Small Banks Get One More Place to Farm Out Mortgage Lending
FBC Mortgage, a unit of the investment bank Sterne Agee Group, is seeking partnerships with community banks that want to farm out their single-family mortgage originations.
The Orlando lender has entered into mortgage referral arrangements with four community banks in Florida, most recently HomeBanc in Tampa. As part of the HomeBanc deal, FBC hired the bank's mortgage personnel, who operated in a distinct unit.
"We took their [mortgage banking] people and give them a home to take care of their clients and customers," says Joe Nunziata, a co-chief executive at FBC. In other cases, the banks kept their loan officers.
Many community banks lack the infrastructure to comply with the qualified mortgage regulations and Consumer Financial Protection Bureau audits, or sufficient loan volume to cover the costs, Nunziata says.
In addition, commercial real estate lending is coming back and it is more profitable than residential lending, where margins are compressed and origination volumes are low.
"I think a lot of banks are starting to focus more on the commercial real estate market right now," Nunziata says. "They donít have the issues on the commercial side as they do with residential."
Other mortgage specialists anticipate increased demand for such services from small depositories. Last month, for example, Freedom Mortgage in Mount Laurel, N.J., created a division that offers mortgage outsourcing for small to midsize financial institutions.
Sterne Agree has investment banking relationships with hundreds of community banks. It also has a correspondent mortgage lending unit that works with 50 community banks.
The HomeBanc referral partnership could result in 2,000 single-family originations this year. The community bank will not maintain an ownership interest in the loans. FBC will service them and retain most of the servicing rights.
"We try to retain as much of the servicing as possible," Nunziata says, and "treat their customers as good as we can treat them."
HomeBanc did not respond to requests for comment.
FBC Mortgage is a Fannie Mae and Freddie Mac seller/servicer and a Ginnie Mae issuer.