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Home Lending Up from Prior Qtr, Yr at Flagstar

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Flagstar Bancorp Inc. accomplished what none of its peers thus far have; it generated a quarter-over-quarter and year-over-year increase in mortgage originations. Mortgage assets also expanded.

Before income taxes, the Troy, Michigan-based bank-holding company earned $51 million during the three months ended Dec. 31, 2017, according to its fourth-quarter earnings report.

Income improved from $42 million during the final-three months of 2016. But there was a decline in earnings compared to the $60 million earned in the preceding three months.

After-tax income swung to a $45 million loss as a result of an $80 million charge for income tax provisions due to a “revaluation of the company’s net deferred tax asset at a lower statutory rate as a result of the Tax Cuts and Jobs Act.”

“The continued growth of our banking and servicing businesses has reduced the impact of the swings in the origination business on our earnings, thus producing more predictable and consistent results,” Flagstar President and Chief Executive Officer
Alessandro DiNello stated in the report.

The report indicated that mortgage revenues fell $7 million.

Residential loans originated during the fourth-quarter 2017 came to $9.860 billion — including $9.749 billion in first mortgages and $0.111 billion in home-equity production. Business improved from $9.666 billion three months earlier and $8.619 billion one year earlier.

Annual production climbed to $34.744 billion from $32.612 billion in 2016.

Flagstar’s quarter-over-quarter improvement in production, as well as its year-over-year gain in quarterly and annual originations, contrast that of the 10 other lenders that Mortgage Daily has so far covered fourth-quarter originations for. Only one reported a year-over-year increase in annual lending, three reported quarter-over-quarter improvements and just one experienced a year-over-year rise in quarterly lending. None of the other 10 firms saw increases for all three comparisons.

“Our mortgage acquisitions earlier in 2017 continued to pay dividends,” DiNello explained.

Retail originations accounted for $1.2 billion of fourth-quarter 2017 first-mortgage production, while wholesale lending made up $1.2 billion and correspondent acquisitions represented $7.3 billion.

Refinance share widened to 45.4 percent from the third quarter’s
42.7 percent.

Mortgage rate lock commitments
dipped to $9.5 billion  from $9.9 billion as of Sept. 30, suggesting the current quarter’s originations are similar to fourth-quarter activity.

Flagstar reported more than a thousand correspondent clients, with the top-10 clients accounting for 12 percent of overall volume. Over 700 mortgage broker relationships were in place, with the the top-10 brokers representing 17 percent of wholesale business.

Flagstar serviced 132,630 residential loans with a collective unpaid principal balance of $32.086 billion as of Dec. 31, 2017. The portfolio expanded from 118,350 loans for $28.718 billion three months prior but was cut from
162,514 loans for $37.023 billion one year prior.

Most recently, third-party servicing accounted for $25.073 billion of the servicing portfolio. The fourth-quarter 2017 weighted-average servicing fee was 29 basis points, while the capitalized value of mortgage servicing rights was 1.16 percent.

Another 309,814 loans for $65.864 billion were subserviced as of the latest date.

Residential assets on Flagstar’s balance sheet ended last month at $3.418 billion, including $2.754 billion in first mortgages and $0.664 billion in home-equity assets. The total increased from $3.161 billion as of the end of the third quarter and $2.770 billion as of the end of 2016.

Commercial real estate loans owned by Flagstar grew to $1.932 billion from $1.760 billion and were much greater than the $1.261 billion owned as of the end of 2016.

Warehouse lending
assets on the balance sheet were trimmed to $1.142 billion from $1.159 billion and reduced from $1.237 billion as of Dec. 31, 2016. The report indicated Flagstar was the ninth-biggest warehouse lender as of the third quarter.

Staffing grew to 3,525 full-time employees from 3,495 and jumped from 2,886 as of year-end 2016.

Flagstar operated 89 retail mortgage locations, down six offices from the end of September.

There were 99 consumer banking branches,
the same as at the end of the preceding quarter.

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