Smaller mortgage vendors face squeeze from lenders, regulators

Mortgage vendors are entering a new phase of consolidation as they respond to rising regulatory and The industry has seen deals across title, processing and other mortgage services. Recent transactions reflecting this trend include In this environment, “larger” vendors often mean those with more than $100 million in revenue and at least $15 million to $20 million in EBITDA, although thresholds vary by subsector.

Sources of pressure

The Houlihan Lokey paper highlights how recent mandates from “Many of the smaller mortgage vendors are facing headwinds and will likely be getting sold to the larger vendors over time, or they will continue to struggle to keep market share as they don’t have the capital to keep up with cybersecurity, compliance and everything you need to have to effectively compete in this market,” Guzzo said. “They’re eventually either going to get acquired or slowly will just go away.”

Guzzo added that “We are beginning to move from single-product vendors to multiproduct vendors that have a diverse product suite,” Guzzo said. “One of the biggest drivers of this is the lenders. They don’t want to deal with 10-plus vendors. If they could just go to a smaller subsegment of larger vendors that provide multiple products, it makes it easier and less costly for the lender to manage.”

That is changing the nature of M&A. Buyers are increasingly focused on acquiring capabilities such as broker price opinions on the servicing side, new software and domain expertise, rather than just revenue.

To build these multiproduct platforms, vendors are tapping