Homestar Financial Corporation on Monday announced that it plans to close at the end of this year after 21 years in operation.
President and CEO Wes Hunt notified staff of his decision on Monday.
In a press release, Hunt says Homestar will accept locks through Tuesday, October 31, and will continue to fund all locked loans in its pipeline. The company’s internal staff will work on closing and shipping the loans ahead of Homestar’s last day on December 31.
The decision to cease retail originations comes on the heels of additional mortgage volatility driven by rising interest rates.
Over the past two months, the 10-year Treasury rate has risen almost 100 basis points after a period of relative stability at already high mortgage rates. As a direct result, mortgage rates recently hit 8%, and, as an industry, lock volume dropped 20% from August to September, according to reports.
These unforeseen events have made mortgage lending unsustainable for anyone except the most deep-pocketed lenders, a press release from Homestar states.
Homestar’s founder and CEO, Wes Hunt, issued the following statement detailing his decision to close: “During the past two decades, I have always been able to successfully lead us through the cyclicality of the ever-shifting housing and mortgage markets, however, over the past year, that has not been the case. The financial losses for mortgage lenders continue to mount due to continued market compression leading to lower margins and higher interest rates, leading to lower volume.
As we head into a period of historically seasonal lows, for protection, with no end in sight for the margin compression or realistic prospects of lower rates, I have decided not to incur further financial risk over the coming months.”
Hunt assured borrowers the company has “ample liquidity and net worth” to fulfill its financial obligations.
Not surprised
News of Homestar’s closing caught many industry insiders and borrowers off guard, but local lender Molly Nicholson says she’s not surprised.
“We went from making 1600 loans a month to 200. With the Treasury rate that’s increased so much, there’s just not a big enough margin there for profit,” she tells Now Habersham.
Nicholson says she and her team of seven Homestar lenders in Habersham have been fielding calls from other mortgage companies trying to recruit them.
“Our phones have blown up for the last two days. I’ve had ten job offers, and we’ve had another 25 recruiters sending texts and emails wanting us to consider going with them,” says Nicholson. “We are listening to a lot of those with different companies and will make up our minds about who we’re going to go with by the middle of next week.”
Saying goodbye to Homestar will not be easy. Nicholson calls Hunt “the best person you’d ever want to do business with.”
“It’s been a slow bleed of profits going to handle overhead, and he just decided he can’t incur any more risk,” she says. “Everybody and all our employees are 100% supportive of him.”
Nicholson adds, “We’re all going to be fine.”
A 27-year veteran of the residential mortgage lending business, Nicholson has worked through volatile markets before, but this is the highest rates have been in 23 years. She adds there does not appear to be any immediate relief in sight.
“If Mr. Hunt had seen it was just a short-term situation, he would have held on longer, but he’s been in this business 20 plus years, and he just didn’t see any end in sight for this margin compression that’s out there.”
Nicholson expects more mortgage lending companies will close before market conditions improve.
As for her and her Clarkesville team, she says, “It’s all in God’s hands. We’re just going to go where the Lord leads us.”
About Homestar
Headquartered in Gainesville, Homestar Financial Corporation is one of the largest lenders in Georgia. It opened in 2002 and grew to become a top mortgage purchase lender nationwide.
Homestar is currently licensed to conduct business across more than 40 states in the US.
According to the company, Homestar has originated over $10 billion of consumer mortgages over the past five years.
