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HomeStreet Bank plans to sell retail mortgage business


Citing “persistent challenges facing the mortgage banking industry,” HomeStreet Bank announced on Friday that it is planning to sell off its entire retail mortgage operation.

HomeStreet“The Board of Directors made the difficult decision to explore the potential sale of our mortgage banking business after extensive deliberations, ultimately concluding that this potential change would be in the best long-term interests of the Company and its shareholders,” Mark K. Mason, chairman, president and CEO of Homestreet said in a news release. “We are considering a sale at this time after having taken substantial steps in the last two years to improve the profitability of our mortgage banking business while expecting a near term recovery in industry volume and profitability.”

Seattle-based HomeStreet has been under pressure to do something about its flagging mortgage business for a number of months. This past June, activist investor Blue Lion Capital pushed the bank’s board to either shrink its mortgage business or sell it. Difficulties in the mortgage segment had already led HomeStreet to lay off 37 employees in April 2018, and it followed Blue Lion’s demand by slashing another 127 personnel this past July.

Apparently, the cost-cutting moves weren’t enough. HomeStreet will still offer mortgages “but the scale of this business line will be substantially smaller,” Mason said.

Specifically, HomeStreet pointed to reduced demand for refinances, due to increasing interest rates, and higher home prices as having negative impacts on its origination volumes. Meanwhile, stricter regulations and higher loan-officer compensation costs have led to increased origination costs, leading to HomeStreet’s difficult but seemingly necessary choice.

There are 72 home-loan centers in California, Hawaii, Idaho, Oregon and Washington that are impacted by the sale. 

A buyer has yet to be identified, but the bank said it is actively looking for one. It also is actively shopping the majority of its single-family mortgage servicing rights that are related to loans originated by the affected loan centers.


 

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