From the roll ups of small- and mid- sized lenders through the mega transaction that finally combined the two largest names in mortgage technology, 2023 resulted in significant reshuffling in the corporate landscape.

While observers expected a high level of industry consolidation entering the year as high interest rates had a severe impact on originations, some of the names pushed out of business were surprising. That included companies that went public during the COVID-19 boom.

For quite a few of these lenders and vendors, how they conduct business is the difference between survival and becoming just another consolidation play, said Garth Graham, senior partner at Stratmor Group.

"We do a lot of (mergers and acquisitions) and all the consolidation action, the sellers are the unbalanced IMBs," Graham said. He noted these companies tend to have "all of their eggs in one basket," such as not owning any servicing rights which can give them fee income on a countercyclical basis.

They had to sell every loan for cash and are now a part of the 80% of the industry that is losing money.

"They don't have any real way to kind of fight their way through it other than hope until they capitulate and then they sell," Graham said.

But as tough as it has been for lenders in 2023, it has even been tougher for the vendors, Graham declared. Vendors typically get paid on the number of units processed, not on the dollar volume of mortgages produced.

"And the units are down so substantially, that [the vendors are] fighting for every dollar and [at the same time] every lender is fighting their own cost basis," Graham said.

As a result, Graham said lenders are asking, "Well, do I still really need this tech product? Or do I really need this tech service?" That is driving the dealmaking on the vendor side.

Here is a digest of some of the more notable transactions of 2023: