Ally Financial exits mortgage business, will lay off staff Loaner

Well, 2025 has gotten off to a rocky start with a fairly large mortgage lender already deciding to quit.

Ally Financial has fully completed its mortgage loans, according to a statement from their spokesperson 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” affected by layoffs.

Apparently, they’re going to “right-size” the company, cutting staff in some areas (like mortgages) but hiring in others.

Ally Financial exits the mortgage business

Although they have only been in the mortgage business under the name Ally Financial for a little over a decade, they are apparently done.

And this time, the culprit is likely continuing higher and longer mortgage rates, not subprime lending or soaring defaults as was the case in the early 2000s.

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

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

They ultimately shut down ResCap as their multibillion-dollar subprime loan portfolio collapsed, leading to bankruptcy and a Treasury bailout.

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

Then Ally Home was born, focusing on direct-to-consumer mortgages and offering everything from conforming loans to jumbo loans.

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

Although this seemed to work for a while, their loan volume declined once mortgage rates were no longer a bargain.

Ally Financial has only funded about $1 billion in the past year

By examining their financeI found that Ally Financial only amassed about $1 billion in total home loan origination volume over the past year.

While that seems okay, it’s not enough for a large depository bank like theirs.

The company only funded $0.2 billion in the first quarter and $0.3 billion in the second and third quarters of 2024.

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

Apparently the high-touch approach proved too costly or was no longer the preferred method of origination.

In the most recent quarter, the company said total loan volume of $256 million “reflected the current environment,” meaning the high mortgage rate environment.

Of course, more than 70% of their direct-to-consumer mortgages came from existing depositors at the bank.

This means that they did not appear to be actively seeking customers outside of the bank. But with such low volume, the business may no longer make sense in the future.

Non-banks continue to gain market share in mortgage lending

The move raises questions about whether other banks will follow suit as mortgage lending is increasingly dominated by non-banks.

In 2023, United Wholesale Mortgage was the nation’s largest mortgage lender. Not only are they not banks, but they only work with mortgage brokers. So there are no retail operations.

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

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

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

One wonders what kind of appetite custodian banks have for mortgage lending, outside of the larger ones.

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

Continue reading: Find out about the latest mortgage layoffs, closings and mergers