A number of banks are going against expectations and rather than consolidating their mortgage lending operations as volume continues to drop, they are expanding them.
More typical among banks is the action being taken by Middleburg (Va.) Financial Corp, the majority owner of Southern Trust Mortgage. In response to the decline in loan production, Middleburg plans a continued reduction in personnel and in expenses throughout the mortgage company, it said in its 4Q13 earnings press release.
On the other hand, Republic Bancorp Inc., Louisville, Ky., plans to start a correspondent lending channel in this quarter. It will supplement the existing bank branch network as a source of new loan growth as well as be a partner to Republic's warehouse lending operations.
Fidelity Homestead Savings Bank, a state-chartered mutual institution based in New Orleans, on Jan. 14 acquired NOLA Lending Group, Mandeville, La. NOLA will become the mortgage banking division for Fidelity Homestead, says the bank's president and CEO Alton McRee.
Fidelity Homestead is a 106-year-old institution, and except for a brief period between 2007 and 2011, has been strictly a portfolio lender. Recently, the bank has been adding more commercial banking products. Even with this shift, it wants to continue its legacy of being a mortgage lender, McRee notes.
NOLA, on the other hand, is a correspondent originator with offices, not just in the Fidelity Homestead bank footprint, but in other parts of Louisiana, as well as Alabama, Mississippi, Tennessee and the Florida Panhandle.
The additional mortgage banking business will allow Fidelity Southern to grow its non-interest income, as well as help the company to manage its interest rate risk, he says.
Then there is the market opportunity. Banks and other originators are cutting back on their mortgage lending because of the regulatory environment and because of rising interest rates. Many of these shops have built their business on refinancings.
Their cutting back opens a door for Fidelity Homestead to grow its business and fill the void, he says. The combination will have close to 400 employees. The bank has 18 branches and $826 million in assets.
NOLA was founded in 2002 and has built a purchase business and a construction lending base to support itself, McRee points out. In the past two years, it has done nearly $1.3 billion in originations.
Approximately two-thirds of NOLA's production is purchase and construction loans and there is a plan to replace the declining refinance business.
Adding a secondary market lender creates the business diversity that Fidelity Homestead desires.
NOLA has been selling all of its production servicing-released. Fidelity Homestead does retain the servicing on the bulk of the loans it originates; that includes loans it did originate when it was a secondary market lender.
NOLA's managing partners Richard LaNasa and Ashton Noel will be executive vice presidents in charge of the NOLA Lending Division.
Rockville Bank, Glastonbury, Conn., is opening loan production offices to service consumers in the greater Boston area as well as in Fairfield County, Conn. (Glastonbury is near Hartford, while Fairfield County is along the border with New York.)
The bank's overall growth plans include expanding its mortgage banking business, which has already added six loan officers (bringing the total to 23) over the past few months.
In November, Rockville Financial Inc., agreed to a merger of equals with United Financial Bancorp Inc., West Springfield, Mass. (which is north of Hartford). That deal is pending regulatory approval.
Proper recruiting is important when it comes to expanding in mortgages, and Rockville is looking for loan officers who fit its culture, says president and CEO William Crawford IV.
The new offices put the company in a stronger position to capture market share from its competition in these markets, he points out.
Heading up the Fairfield office is Joe Antonios, the former president and CEO of Metro Mortgage Corp. and most recently senior vice president of residential lending of the Connecticut region for Guaranteed Rate. Joining him is Jarret Coleman, who in the past three years has worked at both Mortgage Master Inc. and Guaranteed Rate. Coleman finished 2012 as the 140th most prolific originator, according to the Origination News Top 200 list, with volume that year of $71 million.
The Sagamore Beach, Mass., office will be headed by Jim Picciotto, the former president and CEO of Patriot Funding and most recently with EverBank.
Leonard Tocci, also most recently with Guaranteed Rate, will be a loan officer in this location.