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Correspondent Drives Up Flagstar’s Home Lending

Acceleration in residential loan originations at Flagstar Bancorp Inc. was driven by its correspondent business. Elevated activity is likely to continue.

Prior to income taxes, Flagstar earned $87 million during the three months that ended on Sept. 30 of this year, climbing from $69 million the prior quarter.

That data, along with other operational and financial metrics, were revealed Tuesday by the Troy, Michigan-based firm in its third-quarter earnings report.

Income also improved from $71 million in the same three-month period last year.

Residential first- and second-lien loans originated during the third-quarter 2016 came to $9.198 billion. Business accelerated from $8.330 billion three months earlier and $7.876 billion one year earlier.

From Jan. 1, 2016, through Sept. 30, mortgage production amounted to $23.880 billion.

The most-recent quarter’s closings consisted of $5.1 billion in conventional loans, $2.3 billion in government mortgages and $1.8 billion in jumbo mortgages.

Retail originations during the latest period were $0.6 billion, while wholesale lending made up $1.6 billion and correspondent acquisitions accounted for $7.0 billion. Quarter-over-quarter growth was concentrated in the correspondent channel, which saw volume climb $0.8 billion from the second quarter.

Third-quarter 2016 refinance share was
57.6 percent, widening from 54.2 percent the prior period.

New business is likely continuing at the same pace during the current quarter based on fallout-adjusted mortgage rate lock commitments, which inched up to $8.3 billion in the third quarter from $8.1 in the previous period.

The total mortgage servicing portfolio concluded the latest quarter at 167,763 loans for $37.017 billion. Flagstar serviced 163,786 loans for $35.882 billion as of June 30, 2016, and 148,466 loans for $32.013 billion as of Sept. 30, 2015.

Included in the latest servicing numbers were 138,711 loans for $31.372 billion serviced
for others.

An additional 198,400 in mortgages for $38.801 billion were subserviced as of Sept. 30, 2016.

On Flagstar’s mortgage servicing rights, the capitalized rate was trimmed to 0.96 percent from 0.99 percent as of the midpoint of this year. The service fee
rose to 0.279 percent from 0.282 percent.

Residential assets on Flagstar’s balance sheet concluded the third-quarter 2016 at $2.589 billion. Mortgage investments grew from $2.548 billion the prior quarter but sank from $3.271 billion a year prior.

Last months residential assets included $2.136 billion in first mortgages, $0.127 billion in second mortgages and $0.326 billion in home-equity lines of credit.

Flagstar’s representation-and-warranty reserve was reduced to $32 million from $36 million as of June 30, 2016.
The repurchase pipeline held steady at $11 million.

There were 2,881 full-time equivalent employees on Flagstar’s payroll as of the end of last month. Staffing was trimmed from 2,894 the previous quarter but has expanded from 2,677 at the same point last year.

The retail mortgage branch network grew to 31 from 29 as of mid-2016.

Bank-branch count finished the most-recent period at 99, the same as at the end of June.

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