Flagstar Bancorp Inc. continued to cut expenses and address legacy issues in the third quarter as mortgage originations dropped by nearly 30% from the prior quarter.
This strategy reduced net income to $13 million in the third quarter, compared to $79 million a year ago.
During the third quarter, we executed a series of companywide expense cutting initiatives, leading to a reduction in non-interest expense by almost $16 million from the prior quarter, says Flagstar chief operating officer Lee Smith.
The Troy, Mich.-based bank sold $167 million in nonperforming loans during the quarter. It also laid off 331 full-time employees, including loan officers and account executives, as well as 115 long-term subcontracted employees.
Going forward, the company plans to increase its portfolio by purchasing MBS and good quality jumbo loans.
Flagstar originated nearly $8 billion in single-family loans in 3Q, compared to $11 billion in the prior quarter and $16 billion a year ago.
Company executives expect a 10% drop in originations in the fourth quarter.
Most of the 3Q loan production came from its correspondent channel ($5.5 billion) and the retail channel ($2 billion). Just $400 million in loans came from brokers.