Flagstar Bancorp, the holding company for Flagstar Bank, reported its fourth-quarter 2015 earnings on Tuesday, revealing that while it witnessed a good year, it struggled to overcome the impact of the Consumer Financial Protection Bureau’s TILA-RESPA Integrated Disclosures rule that went into effect in October.
"As we expected, our mortgage revenues were seasonally lower. We were also impacted by TRID,” said Alessandro P. DiNello, president and CEO of Flagstar Bancorp.
“The company took a careful approach with the implementation of TRID, taking greater control in creating and delivering disclosure documents. Given our predominantly third party business model, we experienced more of an impact than other bank originators. We are taking steps to address this issue while building market share in our distributed and direct-to-consumer retail channels," said DiNello.
Fourth-quarter noninterest income fell by $31 million, or 24%, to $97 million, as compared to $128 million for the third quarter 2015. The fourth quarter 2015 results were led by lower net gain on loan sales, a decline in loan fees and charges and a reduced net return on the mortgage servicing asset.
Fourth-quarter net gain on loan sales decreased $22 million, or 32 percent, to $46 million, as compared to $68 million for the third quarter 2015, due to seasonal factors and the impact of TRID. In the fourth quarter 2015, fallout-adjusted locks decreased 23 percent to $5.0 billion.
In addition, the net gain on loan sale margin fell 13 basis points to 0.92% for the fourth quarter 2015, as compared to 1.05% for the third quarter 2015, led by price competition.
Loan fees and charges fell to $14 million for the fourth quarter 2015, as compared to $17 million in the third quarter 2015. The decrease primarily reflected lower mortgage closings.
Outside of TRID, DiNello said, "Flagstar had a very good year in 2015, posting the highest level of pre-tax income since 2003. We made continued progress in the fourth quarter, generating higher net interest income through solid growth in earning assets and maintaining a clean credit profile."
Flagstarreported fourth quarter 2015 net income of $33 million, or $0.44 per diluted share, as compared to $47 million in the third quarter 2015, or $0.69 per diluted share, and net income of $11 million in the fourth quarter 2014, or $0.07 per diluted share.
The full year 2015 net income was $158 million, or $2.24 per diluted share, as compared to a full year 2014 net loss of $70 million, or $1.72 loss per diluted share.
JPMorgan Chase also weighed in on the implementation of TRID during its fourth-quarter conference, shedding light on where big banks stand on the issue.
During that call, Marianne Lake, chief financial officer of JPMorgan Chase, was asked if TRID had any impact on operations in the mortgage bank. Check here for a full earnings call transcript on Seeking Alpha.
Lake started by saying, “So, yes, obviously it was [a factor].”
“I would say in the quarter we did as part of being cautious about making sure that we're complying. Our cycle times were a couple days, few days worsened,” she said.