Lending The Ticker

BankUnited execs: Our struggle with mortgage originations

Home lending 'marred by thin margins and volatility'

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BankUnited executives divulged more information on the bank’s decision to stop originating mortgages during its fourth-quarter conference call Thursday morning, an article in the South Florida Business Journal reported.

The bank recently announced it would no longer offer retail residential mortgage loans to consumers since new residential mortgages weren’t generating enough business.

Reporter Nina Lincoff said:

"We actually didn’t put this out as a press release, but we did make a decision on residential mortgage retail origination,” said Rajinder Singh, chief operating officer of the bank.

The mortgage origination business was the smallest part of BankUnited’s mortgage banking business, averaging about $20 million in originations a month. But while the business was growing, it was marred by thin margins and volatility, Singh said.

“When we took a look at this business, among other businesses, we realized it was the lowest margin business that we had…we decided we should exit this business,” Singh said. “This business requires a lot of scale…it was not very strategic for us.”

According to the bank’s fourth-quarter earnings, BankUnited recorded net income of $56.3 million, or $0.52 per diluted share, compared to $46.8 million, or $0.45 per diluted share, for the quarter ended Dec. 31, 2014.

The bank remained positive on other part of its business. “Despite the challenging banking environment, BankUnited had an outstanding quarter with respect to earnings and growth in loans and deposits,” said John Kanas, chairman, president and CEO.

BankUnited isn’t the only institution pulling back from the retail business due to market condition. This news closely follows Walter Investment Management’s announcement that Ditech Financial exited its distributed retail lending channel due to changes in the market.

"Throughout 2015 we moderated our investment in the distributed retail channel given current and expected market conditions, as well as recent regulatory considerations, and subsequently made the decision to exit the channel,” said Denmar Dixon, Walter Investment's vice chairman, CEO and president.

Instead, Ditech choose to go a different route and focus its efforts on growing its correspondent lending division services thanks to strong growth in the space over the last 18 months.

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