Homestar Financial Corporation, headquartered in Gainesville, has declared its intention to discontinue its retail mortgage lending operations. The company, which has established itself as a prominent national mortgage purchase lender, has cited the increased volatility in the mortgage market driven by macroeconomic factors as the reason behind this decision.
In an official statement, Homestar communicated that it will be accepting mortgage lock applications until October 31 and will honor all locked loans currently in its pipeline. The company attributed its choice to the recent uptick in the 10-year Treasury rate, which surged by nearly 100 basis points after a period of relatively stable but already high mortgage rates. Consequently, mortgage rates spiked to 8%, and industry-wide lock volume dipped by 20% from August to September, as reported.
Homestar expressed the belief that the recent market conditions have made mortgage lending unsustainable for all but the most financially robust lenders. The company’s founder and CEO, Wes Hunt, acknowledged the challenges posed by the ever-shifting housing and mortgage markets over the past two decades but indicated that the past year’s financial losses were unprecedented. These losses are primarily attributed to market compression, resulting in narrower profit margins, and the prevalence of higher interest rates leading to reduced lending volume. With no foreseeable relief from margin compression or realistic prospects of lower rates, and entering a traditionally slow seasonal period, the company has chosen to avoid taking on further financial risk in the coming months.
Homestar has reassured its commitment to fulfilling its financial obligations and will collaborate with its business partners during this transitional phase. The company has not made any definitive plans regarding future strategic decisions at this time. Notably, over the past five years, Homestar has originated more than $10 billion in consumer mortgages.
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