Well, 2025 is off to a rocky start as a fairly large mortgage lender has already announced that it is quitting.
Ally Financial is said to have finished all of its mortgage lending, per statement From their spokesman Peter Gilchrist.
He told the Charlotte Observer that the company plans to exit the mortgage origination business in the first quarter of the year.
As a result, the company will see “less than 5% of its workforce” affected by layoffs.
They will clearly “right-size” the company, cutting headcount in some areas (such as mortgage lending) but hiring in others.
Ally Financial is exiting the mortgage business
Although they have been in the mortgage business under the name Ally Financial for a little over a decade, it appears that is over.
This time, the reason is likely to be higher mortgage rates for a longer period, not subprime lending or a spike in mortgage defaults as occurred in the early 2000s.
Speaking of which, Ally Financial was formerly known as GMAC until 2010, a unit of General Motors.
They also owned Residential Capital (ResCap), the subprime lending division caught up in the massive subprime mortgage crisis of the time.
They eventually shut down ResCap as their multibillion-dollar portfolio of mortgage loans collapsed, leading to bankruptcy and a bailout from the Treasury.
But when things settled down, they switched the brand to Ally Bank and a year later renamed it Ally Financial.
Then Ally Home was born, focusing on direct-to-consumer mortgage lending and offering everything from conforming loans to jumbo loans.
Their strategy was to provide a “high-touch experience” unlike many of their digital competitors like Better Mortgage, which eschewed the loan officer altogether.
While it seemed to work for a while, the amount of loans they took out dwindled when mortgage rates were no longer such a screaming deal.
Ally Financial has only funded about $1 billion over the past year
When considering them FinanceI discovered that Ally Financial collected only about $1 billion in total home loan volume over the past year.
While this sounds decent, it is not enough for a large depository bank like theirs.
The company funded just $0.2 billion in the first quarter, and $0.3 billion in the second and third quarters of 2024.
Interestingly, they noted that they continued to focus on “digital experience and operational efficiency” at the channel.
So it seems that the high-touch approach has proven to be too expensive, or is no longer the preferred method of construction.
In the most recent quarter, the company said its total loan volume of $256 million was “reflective [the] current environment,” also known as a high mortgage rate environment.
Naturally, over 70% of direct-to-consumer mortgage assets were obtained from the bank’s existing depositors.
This means that they do not appear to be actively pursuing customers outside the bank. But with volume so low, it may not make sense to go ahead with the business.
Nonbanks continue to gain market share in the mortgage space
The move makes you wonder whether other banks will follow suit, with non-bank institutions increasingly dominating mortgage lending.
In 2023, United Wholesale Mortgage was the largest mortgage lender in the country. They are not just non-banks, but only work with mortgage brokers. So there are no retail operations.
They were followed by rocketing mortgages, which together accounted for about 10% of total origination volume.
Chase and Wells Fargo ranked third and fourth, but we know Wells Fargo is actively working to reduce its mortgage footprint.
Next, CrossCountry Mortgage took fifth place, Fairway Independent Mortgage took seventh place, with DHI Mortgage (DR Horton’s lender) and loanDepot rounding out the top ten.
This makes you wonder what kind of appetite the depository banks have for mortgages, outside of the big banks.
Despite being a depository bank, Ally Financial said less than 1% of the home loans it originated last quarter were kept on its balance sheet.
Read on: Check out the latest mortgage industry layoffs, closings, and mergers
Before creating this site, I worked as an account executive for a wholesale mortgage lender in Los Angeles. My work experience in the early 2000s inspired me to start writing about mortgages 18 years ago to help potential (and current) homebuyers better navigate the home loan process. Follow me on Twitter for hot takes.
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