Bayview Acquires Guild Mortgage

June 19, 2025 | Premium Service | Yesterday a fund controlled by Bayview Management announced that it will acquire all of the outstanding shares of Guild Mortgage (GHLD) common stock that it does not already own in an all-cash transaction valued at approximately $1.3 billion in aggregate equity value. Some observers had thought that Bayview might be for sale, but instead an investor in a Bayview fund is taking the best run purchase mortgage shop in the US private.

“The transaction has already received shareholder approval from McCarthy Capital Mortgage Investors, LLC, which holds the majority of Guild shares, meaning no further stockholder action is required,” reports National Mortgage Professional. The deal is expected to close in the fourth quarter of 2025. 

This is the second major transformational M&A transaction in the mortgage sector this year and has dramatic implications for the remaining top players who have not yet found a dance partner.  The drivers for these transactions are a combination of strategic factors and cost reduction, since many lenders are stretched on cash in a hypercompetitive, low-volume market for residential loans. The outlook for interest rates and mortgage volumes is not positive given the latest meeting of the Federal Open Market Committee.

Bayview controls #2 mortgage servicer Lakeview Loan Servicing, according to Inside Mortgage Finance. The addition of #24 GHLD with $95 billion in unpaid principal balance (UPB) of loans does not move Lakeview past #1 JPMorganChase (JPM), but it does put the two firms under common ownership. The originated mortgage servicing rights (OMSRs) created by GHLD are high quality purchase assets with low prepayment characteristics.

It appears from the press release that Bayview will continue to operate the GHLD as a separate licensed mortgage business: “Guild will operate as a privately held, independent entity as part of Bayview’s portfolio, and be strategically aligned with Lakeview Loan Servicing.” 

GHLD at 16th in lending in Q1 (IMF) is a much stronger lender than is Lakeview ranked below 30th, which may well be part of the rational for the transaction. We have owned the GHLD stock and should have just kept it through the ebbs and flows of the mortgage business. For GHLD, a well-managed but relatively small operation is now affiliated with a huge mortgage servicer and the related cash-flows, a safe home for a gem of a purchase loan business in increasingly difficult times in the mortgage sector.

Because of the unique fund structure of Bayview, acquiring GHLD makes a lot of sense and leaves the enlarged business able to compete against the Rocket Companies (RKT), Redfin (RDFN) and Mr. Cooper (COOP) combination. This transaction ups the pressure on the remaining top players among the 25 top lenders and servicers, but particularly United Wholesale Mortgage (UWMC) and Rithm Capital (RITM). 

The former is a loan production machine, but UWMC lacks a large, stable servicing book to support the lending operation and has been bleeding cash. The latter has a large servicing book, but RITM earns an equity market discount due to the REIT structure and relatively high overhead compared to peers such as RKT or COOP or GHLD. 

In the absence of Fed rate cuts and a rally in longer-dated Treasury bonds, aggressive business models such as UWMC seem unsustainable in terms of loan pricing.  The gain on sale for mortgages, for example, is a non cash item that reflects the future receipt of mortgage servicing fees. Many issuers in the mortgage sector today are literally out of cash and are leveraging remaining assets to maintain operational liquidity.

News that the Treasury intends to increase the issuance of T-bills will be good for stocks, but will likely steepen the yield curve and possibly increase mortgage rates as a result. In such an environment, you could make a case for combining UWMC and RITM to create a comp for the binary of PennyMac Financial (PFSI) and PennyMac Mortgage Trust (PMT), but the overhead cost reductions required would be massive. Truth is, it’s hard to see the leadership of either RITM or UWMC combining with another entity, but the cost pressures in the industry today are driving radical change. 

"Independent mortgage banks (IMBs) and mortgage subsidiaries of chartered banks reported a pre-tax net loss of $28 on each loan they originated in the first quarter of 2025, compared to a net loss of $40 per loan in the fourth quarter of 2024," according to the Mortgage Bankers Association’s (MBA) newly released Quarterly Mortgage Bankers Performance Report. And remember that the loss referenced above is a GAAP measure and does not reflect the actual cash reality facing many mortgage firms.

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