President and Chief Operating Officer David Neylan of retail lender Guild Mortgage anticipates ongoing challenges for mortgage companies in 2025. Despite these difficulties, Neylan intends to seize opportunities presented by the market.
Neylan explained, “I know there’s some forecasts for rates to drop, but it’s not as much as everybody had been hoping or anticipating. And this ‘higher-for-longer’ trend is going to cause continued pressure on profitability, particularly for companies that lack scale and size.”
In the third quarter of 2024, Guild Mortgage recorded $6.9 billion in origination volume and reported profitability in its origination segment, despite an overall loss of $67 million due to a market value change in its servicing book. With this financial foundation, the company aims to enhance its market share and product offerings by acquiring other companies in 2025.
According to Neylan, the pipeline of potential acquisitions has shown strength, with a recent increase in activity due to persistently elevated rates. Guild Mortgage’s strategic acquisitions include deals such as acquiring retail lending rival Academy Mortgage Corp., which added significant volume, employees, and branches to its portfolio.
In 2024, the mortgage sector as a whole experienced a decline in M&A activity, with fewer transactions compared to the previous year. However, this trend may not fully represent the actual activity in the market due to the private nature of many mortgage companies.
Industry experts predict that M&A activity in 2025 will likely continue at a similar pace to 2024. The market conditions and strategic motivations behind acquisitions are expected to drive the transactions in the coming year.
After a period of losses, independent mortgage banks (IMBs) returned to profitability in the second quarter of 2024, with most of them reporting a profit. Mortgage rates fluctuated throughout the year, reaching a peak in May and then declining by September due to changes in monetary policies.
Looking ahead to 2025, uncertainties loom over the mortgage industry as market conditions remain volatile. The Federal Reserve’s actions and the impact of the new administration are key factors influencing the outlook for the sector.
What to expect in 2025
Expectations for 2025 include continued challenges for lenders, potential shifts in M&A activity, and a focus on strategic partnerships to drive growth and efficiency in the market.
Industry experts anticipate that valuations will improve in 2025 as market conditions stabilize. Buyers and sellers in the mortgage space are likely to engage in more complex deals to navigate the changing landscape.
Overall, the mortgage industry is poised for further consolidation and strategic realignment in 2025, with companies seeking to adapt to evolving market conditions and regulatory changes.