Making moves in the mortgage sector, known real estate investment trust (REIT) Two Harbors is boldly expanding into the loan origination market. Recently, Thomas Siering, the company’s CEO, discussed the decision, revealing the strategic underpinning behind it.
Two Harbors doesn’t play by the rule book; they don’t do normal. For a while now, this real estate powerhouse has been printing its own playbook, cranking the gears of creativity to seize market share and stand out in the highly competitive mortgage marketplace. The company’s latest move—to pivot into the loan origination game—is their freshest strategic endeavor yet, illustrating their ambition and forward-thinking approach to business.
CEO Thomas Siering provided insights regarding this decision in a recent interview. For the leader of Two Harbors, the progression into the world of loan origination is an opportunity for the company to diversify its business portfolio, grow revenues, and enhance the firm’s overall value proposition.
To grasp the full picture, it’s crucial to grasp the nature of Two Harbors’ operations before the pivot. The company has been heavily involved in mortgage-backed securities (MBS) and related assets and thrived in this market dealing with securities guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae. The distinctive ability to delve and deal in residential mortgage-backed securities makes Two Harbors dissimilar to conventional mortgage companies.
Making an entry into the lending sector is a welcome deviation that allows Two Harbors to complement its existing business models with the addition of an origination arm. Besides, with the U.S mortgage market currently valued at trillions of dollars, it is a smart and calculated move to stake a claim in this lucrative sector.
But the move isn’t without caution; this venture is filled with potential pitfalls that could potentially offset the projected benefits. However, for CEO Siering, such risks are acceptable given the diverse opportunities that the mortgage sector presents.
Two Harbors’ entry to the origination business isn’t merely about adding a new revenue stream; it also presents an opportunity to build financial resilience. By having its hand in both the cake and icing—loan origination and mortgage-backed securities—the company hopes to weather unpredictable market storms more effectively.
The CEO also notes that expanding into origination is in line with Two Harbors’ overarching mission—to generate stable and sustainable returns. By securing a footing in the mortgage origination process, the company can penetrate a new market segment, expand its footprint, and forge stronger relations with customers.
But as they prepare to face the inherent challenges in the mortgage industry, Two Harbors is not jumping headlong into this new venture. The company plans an incremental and measured entry, starting with the correspondent lending business. Here, they will purchase closed loans from a set of sellers rather than originating loans directly.
However, getting into the origination business isn’t Two Harbors’ first innovative strategy. The company has an impressive history of going against the tide, exploring uncharted waters, and adopting new models that push the business forward. A case in point is their past involvement with Silver Bay Realty Trust, a single-family real estate investment trust, which enabled them to foray into an entirely different thriving real estate market outside of their primary focus.
In conclusion, amidst the sea of mortgage companies and real estate investment trusts, Two Harbors’ entry into the origination business offering is a strategic play that aims to not only grow their revenue but also diversify their business. By creating diversity in their operations, the company aims to better navigate the market fluctuations for a more sustainable and stable return over time. This company is standing true to their commitment to leverage multi-cyclical market opportunities and maintain a firm grasp on their future.
Therefore, the new venture’s success will ultimately depend on how well Two Harbors can apply its expertise in market investment, innovation, and customer service to the volatile mortgage industry. Thomas Siering, their CEO, remains optimistic and open to embracing new possibilities for the growth and betterment of Two Harbors.
