Based in Michigan Flagstar Bancorp, Inc.parent company of Flagstar Bankhas cut its mortgage staff by 20% since the timeline moved to 2022, laying off 420 staff amid significantly lower origination volumes and margins.
Overall, the bank’s net profit in the first quarter of 2022 fell 60.4% from the previous quarter, to $53 million. Mortgage income fell $36 million over the same period to $74 million from January to March.
“The gain on sales revenue came under significant pressure throughout the quarter as the speed of mortgage rate increases increased at the fastest pace this century,” said Alessandro DiNello, president and CEO of Flagstar Bancorp, in a statement.
Flagstar Bancorp reported Wednesday that closed mortgages reached $8.2 billion in the first quarter of 2022, down 23% quarter-over-quarter and 40% year-over-year.
Closed purchase loans were $4 billion from January through March, unchanged from the first quarter of 2021, but down from $5 billion in the fourth quarter of 2021.
Meanwhile, refinances dropped significantly, from $9.8 billion in Q1 2021 to $5.7 billion in Q4 2021 and just $4.2 billion in Q1 2022.
The gain on sale margin decreased to 0.58% in the first quarter of 2022, compared to 1.84% in the first quarter of 2021. In the fourth quarter of 2021, margins were 1.02%.
“While our channel margins held up fairly well, we experienced a decline in EBO revenue and competitive factors,” DiNello said. “We responded by cutting costs, including reducing our mortgage staff by 20% at the end of the first quarter.”
The company’s downsizing included 358 direct layoffs and 62 vacant positions that were eliminated, executives said on a conference call with analysts. The bank had 2,100 employees on its mortgage staff before the cuts.
With respect to the management portfolio, net management fee return increased to $29 million for the first quarter of 2022 from $19 million for the fourth quarter of 2021, the bank said.
“While mortgage income declined more than expected due to an unprecedented increase in mortgage rates, our net interest margin and MSR yields have already improved significantly, although the benefits have only begun to materialize. until very late in the quarter,” DiNello said.
In April, New York Community Bankone of New York’s largest multi-family lenders, announced the acquisition of Flagstar Bancorpin an all-stock merger valued at $2.6 billion.
On Wednesday, the banks announced that they had mutually extended their merger agreement until October 31, 2022, to provide that the merged company will operate under a national bank charter. Under the new agreement, the merger must be approved by the Federal Reserve Board and the Office of the Comptroller of the Currency (OCC).
NYCB had essentially exited the residential mortgage business in 2017 after selling its origination and servicing platforms. Despite the deal, the initial agreement stipulates that the Flagstar brand will be maintained in the Midwest. Flagstar’s mortgage division will also preserve the brand. Other states will retain their current branding.
According to the first quarter results published, Flagstar has a 2.7% market share in the correspondent channel and more than 1,100 partners. The bank has a 0.7% market share in the broker channel, with 1,600 broker relationships. Flagstar also has 82 retail locations in 28 states, with direct lending accounting for 59% of retail volume.