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Year-Over-Year Gain in Flagstar Home Lending

With the help of a recent acquisition, Flagstar Bancorp Inc. was able to make a year-over-year gain in mortgage originations. Ongoing reductions continued, though, for the primary servicing portfolio.

In the first-three months of this year, income before income taxes came to $44 million, according to the Troy, Michigan-based firm’s first-quarter earnings report.

Income improved compared to the first-three months of last year, when Flagstar earned $40 million. But earnings fell from $51 million in the previous three months.

Mortgage revenues amounted to $64 million in the three months ended March 31, 2018, inching up 3 percent from the first-quarter 2017 but tumbling 15 percent from the fourth-quarter 2017.

Flagstar originated $7.951 billion in residential loans during the first-quarter
2018 — including $7.886 billion in first mortgages and $0.065 billion in home-equity loans and lines of credit. Business dropped from $9.860 billion three months earlier.

In the latest quarter, refinance share was
43.0 percent, thinning from 45.4 percent in the last report. Conventional loans accounted for 49 percent of originations, while government share was 27 percent, and jumbo share was 24 percent.

But overall mortgage production picked up from an upwardly revised $5.959 billion one year earlier. The year-over-year gain reflects the May 2017 acquisition of Opes Advisors Inc.

Retail originations made up $1.0 billion of the latest volume. Mortgage brokers accounted for $1.1 billion, while an overwhelming majority — $5.8 billion — of business was from correspondent acquisitions. The bank reported more than a thousand correspondent relationships and over 800 mortgage broker relationships.

Mortgage business is likely descending during the current quarter based on fallout-adjusted rate-lock commitments, which fell to $7.7 billion in the first quarter from $8.6 billion in the fourth quarter.

Flagstar was the primary servicer on 109,611 loans with an aggregate unpaid principal balance of $26.396 billion as of March 31, 2018. The servicing portfolio was reduced from 132,630 loans for $32.086 billion the prior quarter and 150,731 loans for $34.132 billion a year prior.

Included in the latest servicing portfolio were 32,185 owned loans for $7.629 billion and 77,426 loans for $18.767 billion that were serviced for third parties. The capitalized rate on mortgage-servicing rights was 1.27 percent, the multiple was 4.158, and the service fee was 0.305 percent..

360,396 loans were subserviced for $104.144 billion.

Residential assets on the balance sheet finished March 2018 at $3.489 billion — including $2.818 billion in first mortgages and $0.671 billion in home-equity assets. The total was $3.418 billion the preceding quarter and $2.839 a year previous.

Commercial real estate holdings grew to $1.985 billion from $1.932 billion and have substantially expanded from $1.399 billion as of March 31, 2017.

With 3,659 company-wide employees, headcount has expanded by 134 people since the end of last year. Staffing soared versus 2,948 on the same date in 2017.

The bank operated 92 retail home-lending offices.

Retail bank branches ended last month at 107, eight more than at the end of last year.

Flagstar disclosed that it acquired Santander Bank’s warehouse business on March 12. The purchase brought around $500 million in warehouse loans to its investment portfolio, while warehouse commitments grew by $1.7 billion. Nine full-time employees came with the acquisition.

The latest period concluded with $1.407 billion in warehouse-lending assets. Flagstar reports it was the fourth-biggest warehouse lender as of year-end 2017.

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