Flagstar Bancorp in Troy, Mich., announced Thursday it is laying off approximately 600 employees as part of a cost cutting measure.
The $11.8 billion-asset company said in a press release that the changes will aid Flagstar in aligning its infrastructure with the current business environment, specifically the status of the mortgage origination market. The cuts represent about 17.5% of the company's workforce. At the end of the third quarter, the company reported 3,428 full-time salaried employees.
Flagstar hopes the cuts will generate annualized cost savings of approximately $40 million when fully effective by the end of the first quarter. However, the company is also expecting to book a $5.2 million charge related to the employee cuts.
"The decision to downsize our workforce was not made lightly," Flagstar president and chief executive Alessandro DiNello said in the release. "But is a necessary step on the path to achieving the Company's long-term goals."
In recent years, Flagstar has worked diligently to rid itself of past litigation and nonperforming loans tied to the financial crisis.
The decision comes after a 2013 where, among other loan-related settlements, Flagstar began by making somewhat unexpected changes at the chief executive level and ended with a settlement with Freddie Mac. In an attempt to reduce the company's risk profile, in December Flagstar reached an agreement with Freddie Mac to pay $8.9 million to settle loans originated and sold to the government-sponsored entity from 2000 to 2008.
Flagstar agreed with Fannie Mae in November to pay $93.5 million to cover mortgage repurchase obligations on loans that went bad. Also in 2013, Flagstar agreed to pay $105 million to Assured Guaranty, and $110 million to MBIA Insurance Corp.
In May, former Flagstar chief executive Michael Tierney stepped down after a mere eight months, as DiNello was immediately promoted.