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.

Steve Murray on the importance of protecting property rights

In this episode, Steve Murray, RealTrends advisor and industry stalwart, discusses some of the issues facing private property rights, including how a case in Germany could potentially affect U.S. legislation.

Lenders, it’s time to consider offering non-QM products

The non-QM market is making a comeback following a pause in 2020. As lenders rush to implement, Angel Oak is helping them adopt these new lending products.


Bank 34 abandoning mortgage lending

Plans to shutter nine loan productions offices

It’s getting harder and harder for smaller lenders to make money in the mortgage business, as independent mortgage banks and mortgage subsidiaries of chartered banks recently reported that they lost $200 per loan on every loan they originated in the fourth quarter of 2018.

And those tough economic conditions are driving lenders out of the mortgage business altogether. Earlier this week, it was Live Well Financial that announced it was terminating its mortgage origination business.

Now, for the second time in less than a week, another lender is abandoning their mortgage business as well.

Bank 34, which operates nine loan production offices in the western part of the U.S., announced this week that it is shuttering its mortgage business.

According to the bank’s filings with the Securities and Exchange Commission, Bank 34 originated $317.2 million one- to four-family mortgages in 2018. That was an increase over 2017’s total of $252.8 million in originations.

The bank keeps very few loans in its portfolio. According to the bank, it sold $305.8 million of mortgages in 2018, which generate $14.3 million in non-interest income. In 2017, the bank sold all $252.8 million of its mortgages, generating $10.4 million in non-interest income.

The bank expanded its lending operations over the last few years, and earlier this year, the bank said it expected to keep growing, but the plans have apparently changed quite quickly.

According to the bank, in 2015, it expanded its mortgage banking operation to include Maricopa County, Arizona and Albuquerque, New Mexico. Then, in 2016, Bank 34 expanded its mortgage origination footprint to include Lynnwood and Puyallup, Washington; Medford and West Linn, Oregon; Rio Rancho, New Mexico; Yuma and Tucson, Arizona (which was moved to Tubac, Arizona).

And just a few months ago, the bank said that it planned to continue growing.

“Subject to market conditions, and particularly changes in the interest rate environment, we intend to continue to grow our mortgage banking business by selectively adding experienced mortgage lending personnel to leverage our scalable business model,” the bank said in its annual report, which was filed with the SEC in February. “We believe we have managed our mortgage banking operations to provide cost- management flexibility in the event of unfavorable economic conditions or increases in market interest rates.”

But three months later, the bank is shuttering its mortgage operation, citing the unstable financial environment surrounding mortgage lending.

“On May 1, 2019, Bank 34, the wholly-owned subsidiary of Bancorp 34, Inc., took steps to exit Bank 34’s operations with respect to originating residential mortgage loans for sale into the secondary market,” the bank said in an SEC filing. “Bank 34 believes that this transaction aligns with its strategic goal of reducing its reliance on an earnings stream that can be more cyclical and volatile, while increasing its reliance on the more stable earnings from its core commercial banking business.”

According to the bank, the move will include shutting down its nine loan productions offices, which are located in El Paso, Texas; Scottsdale, Arizona; Gilbert, Arizona; Tubac, Arizona; Albuquerque, New Mexico; Medford, Oregon; West Linn, Oregon; Puyallup, Washington; and Lynnwood, Washington.

The move will lead to an unknown number of layoffs, although Bank 34 said that “another financial institution” has made employment offers to a “majority of Bank 34’s employees” who are involved in the bank’s mortgage lending operation.

The bank said that its total costs associated with exiting mortgage lending (which will include severance and termination of leases at its loan facilities) will range between $600,000 and $1.2 million.

The bank said that it expects its exit from mortgage banking to be “substantially completed” during the second quarter of 2019.

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