A decision by Flagstar Bancorp Inc. to exit its distressed servicing business is expected to result in hundreds of jobs cuts.
The Troy, Mich.-based bank-holding company said Wednesday that it has decided to outsource its non-core default servicing operation.
Flagstar said that the business accounts for less than 4 percent of its overall servicing book — which was reported at $74 billion as of March 31.
Significant cost savings is expected from the move.
The company that will take over the servicing from Flagstar is “a recognized servicer that specializes in this area.”
Among the most well-known distressed servicers is Ocwen Financial Corp.
Flagstar expects to complete the transition by September.
“This is part of Flagstar’s ongoing strategy to deliver improving performance while maintaining its commitment to its national mortgage business and community banking in Michigan,” the announcement said. “Part of this strategy is to diversify earnings through the growth of Flagstar’s performing mortgage servicing franchise.”
Flagstar President and Chief Executive Officer Sandro DiNello explained in the news release that the move will better position the firm to enhance profitability, improve long-term growth with servicing and better serve clients.
Around 300 employees in the non-performing mortgage servicing business are expected to be impacted.
But the parent of Flagstar Bank noted that it will attempt to redeploy as many employees as possible to other parts of the company.
“Flagstar is committed to providing transition support to all employees impacted by this arrangement,” the statement said.
Flagstar employed 3,778 people as of March 31 across all businesses, according its first-quarter earnings report.
