A restructuring of its conforming mortgage business has Redwood Trust Inc. laying off employees and ending government-sponsored enterprise originations.
The Mill Valley, California-based
organization disclosed Wednesday that it plans to restructure some aspects of its conforming residential loan operations.
According to the statement, Redwood plans to discontinue the
acquisition and aggregation of conforming loans for resale to Fannie Mae and Freddie Mac.
Instead, the specialty finance company will focus
on direct conforming-related investments in mortgage servicing rights and risk-sharing transactions.
Last year, the conforming purchase-and-sale business generated between $10 million and $11 million in pre-tax losses.
“One of our goals over the past few months has been to closely evaluate both our residential and commercial business operations and our corporate expense structure to look for ways to increase efficiency and profitability in the face of significant competitive pressures and market dislocations,” Redwood Trust Chief Executive Officer Marty Hughes said in the news release. “Today’s announcement specifically addresses our actions related to our conforming loan activities, which we view as necessary as we do not see the competitive pressures easing for the foreseeable future.”
As a result of the moves, staffing will be reduced by an estimated 25 percent.
In a previous Form 10Q filing with the Securities and Exchange Commission, Redwood disclosed a staff of 221 employees as of Sept. 30, 2015.
That puts the estimated layoffs at around 55 people in the residential lending business.
“We know the restructuring of our conforming operations will be difficult on the hardworking employees impacted by today’s announcement and we sincerely appreciate their contributions to the company.” Hughes stated.
The job cuts are expected to cut fixed compensation expense by 15 percent.
Redwood Trust President Brett Nicholas noted in the statement that the company plans to maintain its seller-servicer approvals with Fannie and Freddie.
“The full range of our jumbo loan business, as well as our re-focused conforming loan business, will still be conducted in all of our current office locations,” Nicholas added.
