Nov. 7: A bevy of recent earnings; Anatomy of a lender merger; Saturday Spotlight: Flyhomes

Lenders and servicers, and the public in general, continue to be reminded of the importance of water: too much, too little, or too dirty. Just ask the people in Flint, Michigan, or now… Vermont? Lake Champlain, which straddles New York and Vermont and heads up into Quebec, supplies drinking water to 200,000 people. For the past several decades, though, phosphate pollution has fueled explosive blooms of the often-toxic cyanobacteria known as blue-green algae, which choke the ecosystem and threaten water supplies. Vermont is responsible for two-thirds of the phosphorus that flows into the lake, mostly from agriculture, but stormwater runoff exacerbates the issue. A decade ago, Vermont state leaders set out a 20-year plan that, by 2036, would tighten up cleanup targets to keep phosphate pollution out of the lake. Halfway in, a billion dollars spent, and having only targeted the low-hanging fruit, Vermont is just 35 percent of the way to the goal. Do owners selling properties include this in the disclosure package?

Saturday Spotlight: Flyhomes

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DTI has been the top reason lenders cite when denying purchase mortgage applications for several years running, according to HMDA data. For move-up buyers, the existing mortgage is often what tips the ratio, and the standard workaround is to sell first. In a lot of these cases, they don’t have to wait.

Flyhomes, the leading Buy Before You Sell platform in the US, built DTI Buster for exactly this. Flyhomes places a Guaranteed Backup Contract on your borrower’s current home, which can allow the underwriter to exclude that mortgage from the DTI calculation. Your borrower may qualify for up to 50 percent more on their next purchase, with no home sale contingency and no loan process. That turns a “come back after you sell” client into a deal you can close now.

DTI Buster is part of our Buy Before You Sell DREAM Solutions, which also help borrowers buy with $0 down and make cash-equivalent offers that close in as little as 10 days. They also give you fresh talking points with your agent partners and clients.

We’re wholesale-only, so we never compete with you or your agents. Our solutions are available in all 50 states.

This November, Kaitlyn Miller, our Head of National Accounts & Partner Growth, is hosting a live session on Thursday, Nov 19, at 10AM PT/1PM ET: Help Your Clients Qualify for Up to 50 Percent More. We’ll walk through real scenarios, show you how to spot the borrowers in your pipeline who are stuck on DTI, and cover when and how to use DTI Buster. Bring a client who’s stuck on DTI. Stay for live Q&A. Save your seat or book a call to see how Flyhomes can help you close more deals today.

(For more information on having your firm’s extracurricular activities, employee growth, and your charitable side featured, contact Chrisman LLC’s Anjelica Nixt.) 

Earnings tell the tale and, for the most part, reflect our industry

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Ask anyone at a conference how things are going, and the usual response is, “Good!” Digging into the details, however, usually uncovers the reasons why things aren’t so “good” what with volumes down, overhead still relatively high, over-capacity, and a volatile rate environment. “Misery loves company” would be a stretch, and often teams at publicly held lenders earn their keep by putting a positive spin on announcements. Let’s see who’s been doing what in the biz.

UWM Holdings reported largely in-line third-quarter results: operating EPS of $0.04 beat consensus by a penny, driven by lower amortization and expenses. Mortgage production declined 16 percent quarter-over-quarter to $33.4 billion and gain-on-sale margins narrowed to 124-basis points from 133. Servicing income rose 12 percent to $246.6 million, with favorable MSR valuation gains contributing to stronger GAAP earnings. Book value increased to $0.82 per share from $0.61 in the prior quarter. Although the company withheld fourth-quarter guidance, its full-year revenue outlook implies midpoint fourth-quarter revenue of $824 million; investors will be watching for updates on a planned MSR sale, debt reduction and future earnings potential, particularly given $1.35 billion in available liquidity and 1.77x net non-funding leverage.

Radian has released its Q3 earnings. “The results showcase Radian’s continued evolution from its longtime position as a leading U.S. private mortgage insurer into a diversified, global multi-line specialty insurer following its acquisition of Lloyd’s specialty insurer Inigo Limited, which closed in February.”

PennyMac Mortgage Investment Trust (PMT) reported better-than-expected third-quarter adjusted EPS of $0.35, beating the $0.30 consensus. However, book value declined 5.4 percent sequentially to $14.03 as higher interest rates and wider spreads pressured Agency MBS valuations, resulting in a negative 2.7 percent economic return. Management raised its quarterly earnings run-rate estimate to $0.38 per share but signaled an expected 25 percent dividend reduction from $0.40 to $0.30, which would still represent an attractive 16 percent yield. Trading at just 53 percent of tangible book value, shares appear relatively inexpensive. An expanded $200 million-plus repurchase authorization provides additional capital-allocation flexibility. Strategically, PMT is shifting capital away from lower-return mortgage servicing rights toward organically generated private-label securitization investments targeting low-to-mid-teens returns, positioning the portfolio for improved earnings potential despite near-term book-value and dividend pressure.

