Mortgage industry leaders expect more mergers and acquisitions (M&A) in 2025, fueled by declining interest rates and renewed market confidence after two years of what they describe as “modest activity.”

“There’s definitely activity happening behind the scenes,” Brett Ludden, managing partner at Sterling Point Advisors, said last week during HousingWire’s IMB Summit in Dallas. “Rates are starting to go down. Buyers are feeling better about the market and that they are more able to afford a deal. Sellers feel more confident they’re actually going to be compensated fairly for the transaction.” 

Overall, Ludden sees more discussions involving the sale of entire mortgage companies, not only asset purchases, which was the case in past deals. Founders see this landscape as an opportunity to sell their businesses and retire.

“You’re actually going to see an uptick in M&A as we go forward,” Ludden said.   

Dan Hanson, executive director of enterprise partnerships and acquisitions at loanDepot, said that sellers expect improved conditions for mortgage origination activity, which will lead to more profitability and growth and can in turn increase the value of their businesses.

“The price of their franchise is going to be worth more,” Hanson said. 

When discussing the valuation of mortgage companies, a common benchmark mentioned was about 1% of the trailing 12-month production volume. But this is contingent on the seller’s operational efficiency relative to industry standards and their ability to maintain market share over time.

Ludden said that stock purchases are becoming a model his clients choose despite the risks involved, such as assuming liabilities. That’s because stock purchases offer the advantage of retaining sales teams and integrating them smoothly under the parent company’s structure. Once under the umbrella, buyers can organize an integration plan of the acquired company.

Three-pronged approach

Industry experts emphasized the importance of a “triple win” approach in M&A. This includes ensuring growth for the acquiring company, a successful exit for the seller and team retention. 

Dan Snyder, CEO and co-founder at Lower, said that “looking at the tenure of the sellers’ branches” is key to the retention process. One example is the deal Lower struck in December 2023 to acquire Texas-based Thrive Mortgage, which had branch managers producing for five, seven and 12 years, he added. 

“If you are a team member of a company that’s going to get acquired, it might not be the worst thing,” Snyder said, adding that Lower encourages site visits and shows its planned investments to the sellers’ teams. 

Snyder also mentioned that Lower checks with its internal teams before engaging in acquisitions in some areas of the country to avoid having them internally competing.  

The executives said that while many companies highlight cultural fit as the most critical factor in M&As, other elements also play a role, such as technology integration and communication. 

Ludden said that several deals didn’t come through because the sellers concluded, after their due diligence, that the purchasing company’s structure and technology would not work for their employees.

“It’s much more common than the number of deals you see,” he added. 

Hanson, however, considers product mix “incredibly important,” mainly for the acquiring company to provide a “truly, durable lift” to the seller firm, its executives, loan originators and fulfillment staff. He further added that loanDepot benefits from offering its stock, which has been relatively low since 2021 but has the potential to rise, making it an attractive offer to sellers.

“Acquisition sounds so negative. It’s like somebody wins, somebody loses. The reality is both can win,” he said.