NYCB confirms cuts to retail mortgage channel after acquiring Flagstar

New York Community Bancorp, Inc. (NYCB) confirmed it’s closing 69% of the retail home lending offices outside of its branches after acquiring Michigan-based Flagstar Bank. 

“We made the strategic decision shortly after the transaction closed to swiftly restructure the business, which occurred in January,” Thomas Cangem, NYCB president and CEO, said in a statement. “Going forward, our distributed retail channel will operate as an in-branch footprint model and we will close all out-of-footprint locations, resulting in a 69% reduction in the number of retail home lending offices.”

The companies made the $2.6 billion deal public in April 2021, and the Office of the Comptroller of the Currency gave it a stamp of approval it in late October. In November, the Federal Reserve gave the deal its blessing. 

HousingWire reported on the restructuring last week, noting that the bank cut hundreds of jobs at Flagstar, according to laid off employees. 

According to Cangem, the substantial Fed policy shift last year resulted in significantly higher residential mortgage rates. It harmed the business, as the higher rates caused all mortgage activity to slow. 

“While legacy Flagstar was proactive in rightsizing its mortgage business throughout the past year, we expect the mortgage market to remain challenged,” Cangem said.   

NYCB, one of New York City’s largest multifamily lenders, announced the restructuring of the mortgage division during its fourth-quarter earnings report on Tuesday morning.

The company delivered a $172 million net income from October to December 2022, compared to $150 million in the same period of 2021. Last year, the net income was $650 million, higher than the $596 million in the previous year. 

Flagstar’s acquisition added $25.8 billion to NYCB’s assets and $17.2 billion in loans, according to Securities and Exchange Commission (SEC) filings. The acquisition also diversifies NYCB’s portfolio with warehouse lending business, commercial and industrial loans, commercial real estate loans and residential mortgage loans. 

NYCB says it was the 8th-largest bank originator of residential mortgages in 2022, with $24.2 billion in volume. In addition, it’s the 6th-largest sub-servicer of mortgage loans nationwide, servicing 1.4 million loans as of December 31, 2022. 

Before the acquisition, Flagstar was No. 19 among mortgage lenders in America. It originated $27 billion in mortgages in 2022, a decline of 38% year-over-year, according to Inside Mortgage Finance.  

The retail channel was responsible for $6 billion from January to September 2022, a 54% decline year over year, per IMF data. The wholesale channel reached $17 billion, down 35% in the same period. 

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