There were a lot of high points and low points this year. Certainly it was the year of the CFPB, more oversight, decreasing loan volume, falling unemployment, and a whole host of other things. But for me it was the year of mergers and acquisition. We saw a lot of fire sales and strategic sales, as well. My guess is that we’ll see more of the same next year.
For one, STRATMOR Group, a consulting firm that helps mortgage banks build profitable mortgage lending operations, reported that customer inquiries regarding its M&A advisory services business are trending upward, indicating the possibility of more industry consolidation in 2015. Already in 2014, STRATMOR’s team has been an advisor to either the buyer or seller on 5 deals this year, three of which are expected to be closed this year and two more that are past the Letter of Intent stage.
“The conditions are right for more transactions and buyers are stepping forward, seeking new acquisitions,” said Jeff Babcock, the STRATMOR Partner who heads up the firm’s mergers and acquisitions advisory practice. “In fact, it is clear to us that there is currently more demand for well run retail mortgage lending platforms than there are well-run platforms available to be acquired. Based on the conversations we’ve been having with our clients, we expect to see more consolidation in the mid-size independent mortgage banking sector next year.”
Evidence for this trend came last month when Caliber Home Loans, Inc., Dallas, a leading residential mortgage origination and servicing company, acquired Cobalt Mortgage, Seattle, one of the major privately-owned distributed retail mortgage lenders in the U.S. The combined entity will create one of the largest independent mortgage companies in the country. The terms of the transaction were not disclosed.
“In representing Cobalt in this transaction, the STRATMOR Group has insight into the motivations of both the buyer and seller,” Babcock said. “Even though Cobalt will have originated almost $4 billion by the end of 2014, its ownership recognized that greater production capability is quickly becoming a requirement in order to compete in an environment where compliance costs, infrastructure investment and economies of scale are key success factors.”
“At the same time, Caliber is targeting substantive acquisitions as the most expeditious strategy for expanding its business into key new markets. These complementary goals made this a natural marriage between two powerhouse organizations,” Babcock said.
Babcock said his team is ready to serve more lenders as the M&A marketplace continues to heat up going into next year. He said STRATMOR would welcome conversations with mortgage banks that are considering their sell side strategic objectives.
I’m sure that some will take STRATMOR up on this offer.
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