amid the most challenging market in decades. CrossCountry Mortgage is in talks to acquire Fairway Independent Mortgage Corp., nine industry sources told HousingWire.
The talks remain ongoing and are not believed to be in the late stages, sources said.
If the deal is completed, it will catapult CrossCountry to becoming the fourth-largest mortgage lender in the country, behind United Wholesale Mortgage (UWM), Pennymac Financial and Rocket Mortgage.
A spokesperson for CrossCountry said the company does not “comment on rumors, speculation or acquisitions.” Representatives at Fairway did not respond to multiple requests for comment.
According to loan officers, former executives, recruiters and business partners, Fairway has struggled with liquidity issues and its founder and CEO Steve Jacobson has attempted to sell the business.
The company — like virtually all large mortgage lenders — has laid off thousands of employees and imposed pay cuts to its workforce. However, it has struggled with liquidity due to a significant drop in origination volume, and a lack of operational efficiencies, internal sources said.
A former top executive who spoke anonymously for fear of retaliation said that Fairway went from 10,000 employees in 2020 to around 3,500 this year. Fairway has also lost many of its top-performing LOs to major competitors, in particular, Movement Mortgage, sources said.
“When the market shifted, we transitioned to more of ‘How can we stay afloat?’ rather than ‘How can we innovate?’” the former executive said.
Meanwhile, CrossCountry has been arguably the most aggressive recruiter in the industry, paying big signing bonuses to attract top-producing LOs from across the country. Its strategy has sparked poaching lawsuits from some competitors.
Sources said that acquiring Fairway would be a way for CrossCountry to add loan officers at different branches across the country. However, Fairway allows its regions to operate more independently than most lenders, and sources speculated that a chunk of Fairway’s branches might pass on an opportunity at CrossCountry.
CrossCountry would likely not be interested in Fairway’s wholesale channel business, which has declined considerably over the last year. The deal overall makes sense because the companies’ cultures are profit-and-loss based, sources said.
A source also said CrossCountry raised $400 million in debt financing in 2021, which put the company in a better position to navigate a shrinking market than many of its competitors. It is also a large servicer, with about $85 billion in owned loan servicing as of the second quarter of 2023, which helps counterbalance a tough originations market. (Fairway doesn’t hold mortgage-servicing rights, or MSRs.)
Madison, Wisconsin-based Fairway, the 11th-largest U.S. mortgage lender, originated $13.37 billion from January to June 2023, down 47.6% from the same period last year, per the IMF estimates.
Meanwhile, CrossCountry produced $9.98 billion in the first half of 2023, down 55% year over year but enough to make it the 16th-largest U.S. mortgage lender.
Together, CrossCountry and Fairway would have more than $23 billion in origination from January to July 2023, a sales volume only lower than UWM ($54.18 billion; -21.1% year over year), Pennymac ($47.45 billion; -20.9%) and Rocket ($39.25 billion; -55.6%).
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Property Chomp’s Take:
Hey there! Let’s talk about something interesting happening in the mortgage lending industry. Did you know that two major players, CrossCountry Mortgage and Fairway Independent Mortgage Corp, are in talks to potentially join forces? This news comes amidst one of the toughest markets the industry has seen in decades.
While the talks are still ongoing and not in the late stages, industry sources have revealed that if the deal goes through, CrossCountry would become the fourth-largest mortgage lender in the United States. This would put them behind United Wholesale Mortgage, PennyMac Financial, and Rocket Mortgage.
Of course, both companies have chosen to remain tight-lipped about the potential acquisition. CrossCountry’s spokesperson simply stated that they don’t comment on rumors or acquisitions, while Fairway did not respond to multiple requests for comment.
However, insiders have shared some interesting details about Fairway’s situation. The company has reportedly been struggling with liquidity issues, leading its founder and CEO, Steve Jacobson, to explore selling the business. Like many other large mortgage lenders, Fairway has had to lay off thousands of employees and implement pay cuts due to a significant drop in origination volume. Operational inefficiencies have also added to their challenges.
According to anonymous sources, Fairway’s employee count has dropped from 10,000 in 2020 to around 3,500 this year. Additionally, the company has lost several top-performing loan officers to major competitors, with Movement Mortgage being a notable recipient of talent.
On the other hand, CrossCountry has been aggressively recruiting top-producing loan officers across the country. They have even faced poaching lawsuits from competitors due to their recruitment strategy. Acquiring Fairway would provide CrossCountry with an opportunity to add loan officers from different branches nationwide. However, some speculate that not all of Fairway’s branches may be interested in joining CrossCountry due to the independence they currently enjoy.
It’s worth noting that CrossCountry recently secured $400 million in debt financing, positioning them better than many competitors to navigate the shrinking market. They also have a significant loan servicing portfolio, valued at around $85 billion as of the second quarter of 2023. Fairway, on the other hand, does not hold mortgage-servicing rights (MSRs).
Fairway, based in Madison, Wisconsin, is currently the 11th-largest mortgage lender in the U.S. However, their origination volume has declined by 47.6% from January to June 2023 compared to the same period last year, according to IMF estimates. Meanwhile, CrossCountry originated $9.98 billion in the first half of 2023, making them the 16th-largest mortgage lender in the country.
If the deal goes through, the combined origination volume of CrossCountry and Fairway from January to July 2023 would exceed $23 billion. This figure would only be lower than United Wholesale Mortgage, PennyMac Financial, and Rocket Mortgage.
So, keep an eye out for any updates on this potential acquisition. It could have a significant impact on the mortgage lending landscape and the rankings of major players in the industry!
