Citizens Bank to exit the wholesale channel

Bank said it will continue to service all existing mortgages according to its current processes

Providence, Rhode Island-based Citizens Bank, the 28th largest U.S. mortgage lender, has decided to close its wholesale channel, which produced over $1 billion in volume in the first half of this year. 

“After careful consideration, Citizens has made the difficult decision today to discontinue originations in the mortgage wholesale channel,” Chace Gundlach, senior vice president and national sales director, said in letters sent to broker partners on Tuesday and reviewed by HousingWire

A spokesperson for Citizens did not immediately reply to a request for comments.

Citizens was among the few large depository banks operating in retail, wholesale and correspondent in the mortgage space. In 2018, it acquired Franklin American Mortgage.

In an interview with HousingWire in December 2022, former head of mortgages Sonu Mittal, who transitioned to an executive position at Freddie Mac this year, explained that the retail channel served the bank’s customers; the correspondent channel focused on building a healthy mortgage servicing rights portfolio; and the bank wanted to be exposed to wholesale because it represented about 20% of the market. 

However, shrinking mortgage volume caused by high mortgage rates and fiercer competition have challenged the bank’s strategy. 

In the first half of the year, Citizens originated $2.4 billion in mortgages through the retail channel, a 60.3% decline year over year, according to Inside Mortgage Finance (IMF) estimates. Correspondent channel volume came in at $2.5 billion, down 42.6% in the period. 

Meanwhile, wholesale production was smaller, at $1.1 billion from January to June, down 65.4% year over year. It was enough to make it the 10th largest wholesale lender in the country, per IMF data. 

In a letter sent to a broker parter that HousingWire reviewed, Citizens said the contract has been terminated according to the terms of the agreement after the close of business on Wednesday. Another letter reviewed mentioned the date of Dec. 6.

All broker submissions received after these dates will not be processed, the letters state. The bank added that it will continue to service all existing mortgages in accordance with its existing processes.

Kevin Leibowitz, CEO of Grayton Mortgage, said his brokerage had signed up with Citizens in anticipation of them opening up in New York.

“I was looking forward to have a new outlet for jumbos and ARMs [adjustable-rate mortgages], but that didn’t come to fruition,” Leibowitz said.

A Citizens employee told HousingWire that leadership announced the shutdown of the wholesale division during a meeting on Tuesday morning. The meeting lasted a few minutes and there was no room for questions, the source said.

“I didn’t see it coming because we were busy for months,” said the employee, who spoke on the condition of anonymity due to fear of retaliation.

The information provided to employees is that the exit will happen at the beginning of 2024, when they will be laid off, the same employee said.

Citizens joined a group of companies that have exited the wholesale space over the last two years, including loanDepotMountain West FinancialAmeriSave and Point Mortgage Corp. Home Point Capital, a pure wholesale lender, shut down its operations. 

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