Atlanta-based Equity Prime Mortgage (EPM) has decided to focus its investments on the wholesale channel amid the most challenging mortgage market in decades. This has resulted in the company closing branches and laying off loan officers on the retail side.
“Wholesale is growing. It’s a shift that is happening in the market. And we’re just going along with the shift,” Eddy Perez, co-founder and CEO, said in an interview. “We still have retail, but we do believe that wholesale has the longest runway of growth and opportunity for us.”
EPM’s decision came at a time when several lenders – such as loanDepot, Mountain West Financial, AmeriSave, Point Mortgage Corporation and Stearns Wholesale (owned by Guaranteed Rate) – have exited the wholesale space. Homepoint, the third largest company in the channel, went bust in April.
Meanwhile, with competitive pricing, United Wholesale Mortgage (UWM) reached an estimated 54% market share at the end of 2022.
“UWM has 54% of what is a growing market, and that’s only going to keep going up,” Perez said. “If the whole channel grows, then that means there’s still a lot that’s given up to others.”
Inside Mortgage Finance (IMF) shows the wholesale channel was responsible for 15% of the first-lien mortgage originations in 2022, compared to the lowest level of 9.8% in 2014.
Regarding EPM’s strategy in the wholesale space, Kevin DeLory, the company’s chief lending officer, said it is not chasing borrowers with specific credit scores or being overly-aggressive in pricing.
“There are people that are actually much more competitive when it comes to pricing. We’re out there to help grow our brokers,” DeLory said in an interview.
DeLory estimates that EPM has 2,100 brokers in its network.
EPM claims it originated $3.5 billion in 2022, with 50% coming through wholesale. The company expects about $5 billion volume in 2023, 80% of which would be originated via brokers.
To maintain retail and wholesale channels simultaneously and without conflicts, Perez said EPM’s “pricing is agnostic” for both businesses.
“Where I think sometimes people run into trouble is that they’re putting wholesale rates out on the street, and then their retail people can’t compete,” Perez said. “That has more to do with expense models; that has more to do with mega layers and we don’t have those. We just have one global salesforce on each side.”
In turn, EPM has closed branches and laid off LOs. HousingWire reported in December that the lender had 14 branches and 86 active LOs, according to the mortgage recruiting platform Modex. However, the latest data shows 10 branches and 37 active LOs.
Perez said 2022 was a tough year as EPM made a strategic realignment. The company cut staffers, got rid of many locations – due, in part, to some employees working from home – and renegotiated compensation, bringing “them back down to 2019 numbers.”
While primarily an East Coast company, EPM is expanding to the West, according to its leaders.
“I’ve been at some conferences recently and a lot of people just have not rightsized themselves. Ironically, we thought we were late to the party, and I’m coming to find out that we were very early to the party,” Perez said. “So, I think you’ll see unemployment in the industry increase.”
According to Perez, the industry is “halfway” to its correction, with more consolidation on the horizon.
Amid its shift in strategy, EPM has also been involved in lawsuits.
In December, stock car racing team Jesse Iwuji Motorsports (JIM) accused the lender of allegedly failing to make more than $4 million in sponsorship payments after the company received a margin call from its investors. EPM filed a counterclaim against JIM for breaching the sponsorship contract by changing the car’s driver starting May 2022.
In March, TGT Maitland LLC filed a lease suit in Florida alleging that EPM abandoned its property, located at 2290 Lucien Way, Maitland, despite the leasing agreement being scheduled to expire on September 30, 2025.
“The Defendant has breached the terms of the Lease by failing and refusing to pay the rent and other amounts owed under the Lease,” the plaintiff said.
TGT is holding a security deposit of $9,135.49. The landlord claims that as of March 6, EPM owed rent and other charges totaling $29,731.16, and rent accrues $8,187.79 each month.
Both cases are still pending. EPM executives declined to comment on ongoing litigation.
