Flagstar Posts Huge Loss, Offers Hints at Its Future

Flagstar Bancorp, the largest thrift player in mortgages, posted a $299 million loss in the third quarter, but vowed to continue investing in what it called its "position as one of the leading residential mortgage originators in the country." Its new CEO Joseph Campanelli added, "We anticipate a significant level of industry consolidation and want to be active in that process. But in the near term, we will have to bring expenses into better alignment and make prudent operating decisions as we seek to broaden our earnings streams beyond our traditional mortgage activity." Its third quarter loss was almost triple the loss it suffered in the same period a year ago. The company stressed that its thrift unit remained "well-capitalized" for regulatory purposes, with capital ratios of 6.39% for Tier 1 capital. According to its earnings statement, the Michigan-based Flagstar funded $6.6 billion in residential loans during the quarter, a slight drop from the same period last year, but a 29% decline from the second quarter. Despite the loss, there was some good news in the numbers: its gain-on-sale of loans grew to 137 basis points compared to just 33 bps a year ago. At the end of September Flagstar serviced $53.2 billion in loans, which paid a weighted average service fee of 32.6 basis points. Non-performing residential real estate loans grew to $606 million at the end of the third quarter, up from $588 million at the end of the second quarter. A year ago it held $305 million of delinquent loans. Its non-performing commercial real estate loans climbed to $420 million. According to the Quarterly Data Report, Flagstar is the nation's 11th largest residential funder and ranks 18th among servicers.