PennyMac Financial Services (PFSI) reported a third-quarter earnings miss, with GAAP and operating returns on equity of 2.6 percent and 3.4 percent, respectively, as weaker mortgage banking revenue, compressed gain-on-sale margins, and heightened correspondent-channel competition pressured profitability. Mortgage origination volumes declined approximately 27 percent sequentially, while gain-on-sale margins fell to 77-basis points from 82-basis points in the prior quarter, reflecting increased adverse post-lock adjustments and competition from the GSE cash window.

Management expects fourth-quarter profitability to remain relatively flat before improving to low-double-digit ROE by year-end 2027, supported by lower MSR amortization and tighter expense management. Although near-term earnings remain constrained by a smaller origination market and margin pressure, shares trading at 77 percent of tangible book value provide some valuation support. The longer-term investment thesis depends on an eventual recovery in origination profitability and operating leverage.

Rocket Companies (RKT) delivered a modest third-quarter earnings beat, with operating EPS of $0.15 exceeding estimates as lower mortgage servicing rights amortization and expense savings offset weaker mortgage banking revenue. However, fourth-quarter guidance was softer than expected, with projected adjusted EPS of approximately $0.09 versus the $0.12 consensus. This reflects an anticipated nearly 50 percent sequential decline in refinance activity and lower revenue.

Despite the challenging rate environment, Rocket continues to gain market share in both purchase and refinance lending, with closed loan volume up 42 percent year-over-year and legacy servicing recapture reaching 60 percent, ahead of its longer-term trajectory. Management also reiterated plans for an additional $100 million in annual cost savings beyond its original $400 million synergy target, expected in the first half of 2027. Ultimately, Rocket’s investment thesis increasingly rests on market-share expansion, servicing retention, and integration-driven efficiencies to offset a weaker refinancing cycle, while much of the near-term rate-driven pressure may already be reflected in its share price.

Newrez… Rithm Capital announced its Q3 2026 earnings results, which were discussed in more detail on the company’s conference call this morning (accessible here). Rithm reported Q3 2026 revenue of $1.76 billion, alongside GAAP net income attributable to common stockholders of $217.1 million ($0.38 per diluted share) and earnings available for distribution of $315.3 million ($0.55 per diluted share). Newrez delivered a 24 percent annualized operating ROE on $5.5 billion of average ending segment equity, generating $329.7 million of pre-tax operating income (excluding MSR mark-to-market and other non-operating items), with total servicing UPB reaching $878.9 billion and quarterly origination volume of $12.9 billion. Rithm’s investment portfolio acquired $1.6 billion in non-qualified mortgage loans and completed two related securitizations totaling $975 million during the quarter. The company also purchased $521 million in home improvement loans through its agreement with Upgrade and completed a $306 million securitization backed by home improvement loans.

Freddie Mac delivered stronger year-over-year profitability in the third quarter of 2026, with operating profit of $3.24 billion, up from $2.77 billion a year earlier but down from $3.84 billion in the second quarter. This decline primarily reflects an $800 million credit-loss provision compared with an $880 million benefit previously. Net interest income rose 7.5 percent year-over-year to approximately $5.9 billion, supported by growth in multifamily securitizations and the single-family mortgage portfolio. Modest increases in single-family and multifamily delinquencies suggest some deterioration in credit conditions.

Net worth increased $3.2 billion to $81 billion, but Freddie Mac remains substantially below its statutory minimum capital requirements. Its capital continues to rank behind the government’s senior preferred shares, making the forgiveness or conversion of those shares a critical consideration in any potential privatization. Although third-quarter adjusted EPS of $1.00 exceeded expectations and the 2026 earnings estimate increased to $4.17, the 2027 estimate remains unchanged at $3.69, reflecting expectations for annualized earnings of roughly $13 billion. Despite solid underlying profitability and capital accumulation, Freddie Mac’s common shares face a challenging risk-reward profile: failure to privatize could leave shareholders exposed to substantial downside, while successful privatization could trigger significant dilution.

The anatomy of a lender deal

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On the recent Lenders 1 Wednesday webcast, leaders from Absolute Home Mortgage Corporation (“Absolute“), a national independent mortgage banker, and First Option Mortgage, LLC (“First Option“) (NMLS #123411), headquartered in Suwanee, GA, announced they were joining forces “in a strategic transaction” that “significantly expands the company’s origination capacity, leadership bench, and growth runway.”

The STRAMOR M&A team has indicated that “the scent of mergers and acquisitions is in the air,” given aging owners and attempts at increased efficiencies, so I thought that it might be useful to examine this particular deal to “see how it’s done.”

