U.S. Non-Bank Mortgage Companies: Volatile Environment Affects Q1 2025 Results; Refinancing Volume Rebounds

The Q1 2025 results for non-bank mortgage companies followed by Morningstar DBRS were adversely affected by volatility in mortgage rates and rising economic uncertainty.

Key highlights include the following:

-- Bottomline results for the peer group were heavily influenced by mortgage servicing rights (MSR) fair value declines resulting from mortgage rate volatility.

-- Loan originations saw a notable year-over-year increase, driven by refinance volume and scale, supported by automation and channel optimization.

-- The group's servicing portfolio remained largely flat quarter-over-quarter as organic growth from new originations and strategic MSR purchases was counterbalanced by portfolio runoffs, MSR sales, and subservicing deboarding.

-- Leverage ratios were mixed across individual companies as reported net losses eroded equity levels, while lower debt levels resulted in an improved ratio for some.

"The quarter's results were primarily affected by negative fair value marks on mortgage servicing rights portfolios, driven by the significant volatility in mortgage rates during the quarter," said Shaima Ahmadi, Assistant Vice President of North American Financial Institution Ratings at Morningstar DBRS. "We view the quarterly results as in line with our expectations, given the continued challenging operating environment."