The latest economic and policy trends facing mortgage servicers

Join this webinar for an in-depth roundtable discussion on economic and policy trends impacting servicers as well as a look ahead at strategies servicers should employ in the next year.

2021 RealTrends Brokerage Compensation Report

For the study, RealTrends surveyed all the firms on the 2021 RealTrends 500 and Nation’s Best rankings, asking for annual compensation data for the 2020 calendar year.

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Chicago-based MB Financial Bank shuttering national mortgage origination business

Will maintain Chicago-area origination operation

Citing the “highly competitive” mortgage lending environment, Chicago-based MB Financial Bank is shuttering its national mortgage origination business.

The company announced the move in a filing with the Securities and Exchange Commission.

According to previous SEC filings, MB Financial has 49 mortgage retail offices in 16 states, in addition to its 86 Chicago-area retail banking branches.

The company said that its Chicago-area mortgage operation will remain open, while its national presence will be eliminated.

“The company plans to continue originating residential mortgage loans in the greater Chicago area and to retain its mortgage servicing asset as well as its mortgage servicing operation in Wilmington, Ohio,” the company said in its SEC filing. “In addition, the company plans to continue holding residential mortgage loans (the substantial majority of which are adjustable rate mortgages) on its balance sheet.”

The company said that it made the decision after completing an analysis of the current economic environment, as well as the “highly competitive mortgage industry, including recent very low origination margins,” along with input from the company’s shareholders.

According to MB Financial’s SEC filing, the company was trying to improve the profitability of its mortgage business by growing its retail originations, which have “historically been the most profitable and consistent part of the company’s mortgage originations.”

As evidence of that growth plan, just four months ago, MB Financial acquired some of Busey Bank’s mortgage operation.

This is what the company said in its most recent quarterly SEC filing:

On December 4, 2017, the Company closed on an agreement with Champaign, Illinois-based Busey Bank to transfer approximately 165 residential mortgage team members from Busey to MB Financial Bank and acquired certain operating leases and furniture and equipment. This acquisition adds direct origination capabilities as well as 14 retail mortgage locations across Kansas, Missouri, Nebraska, Iowa and Colorado. The added retail staff supports our strategy to grow those channels and increase our purchase share of originations.

But, things have apparently changed in the last few months.

“Based on an analysis of current and expected economic and market conditions for the foreseeable future, the company determined that it would be unable to successfully execute that strategy within a reasonable period of time,” the company said in its SEC filing.

As one might expect, MB Financial will sustain a number of financial losses as a result of the company’s decision to close its national mortgage business.

The company said that it expects to incur one-time costs of approximately $37 to $41 million during the remainder of this year, including:

  • Severance, retention, and personnel costs of $21 to $23 million
  • Occupancy and depreciation costs of $9 to $10 million
  • Goodwill costs of $3.6 million
  • Other costs of $3 to $4 million

Additionally, the company expects its quarterly net interest income from the mortgage segment to decline approximately $3.5 million (net of funding costs) by the third quarter of 2018, from $10.6 million in the fourth quarter of 2017 due to the decrease in loans held for sale.

The company also expects its quarterly mortgage origination revenue to decline approximately $16.6 million by the third quarter of 2018 from $17.6 million in the fourth quarter of 2017.

The company also said that it expects is quarterly mortgage servicing revenue to increase approximately $1.6 million by the third quarter of 2018 from $4.2 million in the fourth quarter of 2017.

The company said that it plans to stop accepting locked loans and loan applications from the national residential mortgage origination business during the second quarter of 2018.

According to a post on LinkedIn from an MB Financial employee, MB Financial will stop accepting new loan submissions on April 20 and will close and fund pipeline loans until July 6.

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