1) they are paid off by the homeowner.
2) they are replaced by new mortgages upon the sale of the property.
3) they are replaced by refinancing.
There has been much discussion of the fact that refi's plummet in a rising rate environment, the homeowner keeps their current mortgage.
We are about to see the second source of roll-off available mortgages shrink dramatically as affordability issues force potential home buyers to stop bidding house prices higher and the volume of transactions grinds down.
Then the first source of paper available for roll-off, pay-offs, becomes suspect in the face of recession with its concomitant rise in delinquencies and defaults....
From Wolf Street, September 7:
It’s not that mortgages are bad, it’s that mortgage volume collapsed. And the stocks of the biggest mortgage lenders collapsed after IPO or SPAC merger.
The latest entry in the long litany of mortgage-lender layoffs is Citibank, which let go some people in its mortgage unit. Well Fargo, JPMorgan Chase, and numerous other banks, along with the non-bank mortgage lenders, have laid off staff starting late last year.
The biggest mortgage lenders aren’t banks. They’re nonbanks: Rocket Companies (owns Quicken Loans), United Wholesale Mortgage (owns United Shore Financial), and LoanDepot have cut their staff by thousands of people. LoanDepot also exited its wholesale business. AI-powered mortgage lender startup Better.com became infamous when its CEO mass-fired people via Zoom, which was followed by more layoffs. Some mortgage lenders have filed for bankruptcy. Others have shut down.
The stocks of the three biggest mortgage lenders have collapsed: Rocket Companies by 82%, United Wholesale Mortgage by 75%, and LoanDepot by 95%. All three went public either via IPO or via merger with a SPAC during the housing mania over the past two years amid immense hype and hoopla. All three have been inducted into my Imploded Stocks.
But mortgage lenders are not getting in trouble because homeowners are suddenly defaulting on their mortgages or whatever.
They’re getting in trouble because their revenues have collapsed because mortgage origination has collapsed, particularly refinance mortgages, where origination has collapsed to 22-year lows because few homeowners are going to refinance an old 3% mortgage with a new 6% mortgage, unless they have to in order to draw cash out, and that can be done more cheaply with a HELOC.....
....MUCH MORE
