MReport August 2018

TheMReport — News and strategies for the evolving mortgage marketplace.

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42 | TH E M R EP O RT O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T ORIGINATION LOCAL EDITION Citizens Bank Expands into Correspondent & Wholesale Lending Through the acquisition of Franklin American Mortgage Company, Citizens is tripling its off-balance sheet mortgage-servicing portfo- lio, more than doubling its origina- tion platform, and diversifying its lending opportunities. RHODE ISLAND // Rhode Island- based Citizens Bank acquired Franklin American Mortgage Company, a Franklin, Tennessee- based private national mortgage servicing and origination nonbank mortgage company. Franklin American Mortgage managed a $41.4 billion mortgage-servicing portfolio and generated approxi- mately $13.7 billion in annualized originations for the first quarter 2018, nearly 100 percent of which was conforming. "This transaction takes our mortgage business to the next lev- el, expanding our reach and add- ing immediate scale in servicing, as well as innovative correspondent and wholesale solutions," said Brad Conner, Vice-Chairman and Head of Consumer Banking at Citizens. "Franklin American Mortgage's strong history of excellence in cus- tomer service is a great cultural fit with our organization and we are excited to welcome a new group of colleagues to Citizens." "We view this transaction as an opportunity to add scale and capital to the outstanding platform and customer-centric culture that our employees have created," said Dan Crockett, Owner, President, and CEO of Franklin American Mortgage. "Citizens shares our deep and enduring focus on deliv- ering for customers, as well as our strong commitment to colleagues and communities, which Franklin American Mortgage employees have long embraced. Together, we'll be able to increase our positive impact on customers and grow the business platforms that are a great source of pride for us." In a statement in late May, Citizens Bank said the deal will triple the size of its off-balance sheet mortgage-servicing port- folio and more than double its origination platform. It will also significantly diversify the bank's origination capabilities with the addition of correspondent and wholesale channels. "We have a little over $30 bil- lion of service portfolio at present and with Franklin's additional portfolio we will be close to $80 billion in serviced mortgages, which also puts us among the top 15 originators in the U.S.," Eric Schuppenhauer, President of Home Mortgage, Citizens Bank told MReport. Through this deal, the bank plans to add approximately 200,000 servicing households along with more than 600 correspondent relationships and 1,000 wholesale- broker relationships. The acquisition will also help Citizens to improve its mix of confirming originations from 45 percent to around 85 percent with approximately 70 per- cent of combined originations by purchase volume. Most importantly, the acquisition will create a strong correspondent and wholesale lend- ing arm for the bank, which has traditionally been on the retail side of the mortgage business. "Franklin American has built an enviable correspondent and wholesale operation," said Schuppenhauer, who will lead the combined business. "We will be operating their third-party origina- tion (TPO) business as a division of Citizens Bank and by providing our cost of funds and capital, we will be growing into that busi- ness first. Franklin American has a smaller retail component and we'll combine our forces on the retail side to bring our product and pricing capabilities to Franklin American's retail business." Following the completion of the transaction, Scott Tansil, CFO and COO of Franklin American Mortgage, will lead the acquired correspondent and wholesale origi- nation businesses headquartered in Franklin, Tennessee. The bank will also add 900 people from Franklin American by virtue of this deal to its existing team. "The addition of Franklin American's team would take the size of the mortgage lending team at Citizens Bank to around 2,000 to 2,500 people," Schuppenhauer said. In a statement, Citizens said the bank will maintain a significant presence in Tennessee and Texas. Dan Crockett will remain involved in the business in an advisory role with Citizens Home Mortgage. Flagstar Expands Footprint in the Midwest The Michigan-based bank announced its fourth acquisition in the past 15 months, this one covering 52 Wells Fargo branch locations in the Midwest. MICHIGAN // Flagstar Bank, a Michigan-based mid-size bank and national mortgage lender, announced in June that it will ac- quire 52 Wells Fargo Bank branch locations, spread throughout states including Indiana, Michigan, Wisconsin, and Ohio. This acquisition will add $2.3 bil- lion in deposits and $130 million in loans, more than doubling Flagstar's customer base, according to the bank's statement. At closing, Flagstar expects to have 151 branches in the Midwest and eight in California. According to the bank's state- ment, "Flagstar Bank intends to keep all Wells Fargo bank branch- es open and will welcome the almost 500 Wells Fargo employees at the acquired locations into the nationwide Flagstar Bank team of 3,600+ employees." "We're excited to welcome the Wells Fargo employees and customers to Flagstar Bank," said Alessandro DiNello, President and CEO of Flagstar Bancorp, Inc. "Wells Fargo's primary goal throughout the negotiation of this transaction has been to make sure its customers and employees experience a seamless transition to Flagstar, and we will ensure that happens. We are confident custom- ers will like Flagstar's big-bank line-up of quality products and ser- vices delivered with the high-touch personal service of a community bank. Flagstar has a long tradition of supporting its communities and fully expects to continue its com- mitment to good corporate citizen- ship and community reinvestment in our expanded market area." Flagstar clarified that Wells Fargo credit cards and residential mortgage loans will not transfer as part of the deal. Per the terms of the acquisi- tion, Wells Fargo bank branches in Fort Wayne, Indiana; South Bend, Indiana; the upper peninsula of Michigan; and northern Wisconsin will be rebranded. Here's how those 52 Wells Fargo branch locations break down: 33 are in Indiana (26 in Fort Wayne), 14 are in the upper peninsula of Michigan, four are in Wisconsin, and one is in Ohio. The acquired branches should complete their official transi- tion sometime during Q 4 2018, "pending regulatory approval and customary closing conditions." "Being able to increase our presence in the Midwest market—a geography we know well and find very attractive—is a terrific oppor- tunity for us," DiNello said. "This transaction significantly expands our banking footprint, more than doubling our customer base. We're also excited about the opportunity to meaningfully transform the bank's balance sheet, while benefit- ing from funding that's both more efficient and less sensitive to rising interest rates. This acquisition strengthens our funding platform and enhances franchise value." According to the bank's media statement, Flagstar is the third- largest savings bank in the country and the fifth-largest bank mortgage originator, servicing the mortgages of some 470,000 homebuyers. The bank has also been expanding ag- gressively in the past year, having completed three other acquisitions over the course of the past 15 months. Susan Bergesen, Flagstar's spokesperson told MReport the acquisition will "expand core de- posits that we can use to support our growth," as well as allowing the bank to "craft solutions for nearly 200,000 new customers in the Midwest region, expanding our brand and affording us additional opportunities." LOCAL EDITION ORIGINATION

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