Ally Financial Calls It Quits on Mortgage Lending, Will Lay Off Staff

Well, 2025 is off to a rough start with one fairly large mortgage lender calling it quits already.

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Ally Financial is reportedly done with mortgage lending entirely, per a 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” impacted by layoffs.

Apparently they will “right-size” the company, reducing staff in some areas (like mortgage lending) but hiring in others.

Ally Financial Exits the Mortgage Business

Despite only being in the mortgage business under the Ally Financial name for just over a decade, they’re apparently done.

And the culprit this time is likely higher-for-longer mortgage rates, not subprime lending or skyrocketing mortgage defaults like it was back in the early 2000s.

Speaking of, Ally Financial was previously known as GMAC until 2010, a unit of General Motors.

They also owned Residential Capital (ResCap), their subprime lending division that was caught up in the massive mortgage crisis back then.

They eventually shuttered ResCap as their multi-billion-dollar subprime loan portfolio went kaput, leading to a bankruptcy and bailout from the Treasury.

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But as things settled down, they transformed the brand into Ally Bank and a year later renamed it Ally Financial.

Then Ally Home was born, focused on consumer-direct mortgage lending and offering everything from conforming loan to jumbo loans.

Their strategy was to provide a “high-touch experience” unlike many of their digital competitors such as Better Mortgage, which eschewed the loan officer altogether.

While it seemed to work for a while, their loan origination volume dwindled once mortgage rates were no longer a screaming bargain.

Ally Financial Only Funded About $1 Billion Over the Past Year

Upon looking into their financials, I discovered that Ally Financial only mustered about $1 billion in total home loan origination volume over the past year.

While that sounds decent, it’s not enough for a large depository bank such as theirs.

The company funded just $0.2B in the first quarter, and $0.3B in the second and third quarters of 2024.

Interestingly, they noted that they continued to focus on a “digital experience and operational efficiency” in the channel.

So apparently the high-touch approach proved to be too expensive, or was no longer the preferred method of origination.

In the latest quarter, the company said the $256 million in total loan origination volume was “reflective of [the] current environment,” aka the high mortgage rate environment.

Of course, 70%+ of their direct-to-consumer mortgage originations were sourced from existing depositors at the bank.

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Meaning they didn’t seem to be actively pursuing customers outside the bank. But with volume so low, the business might just not make sense moving forward.

Nonbanks Continue to Gain Market Share in Mortgage Space

The move makes you wonder if other banks will follow suit, with mortgage lending increasingly dominated by nonbanks.

In 2023, United Wholesale Mortgage was the largest mortgage lender in the country. Not only are they a nonbank, but they only work with mortgage brokers. So there are no retail operations.

They were followed by Rocket Mortgage, which together accounted for about 10% of total origination volume.

Chase and Wells Fargo took the third and fourth spots, but we know Wells Fargo is actively reducing its mortgage footprint.

And after that CrossCountry Mortgage took fifth, and Fairway Independent Mortgage took seventh, with DHI Mortgage (D.R. Horton’s lender) and loanDepot rounding out the top 10.

It makes you wonder what kind of appetite the depository banks have for mortgages, outside the largest ones.

Oh, and despite being a depository bank, Ally Financial said less than 1% of the home loans it originated in the latest quarter were retained on its balance sheet.

Read on: Check out the latest mortgage layoffs, closures, and mergers