Published on LinkedIn, written by Amber Buker
Feb. 13, 2020 – When I started researching the latest article in my “How Innovative Banks…” series for BankDirector.com, I had some preconceived notions about mortgages.
It seemed as though every few years we’d see a rash of news articles about banks selling off or shuttering their mortgage businesses. Recent reports on mortgage profitability — which hit a net loss of $200 on every mortgage originated in the fourth quarter of 2018 — paired with ad after ad for national non-bank lenders like Rocket Mortgage, led me to more or less accept that mortgages were not a viable product for community banks and their mortgage subsidiaries.
But mortgages are a bread-and-butter product that everyone expects their bank to provide. So I had to dig in and see if it was possible to make mortgages work. The banks I spoke to showed me it was.
Stephen Curry, chairman and CEO of Gateway First Bank, headquartered in my hometown of Tulsa, Oklahoma, said that the servicing side of his business was an important piece of the puzzle. Even as the bank reduced its exposure to servicing government-backed loans, Gateway’s servicing volume increased to a $15B book representing a little over 100,000 customers in recent years. The bank’s origination volume also jumped, and it was done without increasing headcount due to the bank’s technology partnership with mortgage point-of-sale provider, Blend. And by January 2021, the bank will be implementing Black Knight’s origination system, with a goal to reach 100% digital origination in the coming years.
Both technology and a key acquisition have led to the expansion of Citizens Bank’s mortgage operations. Citizens’ 2018 acquisition of Franklin American Mortgage Company was estimated to double originations for the bank and triple the size of its servicing portfolio. Sonu Mittal, senior vice president and head of retail mortgage for the institution, shared that the fee income associated with mortgages is a big driver for their institution. Citizens is also working with Blend.
While these banks are working with one of the biggest names in mortgagetech, Troy, Michigan-based Flagstar Bancorp has launched an entire accelerator program aimed at cultivating new mortgage technology. Flagstar is truly a mortgage bank, according to Rocky Stubbs, head of digital and direct lending. The bank has close to $22 billion in deposits, but its mortgage originations double that, at about $40 billion. So it makes sense that Flagstar would want to stay on the leading edge of mortgagetech. The accelerator launched its first cohort last year, and Stubbs says they’re seeing a huge appetite for mortgage technology.
That appetite was also confirmed for me this week when I took a trip to the ICBA’s ThinkTech Accelerator. Mortgages were a key issue that the ICBA and its partners at The Venture Center in Little Rock, Arkansas, identified for banks today. They recruited some exciting new technologies to help meet that demand. One of the companies tackling mortgages in the ThinkTech Accelerator is Lendsmart. This company’s co-founder, AK Patel, dazzled in demo, and the tech shone even more. As someone who looks at fintechs all day, I was really impressed. Keep an eye on those guys.
So, yes — mortgages are hard, and they’ve gotten harder in recent years. But they’re still a product that every bank customer expects. So whether servicing or name-brand players or exploring new mortgagetech options is the key to a successful program, there are options out there for making mortgages work.
About Gateway First Bank
In May of 2019, Gateway Mortgage Group merged with an Oklahoma community bank to create Gateway First Bank. With bank roots dating back over 100 years and a 20-year mortgage history, a new kind of financial institution emerged. Gateway First Bank is a leading financial institution that provides digital banking and mortgage services for consumers and commercial customers. Headquartered in Tulsa, Oklahoma, Gateway funds over $7.7 billion in mortgages annually, maintains $1.5 billion in assets, and operates six bank branches in Oklahoma and 160 mortgage centers across America. With over 1,300 employees, Gateway is one of the largest banking and mortgage operations in the United States.
Learn more at www.GatewayFirst.com.
Member FDIC, Equal Housing Lender (NMLS 7233)