Ally Financial to Stop Mortgage Originations

https://finance.yahoo.com/news/ally-end-mortgage-originations-cut-161513045.html

Bloomberg) -- Ally Financial Inc. will cut jobs, end mortgage originations and consider strategic alternatives for its credit-card business as borrowers have struggled to pay down costly debt.

A couple of thoughts

There is not enough mortgage volume to feed all the lenders out there. Its a shrinking pie.
Ally does not think it will get better anytime soon. Which means they don't expect rates to come down this year.
Normally these types of decisions are made in the 4th quarter NOT the 1st Quarter. They must have got some bad forecasts.
Other lenders will follow suit or consolidate.

Tough times for those that work in the real estate industry and its ancillary businesses (appraisers, escrow, inspectors, etc)

2 comments

2 Comments

OldPueblo

Jan 08

I’ve a couple wuestions for you Ballss.

Is Ally just a meme finance company? How robust was their origination business? Sounds like they got screwed with the credit card arm and are trying to bail out the boat.

Do you think the cash-buyer trend is affecting this at all? Especially in CA. I’s like to see the C-S index at the end of the quarter. Thanks for your thoughts.

BigBallss

Jan 08

Replying to

Ally Financial was known as General Motor Acceptance Corporation (GMAC) up until 2010. GMAC also owned a subprime lender that went out in 2010 known as RESCAP. This history of subprime lending by the executive team is important to what's happening today. Subprime mortgage lending is still around but in very very modest volumes due to the lack of securitizations. These guys were not doing subprime mortgage loans but only because no one will buy them. It seems this company is run by credit whores.

Ally's mortgage originations were just shy of $1B in 2023 and when the 2024 numbers are finalized they will be worse. About $200 million per quarter, that's $66m a month. That may sound like a lot but its actually terrible. Impossible to be profitable at those levels. The last company I was a part of, we were funding 1B PER MONTH and we still went under.

The mortgage business at Ally has got to be burning thru a lot of cash. Good move to close this business.

The credit card business is also a disaster, delinquencies are high because they lowered their credit standards to Ficos below 600. Charging 25% interest rates is only profitable IF THEY PAY.

So they are exiting that business too. They are going to have to discount their credit card portfolio DEEP to sell.

Their auto financing business is 70% of the the company and delinquencies are killing them there too because they went subprime. Their FICO requirement for an auto loan is down to 520.

Their credit facility is requiring them to tighten up their underwriting. That's not good. They will have to make do with lower volume while at the same time working their delinquencies thru the system. ouch.

Mortgage rates are up in the 7's again and we are seeing more cash buyers than ever before. Where the hell is all that cash coming from?

But no, that is not the major problem The major problem is the lack of loans available and too much competition. Refi's are absolutely dead and the purchase volume can't feed the large number of lenders we have out here. Just not enough business being generated.

Damn,. this post got way too long, I hope you made it top the end.