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

Flagstar's Home Lending Jumps, Servicing Grows

Headcount and CRE assets up, mortgage revenues down

July 24, 2018

By Mortgage Daily staff

Home-lending volume jumped at Flagstar Bancorp Inc., and it's likely a further ascension is ahead. Also increasing were headcount, servicing and commercial mortgages. But mortgage revenues were off from a year earlier.

Income before income taxes during the period that began on April 1 and concluded mid-year came to $62 million, according to the Troy, Michigan-based firm's second-quarter earnings report.

Results were slightly better than the $60 million earned in the year-earlier period. A big improvement was made versus the $44 million earned in the preceding three-month period.

Based on an analysis of comments in the report, mortgage revenues were an estimated $69.5 million, off from an estimated $72.5 million in the second-quarter 2017 but up from an estimated $61.5 million in the first quarter of this year.

Behind the quarter-over-quarter improvement were a seasonal increase in originations and a higher net return on mortgage-servicing rights.

Single-family originations were $9.181 billion during the second quarter -- including $9.040 billion in first mortgages and $0.141 billion in home-equity assets. Business jumped from $7.951 billion the preceding quarter, bringing full first-half production to $17.132 billion.

The third quarter is poised to see a further increase in home lending based on mortgage rate lock commitments, which jumped to $9.0 billion in the second quarter from $7.7 billion the prior period.

But mortgage production slipped from the second quarter of last year, when Flagstar closed $9.259 billion.

In the report, Flagstar President and Chief Executive Officer Alessandro DiNello said mortgage business was softer than expected and called the mortgage environment "challenging."

Refinance share dropped to 28.9 percent from the previous period's 43.0 percent. Conventional share was 46 percent, government share was 30 percent and jumbo share was 24 percent.

Retail originations accounted for $1.3 billion of second-quarter 2018 originations, while wholesale lending made up $1.1 billion and correspondent acquisitions were $6.6 billion.

Flagstar reported more than a thousand correspondent relationships and nearly 800 mortgage broker relationships.

Flagstar serviced 110,910 home loans which collectively had an unpaid principal balance of $26.552 billion as of June 30, 2018. The total included third-party servicing of 78,898 loans for $19.249 billion.

At the end of the prior quarter, the primary servicing portfolio was 109,611 loans for $26.396 billion, and it was 96,981 loans for $23.300 billion as of a year prior.

In addition, 424,331 loans for $93.761 billion were subserviced for others.

"We continued to build scale and profitability within our servicing business -- a segment that brings fee income, as well as ancillary benefits like deposits that fuel our loan growth," DiNello explained. "During the second quarter, we sold $6.4 billion of mortgage servicing rights with 100 percent of the servicing retained. Since the beginning of 2018, we've increased the number of loans serviced by 93,000 or 21 percent and are well positioned to add more scale later this year."

The capitalized MSR value was 1.34 percent, and the weighted-average service fee was 32.5 basis points.

On the balance sheet of the bank-holding company were $3.671 billion in residential assets -- including $2.986 billion in first mortgages and $0.685 billion in home-equity assets. The portfolio grew from $3.489 billion in the last report and just $2.997 billion as of the same date last year.

Warehouse lending assets were $1.801 billion as of the most-recent date, while commercial real estate holdings were $2.020 billion.

Across the entire organization, Flagstar employed 3,682 people. Staffing was up from 3,659 full-time employees at the end of March and 3,432 as of mid-2017.

Flagstar operated 88 retail mortgage locations, four fewer than as of March 31. Retail bank branch count was unchanged at 107.

Flagstar profile

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