Flagstar Bank trims retail mortgage, cuts jobs in wake of merger

Nearly two months after merging with New York Community Bancorp, Inc., Flagstar Bank has reduced its retail mortgage business and cut jobs as it restructures the company.

In a fourth quarter and year-end earnings report released Tuesday, NYCB President and CEO Tom Cangemi said the substantial Federal Reserve policy shift in 2022 resulted in significantly higher residential mortgage rates that had a negative impact on the business, slowing mortgage activity.

Cangemi said that although Flagstar was proactive in rightsizing its mortgage business in 2022, NYCB expects the mortgage market to remain challenged this year. New York Community Bank acquired Troy-based Flagstar in December.

"Therefore, we made the strategic decision shortly after the transaction closed to swiftly restructure the business, which occurred in January," Cangemi said. "Going forward, our distributed retail channel will operate as an in-branch footprint model and we will close all out of footprint locations, resulting in a 69% reduction in the number of retail home lending offices.

"These decisions are among the most difficult decisions our leadership team has to make; however, they are necessary to ensure the long-term success of our mortgage business," he said. "We anticipate that these actions will optimize our mortgage business and improve our profitability during the current downturn, while still allowing us to participate in the upside in the event the interest rate environment becomes more favorable."

During a Tuesday morning earnings conference call, Cangemi said that the staff headcount for mortgage origination is expected to drop to less than 800 full-time employees compared to a high of 2,100 full-time employees in 2021.

It is unclear how many local jobs would be impacted. A Flagstar spokeswoman declined to comment Tuesday afternoon.

When plans for the merger were announced in 2021 Cangemi said it would allow each of the companies to continue the transformation to a full-service commercial bank by broadening product offerings while expanding its geographic reach with no branch overlap. At the time, the country was experiencing historically low interest rates. Since early 2022, companies such as Detroit-based Rocket Mortgage have trimmed their workforces as higher interest rates have slowed the demand for home mortgages.

As for income, New York Community Bank's net income totaled $650 million, up from $596 million for the 12 months ending Dec. 31, according to the report. As of Dec. 31, the allowance for credit losses was $393 million, up $175 million compared to $218 million as of Sept. 30. Most of the losses were due to the initial provision for credit losses under current expected credit losses, or CECL.

cwilliams@detroitnews.com

Twitter: @CWilliams_DN