New York Community Bank (NYCB) announced in its 2022 fourth quarter earnings report that it would be closing a majority of its retail mortgage business as part of rightsizing processes following the finalization of its acquisition of Flagstar Bank in December 2022.
NYCB CEO Thomas Cangemi stated this was an overdue adjustment to the residential mortgage market slowing following shifts in Federal Reserve policy toward interest rates in early 2022.
“The substantial Fed policy shift last year resulted in significantly higher residential mortgage rates,” Cangemi wrote in the bank’s earnings report. “This had a negative impact on the business, as all mortgage activity slowed. While legacy Flagstar was proactive in rightsizing its mortgage business throughout the past year, we expect the mortgage market to remain challenged. Therefore, we made the strategic decision shortly after the transaction closed to swiftly restructure the business, which occurred in January.”
The bank reported that a reduction in coverage by 69 percent was intended to better reflect demand and align to where the bank’s brand strengths and familiarity lie.
“We expect that these actions will optimize our mortgage business and improve profitability during the current mortgage down cycle, while still allowing us to participate in the upside once the interest rate cycle becomes favorable,” the earnings report read. “This allows us to maintain a retail presence within our nine-state footprint, leverages our marketing and branding spend, and reduces risk. More importantly, it leaves our position within the mortgage industry intact. We remain one of the largest bank originators, the sixth-largest sub-servicer in the country, and the second-largest warehouse lender. Moreover, it allows us to continue to lend in all six channels and maintain our commitment to the correspondent and broker business.”
Cangemi regarded the reductions as being “among the most difficult decisions our leadership team has to make,” adding that the move would leave the bank’s position within the mortgage industry “intact.”