Welcome to the Business Journal Archives
Search for articles below, or continue to the all new BusinessJournalDaily.com now.
Search
Cortland Exits Wholesale Mortgage Business
CORTLAND, Ohio -- Cortland Banks abruptly exited the wholesale mortgage business Friday with an announcement from its president and CEO, James Gasior. “The board of directors and management [of Cortland Bancorp] have decided that CSB Mortgage Co., a wholly owned subsidiary of its commercial banking unit, The Cortland Savings and Banking Co., will cease wholesale mortgage operations effective immediately,” the company said.
Cortland Bancorp expects to incur a one-time loss in the third quarter, Gasior said. The extent of loss has not been determined but is projected to not exceed $400,000.
The holding company will continue to originate and refinance retail mortgages as it always has through the bank, Gasior said, and focus on retail and commercial banking.
The CSB subsidiary will continue to fund and process all broker-originated mortgage loans in process as of close of business last Friday. Since its creation in 2011, CSB had been touted as a profitable niche Cortland saw for itself and at one time had “$80 million in mortgages in our pipeline,” Gasior said Friday.
“During the height of its operations,” the bank said in its statement, "wholesale originations comprised over 90% of the volume of CSB Mortgage, producing banking gains of $1.8 million for the year ended [Dec. 31,] 2012.
“A group of employees will be retained for purposes of winding down the operations [of CSB] and to administer the ongoing mortgage loan operations,’ Cortland Banks said in its announcement.
Wind-down costs are projected in the neighborhood of $400,000 including severance pay for the 17 dismissed and renting the office just opened in Dayton.
CSB had 31 employees assigned to it and 17 will be let go, Gasior said, including Paul Snyderman, senior vice president and head of CSB, Ladi Stimpfel, vice president for wholesale lending, and Katie Shaw, senior vice president of the CSB office in Dayton. Shaw, a 25-year veteran, was hired to run that office just before it opened in July. Between 2003 and this year she had closed more than $1 billion in mortgage loans.
At the time, Snyderman spoke of CSB plans to add more experienced mortgage loan originators to its staff throughout Ohio and establish a physical presence in the Columbus and Cleveland markets.
Since its creation in 2011, CSB was purchasing “high-quality mortgages originated by mortgage brokers, mortgage bankers, banks and credit unions in 11 states” in the Midwest including Pennsylvania, Indiana and Kentucky, the bank said when it announced opening its office in Dayton.
What changed since affected not only Cortland Banks but most lenders engaged in originating and refinancing mortgages, including Citigroup, J.P. Morgan, Wells Fargo, Bank of America and BB&T Corp., The Wall Street Journal reported last Tuesday and Thursday. Rising interest rates have softened demand for both refinancing and buying houses.
The Mortgage Bankers Association expects refinancing to fall to less than $400 million next year from $1.2 trillion last year.
“What we’re going through today is not a temporary short-term anomaly,” said the CEO of the trade association, David Stevens, as quoted in The Wall Street Journal.
As Gasior said, he and his colleagues concur with Stevens and their analysis in that the Federal Reserve is likely to end its monthly $85 billion purchase of bonds backed by mortgage securities sooner rather than later. The promise CSB once held has evaporated.
CSB “offered a comprehensive suite of mortgage products,” Cortland Banks noted in its announcement, among them “conventional, FHA and jumbo loans [those $417,000 and more]. These products will continue to be offered by the bank’s retail mortgage offices.”
Copyright 2013 by The Business Journal, Youngstown, Ohio.
CLICK HERE to subscribe to our free daily email headlines and to our twice-monthly print edition.