Company: BLNE
Filing Date: 2025-01-08
Form Type: S-1/A
Source: 0001493152-25-001415
Chunk: 83

Company: Beeline Holdings, Inc.
Filing Date: 2025-01-08
Form: S-1/A
Chunk 83
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 resulting in a decrease in overall funding activities in the mortgage market generally. As interest rates increase, the pool of customers who can reduce their monthly payment by refinancing, because their existing mortgage rate is higher than current mortgage rates, declines.

In addition, higher prevailing market rates both reduce the propensity of new home buyers to enter the market and reduce those willing to sell their homes or take existing equity out of their homes through a cash-out refinance. This creates a supply-demand imbalance where mortgage lenders are competing for fewer customers, and become increasingly price competitive to win business, thereby accepting lower potential gain on sale margin. This competition manifests in an industry-wide gain on sale compression and a decreased industry origination volume in higher rate environments. Starting in the second half of 2021, and continuing through the majority of 2023, Beeline experienced this trend where volume declined, and gain on sale margin compressed due to heightened interest rates and an increasingly competitive market for lenders.

Market and Economic Environment

Various economic conditions significantly influence the consumer lending market and the related volumes of mortgage loan origination. Key factors include the interest rate environment, unemployment rates, appreciation in home prices, and consumer confidence. Purchase mortgage loan origination volumes are typically impacted by a wide array of economic elements such as shifts in interest rates, the overall economic health, unemployment levels, and housing prices, in addition to seasonal trends, with home sales generally peaking in the second and third quarters. Nonetheless, in 2022 and 2023, the usual seasonal patterns in the housing market were overshadowed by rising interest rates and ongoing limitations in housing supply. As a result, Beeline is noticing a continued reduction in the influence of seasonality on its business due to these and other factors.

The volume of mortgage loan refinancing is largely influenced by changes in mortgage interest rates. Although the demand for consumer credit from borrowers usually stays robust across various economic conditions, potential borrowers may choose to postpone financing when faced with high or volatile interest rates or unfavorable economic situations. Consequently, Beeline’s revenue can fluctuate considerably from one quarter to the next, and the recent hikes in interest rates, along with inflationary macroeconomic trends, have a notable impact on its financial performance.

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Limited Housing Supply Ultimately Stimulates Increased Construction and Purchase Activity

The availability of homes for sale and their corresponding market prices are key factors influencing mortgage purchase volumes. Beeline believes that limited housing supply has played a role in curbing both new home sales and mortgage purchase activity. At the same time, this constrained supply