“As part of the transaction, Alvin Shah and Kurt Nikolai will join Absolute’s ownership group and Board of Directors, pending regulatory approval. Upon regulatory approval, and based on Absolute’s transaction activity over the past year, the combined organization, together with its wholly owned subsidiary Mortgage Equity Partners (MEP), is positioned to originate approximately $4 billion annually. The First Option team will migrate to Absolute and operate as a DBA business unit, continuing to serve its borrowers and referral partners with the same leadership and sales culture that built its reputation.

“This partnership is exciting. We have proven what we can do together in the face of adversity and tough market conditions,” said Matthew VanFossen, CEO of Absolute Home Mortgage Corp. “Now we are 100 percent confident that we are strategically positioned to scale. There is no better time to capitalize on the foundation we have built.”

“Years of Strategic Alignment, Now Under One Roof: This transaction is not a first meeting. Shah, Nikolai, and VanFossen have operated in close strategic alignment for years, working side by side and sharing a common view of how a modern independent mortgage banker should operate, compete, and grow. While VanFossen and Shah each focused on scaling their independent lending businesses, the leadership teams stayed in lockstep on strategy. Combining forces is the natural evolution of that work.

“’We have been building toward this for years, on the operating model, on the culture, and on the vision,’ said Kurt Nikolai. ‘We have been strategically aligned for years, and we have seen firsthand how well our teams work together. Bringing our two lenders together makes natural sense.’

“Alvin Shah will join Absolute as Chief Strategy Officer, overseeing strategic expansion and driving the additional acquisitions the company is actively pursuing. ‘I am excited about the combined resources of this team and the scaling opportunity it brings to the market,’ said Shah. ‘Scale creates opportunities for other mortgage companies to join our platform and become more profitable. We have the people, the capital alignment, and the platform to grow aggressively, and we intend to.’

“What the combination delivers: An approximately $4 billion annual origination platform across Absolute, MEP, and First Option upon regulatory approval. A dedicated Chief Strategy Officer focused on expansion and further acquisitions. A deliberate push to add considerable servicing retention to the business model, building long-term customer value. Absolute’s marketing, compliance, and operational infrastructure working behind a larger, stronger team. First Option’s team, leadership, and market relationships carried forward as a DBA business unit.

“Built to Acquire: An Open Door for Independent Lenders. First Option is the latest step in a long-term plan, not the last. Absolute intends to keep acquiring and partnering with independent mortgage companies, and the combined scale of the platform is designed to make those partnerships more valuable for everyone who joins. For independent lenders facing rising costs, compressed margins, and growing compliance demands, Absolute offers a path to greater profitability without giving up their identity: Scale advantages: The operating leverage and market presence of an approximately $4 billion platform; Shared infrastructure: Marketing, compliance, and operational support that individual lenders would otherwise have to build and fund on their own; Servicing retention: A growing retention strategy that builds long-term customer value; Brand and leadership continuity: Partner companies operate as DBA business units or wholly owned subsidiaries, keeping their names, teams, and local relationships. “Every lender that joins makes the platform stronger for the next one,” said Shah. “Our goal is simple: give great mortgage companies the scale and resources to become more profitable than they could ever be on their own. We are actively talking with lenders who see the same opportunity.”

“’The IMBs that win the next cycle will be the ones that operate at scale, retain their customers, and move decisively when the market opens up,’ added VanFossen. ‘That is exactly what we are building. First Option is a major step, and we are not done. We intend to be the platform of choice for independent lenders who want to grow.’”

(Independent mortgage companies interested in exploring a partnership with Absolute are encouraged to reach out to Matthew VanFossen, Chief Executive Officer, Absolute Home Mortgage Corp.)

Let’s have a little change of pace for a Saturday. Here are two links leading to the same short video about a man who “inspired millions without knowing it.”

Visit www.ChrismanCommentary.com for more information on our industry partners, access archived commentaries, or subscribe to the Daily Mortgage News and Commentary. You can also explore the Chrisman Marketplace, a centralized hub connecting mortgage professionals with trusted vendors and solutions. If you’re interested, check out my periodic blog on the STRATMOR Group website. STRATMOR’s current blog is, “Those Monthly Payments Go Somewhere.”  “Pricing That Can Help Borrowers.”  The Commentary’s podcast is available on all major platforms, including Apple and Spotify.

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(Market data provided in partnership with MBS Live. For free job postings and to view candidate resumes, visit the Chrisman Job Board. This newsletter is intended for sophisticated mortgage professionals only. There are no paid endorsements by me. For the latest mortgage news, visit Mortgage News Daily. For archived commentaries, or to subscribe, go to www.ChrismanCommentary.com. Copyright 2026 Chrisman LLC. All rights reserved. Paid job & product listings do appear. This report or any portion hereof may not be reprinted, sold, or redistributed without the written consent of Rob Chrisman. The views and opinions in this newsletter are mine alone unless otherwise specifically stated herein.)