Michigan-based Flagstar Bank laid off hundreds of staffers and made cuts to its retail mortgage operation two months after receiving approval to merge with New York Community Bank from the Federal Reserve, according to laid-off employees.
According to former employees, the layoffs occurred with no warning on the morning of Thursday. They were immediately denied access to the company’s systems, computers, and email accounts. Based on the tenure and position of the employee, the company offered severance payments.
The $2.6 billion merger deal between the No. 19 among mortgage lenders in America — Flagstar and one of New York City’s largest multifamily lenders — New York Community Bank, was announced last April 2021. In late October, the merger was approved by the Office of the Comptroller of the Currency, and in November, the Federal Reserve followed suit.
Based on figures from Inside Mortgage Finance, Flagstar originated $27 billion in mortgages last year, down about 38% from the previous year. In the same way as its competitors, Flagstar’s performance weakened over time, dropping from $8.2 billion during the period January to March 2022 to $4.1 billion during October to December 2022.
A total of $6 billion was originated through the retail channel by the bank in the first nine months of 2022, a decrease of 54% over the previous year, according to IMF data. A 35% decline in the wholesale channel was recorded in the same period, bringing it to $17 billion.
As a result of the merger approval by the OCC in October, Flagstar said its mortgage business would be operated nationally through 81 retail lending offices in 26 states. There were approximately 3,000 third-party originators in the wholesale network.
One of the largest regional banks in the United States is created as a result of the merger according to the companies. Including the Northeast and the Midwest, it is expected to be operating 395 branches across a nine-state territory, with exposure to the Southeast and West Coast’s high-growth markets.