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Quarterly residential mortgage production by lender. Subprime, Alt-A, home equity and conforming originations. Volume by quarter since 2003.

Flagstar Invests in Purchase Business

Q1 mortgage originations fall 19% from Q4

April 24, 2013

By Mortgage Daily staff

Nearly a dozen new mortgage centers were opened by Flagstar Bancorp Inc. in an effort to finance more home purchases. But the move didn't come soon enough to head of a quarterly drop in new business.

The Troy, Mich.-based financial institution reported in its first-quarter earnings report that home loan originations were $12.423 billion, falling from $15.357 billion in the prior period.

Business improved, however, from the first quarter of last year, when Flagstar closed $11.169 billion in residential loans.

Correspondent clients generated $8.525 billion of first-quarter activity, while the mortgage broker share was $3.201 billion and retail originations were $0.697 billion.

Purchase financing was $2.339 billion, and refinance mortgage originations were $10.084 billion.

Gross mortgage rate lock commitments fell to $12.1 billion from the fourth quarter's $16.2 billion.

Even after completing the bulk sale of mortgage servicing rights on $10.7 billion in loans, mortgages serviced for others still totaled $73.933 billion.

The third-party servicing portfolio was $76.821 billion at the end of last year and $68.208 billion at the same point last year.

Flagstar President and Chief Executive Officer Michael Tierney noted in the report that the company "continued our efforts to reduce MSR concentrations, as we prepare to meet the requirements of Basel III and the regulatory-prescribed stress tests."

Flagstar owned $2.991 billion in residential loans, trimming its holdings from $3.009 billion as of the end of December and $3.305 billion 12 months prior.

Second mortgage holdings fell to $0.112 billion from $0.115 billion and were $0.132 billion a year earlier.

Another $0.168 billion in home-equity lines of credit were on the books, less than $0.179 billion previously owned and falling from $0.209 billion at the end of March 2012.

Warehouse lending assets accounted for $0.751 billion of the investment portfolio, tumbling from $1.348 billion as a result of falling originations. This category stood at $1.104 billion one year prior.

Commercial real estate loans fell to $0.563 billion from $0.640 billion and stood at $1.158 billion in the year earlier period.

Net repurchase charge-offs fell to $31 million from the fourth quarter's $42 billion, while the pipeline of active loan repurchase demands declined 17 percent to $187 million. The representation and warranty reserve closed out last month at $185 million, down from $193 million three months earlier.

"Flagstar's revenues are heavily dependent on the mortgage banking business, with gain on loan sales, net interest income, and loan fees all driven by mortgage volume," Tierney said in the report. "Along with the industry, we experienced a slowdown in mortgage banking activity during the quarter, with reduced demand and tighter margins due to increased competition and excess capacity.

"In response to recent headwinds, we have taken steps to gain market share and improve margins, and are confident that Flagstar remains well positioned to capitalize on future opportunities in the mortgage business."

Flagstar Bancorp earned $24 million before taxes from all of its businesses, swinging from an $89 million fourth-quarter 2012 loss and a $7 million loss in the year-earlier period.

Hugh Boyle was appointed to the role of chief risk officer, and Michael Flynn was named general counsel.

Flagstar employed 322 loan officers and account executives, trimming its mortgage sales staff from 334 as of the end of December. More were employed, however, than the 311 as of a year earlier.

There were an additional 3,456 employees throughout the bank-holding company and its subsidiaries, more than the 3,328 at the end of the previous quarter and 2,970 as of March 31, 2012.

The addition 10 new retail home lending centers since Dec. 31, 2012, brought the total to 41. The expansion was part of an effort to expand purchase originations.

The number of bank branches was unchanged at 111.

Flagstar profile

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