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Flagstar Performance Deteriorates

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Home loan production sank as Flagstar Bancorp Inc. reported a massive quarterly loss. But the company’s new chief, who was also elected chairman of the board, is moving quickly to stop the bleeding.

Residential originations during the third quarter were $6.6 billion, according to earnings data reported today. Volume tumbled from $9.3 billion in the previous quarter but was barely changed from $6.7 billion a year earlier.

Year-to-date Sept. 30, volume totaled 25.4 billion.

The servicing portfolio ended the third quarter at $53.2 billion, falling from $61.5 billion three months earlier.

First mortgages on the balance sheet as of Sept. 30 were $5.3 billion, less than $5.5 billion as of June 30. Second-mortgage holdings were marginally off to $0.2 billion.

Warehouse lending assets were $0.4 billion as of the end of September, up slightly from the end of June.

Commercial mortgages held for investment edged up to $1.7 billion at the end of the third quarter.

Flagstar had a third-quarter loss of $298 million, worse than the $77 million loss in the prior period and the $62 million loss in the third-quarter 2008.

Thomas J. Hammond retired as chairman on Oct. 22. Replacing him was Joseph P. Campanelli, who himself replaced Hammond’s son, Mark Hammond, as president and chief executive officer on Oct. 1.

Campanelli has wasted no time setting the Troy, Mich.-based institution on a profitable track.

In today’s statement, Flagstar announced “a comprehensive effort to better align expenses with revenues and appropriately rightsize the Flagstar enterprise.”

As part of Campanelli’s strategy, Flagstar said it plans to invest in its “position as one of the leading residential mortgage originators,” though it also plans to “broaden our earnings streams beyond our traditional mortgage activity” and consolidate when the opportunity arises.

“We anticipate a significant level of industry consolidation and want to be active in that process,” Campanelli said in the statement. “But in the near term, we will have to bring expenses into better alignment.”

Additionally, Salvatore Rinaldi was appointed executive vice president and chief of staff, while Marshall Soura was named executive vice president and director of corporate services

Flagstar said it operated 42 loan origination centers as of the end of September, fewer than the 45 operated at the end of June and far less than the 111 centers on Sept. 30, 2008.

The number of loan officers and account executives as of the end of the third quarter was 436, down from 457 at the end of the second quarter and 736 at the end of the third-quarter 2008.

Across all of Flagstar, headcount — including originators and AEs — finished September at 3,656, lower than 3,747 at June’s end.

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