A combination of mortgage volatility and extreme margin compression forced Homestar Financial Corp. to suspend retail operations.
The Gainesville, Georgia-based lender announced plans to cease retail operations while accepting mortgage locks through Oct. 31, 2023.
The decision to shut down retail operations comes on the heels of additional mortgage volatility driven by the macro economy, Homestar said in a statement.
Over the past two months, the 10-year Treasury yield rose almost 100 basis points (bps) after a period of relative stability at already high mortgage rates. As a direct result, mortgage rates recently hit 8%, and, as an industry, lock volume dropped 20% from August to September, Homestar said, citing industry reports.
“The financial losses for mortgage lenders continue to mount due to continued market compression leading to lower margins and higher interest rates leading to lower volume,” Wes Hunt, founder and CEO of Homestar, said in a statement. “As we head into a period of historically seasonal lows, for protection, with no end in sight for the margin compression or realistic prospects of lower rates, I have decided not to incur further financial risk over the coming months.”
The lender continues to have “ample liquidity and net worth to fulfill its financial obligations” and will be working with “all of its counterparties during this transition,” according to the announcement. The company also noted that no plans have been made regarding its future strategic decisions.
A branch manager at Homestar posted on LinkedIn that the lender will be ceasing operations at the end of 2023.
“If you currently have a loan in process that will close by the end of the year, your loan is safe! Your loan should still close on time! In the coming weeks, I will land on my own feet with a new company, but, as of this very moment, I do not know where that will be,” the branch manager wrote.
Founded in 2002, Homestar is a full-service mortgage banker that offers conventional, government, jumbo, reverse loans, refinance loans and a doctor/medical professional mortgage program.
The Nationwide Multistate Licensing System (NMLS) shows that Homestar has 179 mortgage loan originators and 51 active branches across the country.
Year-to-date in 2023, the lender has originated $801.8 million in production volume across 3,014 units, according to data from mortgage tech platform Modex.
Homestar claimed it has originated more than $10 billion in consumer mortgages over the past five years in its wind-down announcement.