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

Originations, Servicing Portfolio Decline at Flagstar

Mortgage production down 12%

July 24, 2013

By Mortgage Daily staff

The volume of home loans and the mortgage servicing portfolio were both down in the second quarter at Flagstar Bancorp Inc. But the number of mortgage sales jobs moved higher.

First- and second-mortgage originations totaled $10.882 billion during the three months ended last month, according to earnings data.

Business was slower than during the first quarter, when $12.423 billion in home loans were closed.

Mortgage production was also worse than in the same period last year, when $12.547 billion was originated.

First-half 2013 residential fundings totaled $23.305 billion.

Included in second-quarter volume was $0.665 billion in jumbo originations, tumbling from $1.033 billion in the prior report. Loans closed through the Home Affordable Refinance Program declined to $0.887 billion from $1.168 billion.

Business generated through the retail channel fell to $7.332 billion from the first quarter's $8.525 billion, while mortgage broker production declined to $2.975 billion from $3.201 billion, and correspondent activity dropped to $0.575 billion from $0.697 billion.

Refinance share fell to 71.1 percent from 81.2 percent in the first quarter.

Overall upcoming business is likely to decline further based on gross mortgage locks, which have fallen for two consecutive months to $3.4 billion in June.

After selling mortgage servicing rights on $12.7 billion in loans, the third-party servicing portfolio was reduced to $68.321 billion from $73.933 billion as of March 31. At the same point in 2012, Flagstar serviced $76.192 in home loans for investors.

The bank's investment portfolio included $2.628 billion in residential first mortgages, less than the $2.991 billion owned as of March 31 and the $3.102 billion owned one year prior.

Second mortgages on the balance sheet inched up to $0.181 billion from $0.112 billion three months earlier and $0.127 billion a year earlier.

Flagstar said its portfolio of home-equity lines of credit grew to $0.322 billion from $0.168 billion at the close of the first quarter and $0.198 billion as of the same date last year.

Warehouse lending assets were trimmed to $0.676 billion from $0.751 billion and stood at $1.261 billion at the same point in 2012.

Commercial real estate loans were cut to $0.477 billion from $0.563 billion and have plummeted from $1.075 billion on the books as of the end of the second-quarter 2012.

There were 800 new repurchase demands received in the second quarter, dropping 35 percent from the first quarter and leaving the total repurchase pipeline at $115 million.

The report indicated that loans repurchased with government guarantees fell to $1.509 billion from $1.605 billion at the end of the first quarter and $1.999 billion one year prior.

Flagstar President and Chief Executive Officer Sandro DiNello highlighted how the company took advantage of opportunities to resolve its legacy litigation issues by reaching a $110 million settlement with MBIA. The litigation involved $1.1 billion in securitized non-agency second mortgages.

He also said Flagstar reached an agreement on June 21 to settle for $105 million a lawsuit filed by Assured Guaranty Municipal Corp. on $902 million in non-agency securitizations issued in 2005 and 2006 and backed by HELOCs.

In addition, DiNello noted that Flagstar capitalized on improving market conditions and reached a deal to sell the company's non-core default servicing business.

Flagstar Bancorp. earned $61 million before income taxes, a vast improvement from the first quarter's $24 million profit. But earnings dropped from $88 million in the same three-month period last year.

Mortgage sales staffing expanded to 341 loan officers and account executives from 322 at the end of March. As of June 30, 2012, there were 336 people in mortgage sales.

Company-wide headcount, including mortgage sales employees, was 3,759 as of the end of last month, retreating from 3,778 people at the end of the previous quarter. One year prior, 3,520 employees were on board at the Troy, Mich.-based firm.

Flagstar said it operated 111 banking centers at the end of last month, with all located in Michigan, the same as at the end of the first quarter.

In addition, 40 home lending centers were operated in 17 states, down one center from three months earlier.

Flagstar profile

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