New York Community Bank is closing 69% of Flagstar’s retail home-lending offices and shifting to a branch-only model for that sector, the bank said Tuesday in a fourth-quarter earnings report.
The move lends credence to reports by HousingWire and the Detroit Free Press that hundreds of Flagstar’s mortgage employees were laid off with “no warning” last week.
NYCB’s $2.6 billion merger with Flagstar closed Dec. 1. Alessandro DiNello — Flagstar's outgoing CEO, who now serves as a nonexecutive chairman on NYCB’s board — told the Free Press at the time that no branch closures or "notable reduction[s] in force" were planned in connection with the merger.
The precise number of layoffs is unclear, but Flagstar’s mortgage origination-related workforce stands at 800, according to American Banker. That’s down from 2,100 in 2021.
Flagstar cut its mortgage staff by 20%, or 420 people, early last year, when business volume began falling, the Free Press reported. It cut another 7% at the end of the third quarter, according to American Banker.
"They've been cutting and cutting and cutting [but] at the end of the day, we … wanted to make sure that this business is not losing any money," NYCB CEO Thomas Cangemi said, according to American Banker. "The goal here was not to bleed.”
The cuts mean the bank presumably will no longer offer new mortgage lending outside its nine-state branch footprint. Flagstar’s website lists 94 home loan centers — some of which are in states such as Massachusetts, Connecticut, North Carolina, Illinois, Colorado and Washington — that have no Flagstar or NYCB branches.
In NYCB’s earnings report, Cangemi called the reduction “among the most difficult decisions our leadership team has to make,” but added the move would leave the bank’s “position within the mortgage industry intact.”
NYCB is hardly the first bank to downsize in home lending as rising interest rates curbed consumer demand in the sector. Wells Fargo this month said it would streamline its mortgage business to focus on existing customers and nonwhite communities. The bank has initiated several rounds of layoffs since April. JPMorgan Chase and Citi have launched job cuts of their own.
NYCB executives said Tuesday the bank expects to incur $12 million to $13 million in one-time restructuring costs — mostly in severance pay.
The bank expects to realize $125 million in cost savings from the Flagstar merger, not counting mortgage restructuring costs, Cangemi said, according to American Banker. Half of that should come this year, Cangemi said.
The bank saw a 46% drop in annual origination volume in 2022, and expects that figure to fall another 25% this year, Cangemi said.
