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Flagstar Reports Strong Originations

Unlike many of its competitors, Flagstar Bancorp Inc. was able to increase residential loan production from a year earlier. The company grew its servicing portfolio while selling off branches and cutting staff.

First-mortgage originations during the last three months of 2011 totaled $10.187 billion, according to fourth-quarter earnings data.

Business leapt from just $6.926 billion closed in the third quarter.

And while many of Flagstar’s mortgage lending rivals saw a fourth-quarter year-over-year decline, the Troy, Mich.-based company was able to raise its originations from $9.165 billion funded during the fourth-quarter 2010.

Refinances accounted for 79 percent of fourth-quarter volume, growing from a 63 percent share in the previous period.

A precursor to upcoming production, mortgage rate lock commitments, fell to $11.2 billion from the third quarter’s $13.1 billion pipeline.

For all of last year, originations came in at $26.613 billion, slightly exceeding the $25.561 billion closed during 2010.

The third-party mortgage servicing portfolio grew to $63.771 billion as of the end of December from $56.773 billion as of the end of September. The company serviced $56.040 billion for others as of Dec. 31, 2010.

The mortgage servicing system used for first mortgages was converted to “a nationally recognized loan servicing platform” during the fourth quarter.

Flagstar owned $4.111 billion in residential assets as of the end of last month. Holdings fell from $4.207 billion at the end of September but slipped from $4.239 billion at the same point in the previous year.

The latest residential total included $3.750 billion in first mortgages, $0.139 billion in second mortgages and $0.222 billion in home-equity lines of credit.

An additional $1.174 billion in warehouse lending assets were on the books, growing from $0.996 billion at the end of the third quarter and $0.721 billion at the end of the prior year.

Commercial real estate loans slipped to $1.243 billion from $1.269 billion and were $1.250 billion at the end of 2010.

The reserve for representations and warranties was raised to $120 million as of Dec. 31, 2011, from $85 million as of Sept. 30. Outstanding repurchase demands fell to $343 million from the third quarter’s $352 million.

Flagstar noted in the report that Fannie Mae and Freddie Mac have moved from issuing repurchase demands primarily on foreclosed loans to demanding repurchases on delinquent loans that have not yet converted to real estate owned. Flagstar says that the more aggressive pattern “is an indication of acceleration of repurchase demands on a relatively static population by the GSEs.”

Losses at the holding company before federal income taxes were $42 million, worsening from the $9 million loss in the third quarter but an improvement from the $186 loss in the fourth-quarter 2010.

“Our results for the fourth quarter and full year 2011 reflect near-record revenues from our mortgage banking business, significant growth in net interest margin, de-risking of our balance sheet through building of reserves, and the benefits of our continuing transition to a full-service commercial bank,” Flagstar Chairman, President and Chief Executive Officer Joseph P. Campanelli said in the report.

Loan officers and account executives employed at Flagstar fell to 297 from 306 people at the end of September. The mortgage sales staff grew, however, from 278 employees as of Dec. 31, 2010.

Including all employees at Flagstar Bancorp, headcount closed out 2011 at 3,136 people, down from 3,299 as of Sept. 30 and 3,279 as of the end of 2010.

Flagstar operated 27 home loan centers in 13 states as of the end of last year, down from 29 centers as of Sept. 30 but the same as a year earlier.

Following the sale 22 Indiana branches to First Financial Bank, N.A., and the sale of 27 Georgia branches to PNC Bank, N.A., the company branch count finished last year at 113, down from 162 branches as of the end of the third quarter and as of the end of 2010.

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